Video Gaming Virtuoso

Every five years, a new set of consoles are released. In the 70s, Atari and Magnavox pioneered the show. In the early 80s, it was Atari and Coleco running it into the ground. It needed Nintendo to save it in the mid to late 80s and required Sega to balance it after Nintendo came to power. The show needed Sony to take it to the next level and finally Microsoft to make us question it's future.

And that brings us to the Seventh Generation of video games, where history is only starting to write itself. The dust has settled on the first battles of the console wars, and the new battle lines have been drawn. When the Nintendo Wii and the Playstation 3 launched last November, they met the XBox 360 at the marketplace, and the most recent console wars began. After four months of selling (plus one year for the 360), the most recent worldwide numbers look like this:

As of the past decade or so, Video Games have become a very big business. This is thanks in large part to Sony, who made great strides to bring video games into the mainstream. With the expansion of the industry and the glut of money that has entered it, financial analysts have started to pay attention. The only problem is that most video game researchers also do research on automobiles or pork bellies or anal lubricants. Industry analysts know how to analyze industries, but they don't know one of their certain sphincters from an aperture in the earth when it comes to the esoteric video games industry. Most of these analysts would rather hold a calculator than a game controller.

Case in point:In August, a financial research firm known as The Yankee Group made their predictions on the entirety of the forthcoming console wars in the North American market. They predicted the Playstation 3 would sell 30 million consoles, the XBox 360 would sell 27 million, and the Nintendo Wii would bring up the rear selling 11 million consoles - totaling 69 million consoles sold through by the time the market matures in 2011.

Personally, I found this to be a fairly modest prediction, as the previous generation has sold through 63.6 million consoles to date(NPD group), and everyone is going to be looking to improve in the next 5 years.

As of the end of January, NPD Group reports that the North American market currently has installed user bases looking like this: 360 - 4.8 million, Wii - 1.5 million, PS3 - 933,000. Now, NPD doesn't report sales from Wal-Mart stores because Wal-Mart witholds their sales figures. The only other way to figure the numbers is to look at the shipment figures from Microsoft, Nintendo, and Sony, but those figures do not count the sell through numbers to American homes and are probably biased for obvious reasons. With Wal-Mart being the largest seller of video games in the United States (an everything else, for that matter) these numbers are obviously smaller than they ought to be.

The Nintendo numbers alone (probably closer to 2.5 million) would show that the Yankee Group has probably gotten this one wrong. Sony has incurred massive shortages, and they still haven't sold through every console. One can readily find Playstation 3's in stores due to it's lack of enticing software, high price point, and strong competition from the 360 and Wii. And with Sony continuing to alienate 3rd party video game developers by delaying the European launch and continually changing hardware and firmware configurations, it doesn't seem the PS3 will have a comparitively enticing software lineup until well into 2008.

With the Wii selling like gangbusters and the 360 having the most attractive software lineup for 2007, it doesn't seem like Sony is going to be able to meet the Yankee Group's expecations and pull ahead anytime soon. At the same time, Nintendo could exceed their expecations(11 million consoles) by the end of this calendar year, and Microsoft could do the same(27 million) before 2010 hits.

But we're only 4 months into the current war, so anything could happen. Let's take a look at a more recent prediction:

Research firm IDC recently made predictions on what they believe to be the future of the video games industry. You can read the major points of that report over at GamesIndustry.biz.

The Nintendo Wii has spent much of it's 4 months on the market quickly making up ground between it and the Xbox 360. It has sold 5 million consoles Worldwide in half the time it took the 360 to do so. So what is IDC saying? They believe Nintendo will be outselling Microsoft and Sony throughout 2007 and 2008. This is, currently, not so bold a prediction as The Yankee Group's, but I still tend to disagree.

Ask any analyst about any entertainment sector and they will ultimately tell you that content is king. It has always been, and it will always be, about the games. So, in any given year, one need only look to a console's release list to see how well it's going to sell. Let's take a look at 2007:

Key Titles for XBox 360 in 2007
Halo 3
Half-Life 2: Orange Box
Grand Theft Auto: IV
Fable 2
Guitar Hero 2

Key Titles for Playstation 3 in 2007
The Godfather: The Don's Edition
Tom Clancy's Splinter Cell Double Agent
Ninja Gaiden Sigma
Half-Life 2: Orange Box
Grand Theft Auto IV
Metal Gear Solid 4: Sons of Patriots

Key Titles for Nintendo Wii in 2007
Prince of Persia: Rival Swords
The Godfather: The Blackhand Edition
Super Paper Mario
Cooking Mama: Cook Off
Super Smash Bros. Brawl
Final Fantasy Crystal Chronicles: Crystal Bearers
Metroid Prime 3: Corruption
Super Mario Galaxy
Animal Crossing Wii
DK Bongo Blast

[Source: IGN Release Lists]

Now, glancing at these lists, it might seem like the Wii has the most formidable upcoming release list. This is not a disagreeable statement. However, 2007 will be the last great year of the core gamer.

The core gamer is the demographic that has been driving the industry for the last 10 years. Generally male between 18 and 35, the core gamer has been explicitly catered to by Sony and, more recently, Microsoft since they entered the market. While Nintendo attempts to expand the video game market past the core gamer with the Wii, Sony and Microsoft will continue to attempt to penitrate the core market.

The first person shooters, third person shooters/adventures and sports games that have dominated the core gamer in recent years will be the games that push the most consoles this year. The Wii will continue to make inroads into new markets, but this will not be the year that this expanded marketplace will redefine what the core gamer is. Sony and Microsoft will fight for the largest piece of the game industry pie in 2007. The XBox 360, with its superior price point, highly advanced online capabilities, and already formidable installed base, will win the core gamer this year.

2007 is the 360's year. Nintendo will take gamers to new places in 2007 with the Wii, but this will do more to set them up to regain market dominance (after a 15 year absence) in 2008. Sony will have a lot of work to do if they want to win the console war again, and they certainly shouldn't be ignored. However, with the mistakes Sony has made (poor launch software, high price point, hardware issues and shortages), they could easily fall out of the market all together. With the Playstation name accounting for nearly 20% of all of Sony's revenue year-to-year, the entire company is in a fight for its well-being.

So while IDC believes the Wii is going to lead 2007 and 2008 with the console wars eventually halting at a stalemate, I am predicting more to the contrary.

But now I've bored myself with this talk. I think I need to play some video games after all this talk about "video games".

"The industry" has made me exhausted. I'm going to play my Wii.

Tschües!