Video game makers can hardly wait for monthslong sales slump to end
In the fall, Sony Corp.'s PlayStation 3 and Nintendo Co.'s Wii systems are expected to join the Microsoft Xbox 360 on store shelves — a relief to game publishers who have seen sales plummet as consumers waited in recent months for the latest gear.
But as the hype is replaced by actual gaming systems, the latest "console wars" will enter a new phase, potentially shifting the balance of an industry whose sales top Hollywood's domestic box office receipts.
During this week's Electronic Entertainment Expo in Los Angeles, the big three console makers gave an important glimpse into the future, and further fueled questions about which maker will come out on top.
Will Sony's current dominance continue with its PlayStation 3 or will its high price tag send fans looking elsewhere? Will Microsoft's early release of its Xbox 360 snag it more market share? Or will the intuitive remote control that's offered with Nintendo's Wii prove to be the greatest draw? On the exhibition floor, at least, Nintendo's sprawling booth appeared to be the hit of the show. Throngs of attendees crowded in lines that snaked around the Los Angeles Convention Center in order to get a first try at Wii games.
But Colin Sebastian, an analyst with Lazard Capital Markets, said he was particularly impressed with the inroads Microsoft has made in an industry Sony dominated with its PlayStation 2. He predicted Microsoft and Sony will each grab 40 percent of the nextgeneration market, with Nintendo keeping a strong hold on the remaining 20 percent.
In the more distant future, the video game business will only improve, predicted Doug Lowenstein, president of the Entertainment Software Association, which organizes E3.
"The truth is, it's not terribly important how many units of hardware and software are sold in 2006," he said. "Don't get me wrong, it is important to individual companies, but it is less important for the industry collectively. The real issue is how this year positions the industry for the future. That is, after all, what transitions are all about."
And in that regard, most see a lot of opportunity.
Shane Kim, general manager for Microsoft Game Studios, also predicted strong growth in the coming years.
"I think the signs are all positive," he said. "With the competition now finally entering the market later this year, I think it will start to remove that uncertainly so customers will be able to make some better decisions, because some have been waiting, frankly, wondering 'What are my options going to be?'"
According to market research firm NPD Group, overall video game sales dropped 5 percent to $7 billion in the United States last year as gamers waited for the new systems. Top game publishers such as Electronic Arts Inc., Activision Inc. and THQ Inc. have lost millions recently due to slow sales.
But tough times might not go away so quickly.
Availability, which plagued Microsoft's Xbox 360 last fall, might turn out to be a continuing problem, particularly for Sony.
With only 4 million PS3 units expected to be available through the end of the year, analysts and industry insiders predict there will be shortages.
Consumers also could balk at the price tags, particularly on the PlayStation 3.
At its Nov. 17 launch, Sony will offer a $499 model that features a 20 gigabyte hard drive but not some important features such as a special output for highdefinition video, a memory card slot and built-in wireless. Buyers will have to cough up $599 to get those extras, plus a more spacious 60 gigabyte disk drive.
Though some critics say the console is too expensive, Sony has insisted the prices are suitable considering what's under the hood.
Each of the manufacturers announced a lineup of exclusive games that includes "Super Mario Galaxy" for the Wii, the shooter "Gears of War" for Xbox 360 and the frenetic action game "Heavenly Sword" for PS3.