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Analyst: Core Games Best Investment For Publishers As Wii 'Bubble' Deflates

Analyst: Core Games Best Investment For Publishers As Wii 'Bubble' Deflates

November 24, 2009 | By Leigh Alexander

November 24, 2009 | By Leigh Alexander
More: Console/PC

Despite broadening audiences and casual platforms, core games remain the best investment for video game publishers, says Cowen Group analyst Doug Creutz -- who says "the Wii bubble could be deflating."

Revealing the results of a broad fall-holiday survey, Creutz says Wii owners are buying fewer games now than they did a year ago -- while Xbox 360 and PlayStation 3 plan to buy more.

This is partially a function of the economic climate -- core gamers are the group least likely to trim entertainment spending when budgets get tight. Consumers who own only a Wii, however, are least-likely among all current-generation platforms to increase their software purchases this holiday, he says.

Over half of Wii owners also own an Xbox 360 or a PlayStation 3, Creutz says -- but of those who own more than one console, only 23 percent consider Wii their main platform, which means bigger holiday wish lists among core gamers are more likely to benefit core market games rather than Wii titles.

"While core gamers who own a Wii own more Wii games on average than casual gamer Wii-owners, the average title ownership spread between the two categories of gamers is much lower than it is for owners of Xbox 360 and PS3 consoles," says the analyst.

Creutz concludes that core gamers who own multiple consoles are primarily buying Wiis to play Nintendo titles, and not games by other publishers.

"We believe that the optics of this hardware cycle have been significantly distorted by the explosive growth of the Wii console," says Creutz.

The Impact On Publishers

Wii was the primary driver of industry growth in 2007 and 2008, and remains the top-selling console in America. But according to the analyst, "its success did not correlate with strong performances by the U.S. software publishers as a group."

And with Wii hardware and software sales declining, investors have become much more cautious about the games business -- meaning further negative impact for U.S. publishers.

"While we believe the Wii is likely to be a drag on overall software sales through the holiday, the impact should be limited to those publishers which have invested significantly in Wii development, with the biggest negative impact likely to be felt by Electronic Arts, which (unwisely in our view) heavily invested in Wii development for [calendar 2009]," says Creutz.

Sony's PS3 Strategy To Bear Fruit At Last?

On the other hand, Creutz says, the PlayStation 3 looks poised for a strong holiday -- 21 percent of survey respondents who don't currently own one plan to buy one this season.

That's slightly below the Wii's 26 percent intent figure, but nearly double the Xbox 360's 12 percent purchase intent, according to Cowen's survey. And Sony's long-held faith in brand loyalty may finally bear fruit: the data also shows that 32 percent of PlayStation 2 owners who haven't yet bought a current generation plan to buy a PS3, versus 19 percent for the Wii and just 9 percent for the Xbox 360.

The uptick in intent is largely credited to the new $299 price point, says Creutz -- and the Blu-ray player may finally be helping the console too, as consumers showed a willingness to pay slightly higher prices for a console with one versus without.

"With the frontline Xbox 360 console (the Elite) also retailing for $299, we believe Sony now has, for the first time, a significant price advantage at retail, particularly in the minds of serious gamers who are more likely to be considering the PS3 vs. the Xbox 360 Elite rather than the $199 Xbox 360 Arcade version," the analyst concludes.

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