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Analyst: Current Console Cycle To Extend Through 2013

Analyst: Current Console Cycle To Extend Through 2013

June 29, 2009 | By Matt Matthews

June 29, 2009 | By Matt Matthews
More: Console/PC

In a new report from Wedbush Morgan Securities, industry analyst Michael Pachter explains that the current console hardware cycle should extend through at least 2013 with an increasing focus on digital downloads and other supplemental revenue streams.

The report, entitled "Money for Nothing, How Ancillary Revenues Can Extend The Console Cycle", predicts that the Nintendo Wii will be the dominant console by the end of the present hardware cycle, based primarily on its lower price and novel input method, the Wii remote. While the Xbox 360 is currently presumed to be in second place globally, the report suggests that by 2015 the PlayStation 3 could have displaced Microsoft's console on the strength of Blu-Ray's dominance in the high-definition media market.

In 2009, the report explains that the Nintendo Wii will account for 49 percent of the American and European console videogame market revenues (excluding older systems such at the PlayStation 2) while the Xbox 360 will capture 29 percent. The PlayStation 3 will lag behind at 22 percent.

However by 2011, the last year for which the report provides specific figures, the PlayStation 3 is expected to increase its share to an even 26 percent -- same as the Xbox 360 that year -- with the Wii share dropping marginally to 48%. It is worth noting that the growth in revenue will more than offset the expected losses in marketshare and that all three systems are expected to demonstrate increased revenues even as the marketshare distribution shifts.

In Japan the market will be dominated by Nintendo, who will command a share of more than 65% in its home market by 2011, according to the report.

On the subject of hardware itself, Mr. Pachter ties together several trends in the market today. On the subject of high-definition graphics, a Wii Plus (HD) console is expected by the end of 2010 at a price of just under $200. Such a system would have the potential to pull even more marketshare from the competition -- Microsoft and Sony -- as the Wii continues extraordinary growth through at least the next two years.

Moreover, the report suggests that through the next ten years local storage on videogame systems will grow to 1 terabyte, and that in the near term the expansion of digitally distributed software (i.e. through an internet connection) will be approximately exponential. Despite this growth, the current expectation is that consumers will never fully abandon physical media and that in 2019 digitally distributed software will still account for only 50 percent of all software sales.

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