Analyst Predicts XB360 maintains lead, PSP pulls ahead of DS

[Strollymonster]

From GameSpot (http://www.gamespot.com/news/6142885.html):


UBS's Mike Wallace thinks Microsoft and Sony will win the next-gen console and handheld wars, predicts 3 percent spike in 2006 software sales.

Citing the start of the next-generation console transition and the lack of a Halo 2 or San Andreas-level blockbuster, many analysts predicted game sales would shrink in 2005. And while US retailers sold $10.5 billion of combined gaming hardware and software--6 percent higher than in 2004--taken alone, software revenue did slide 3 percent, from $6.25 billion to $6.06 billion.

Now, more and more analysts are beginning to predict what 2006 has in store for the game market. The latest expert to join the chorus is Mike Wallace, the lead game analyst at the Wall Street investment firm UBS. "We expect US software sales to grow 3 percent in 2006 (up from a 3 percent sales decline in 2005)," he said in his most recent report. "This is up from our prior view of flat sales in 2006, with the year-over-year increase mainly due to 2005 being weaker than expected."

Wallace believes the increase will be fueled by the debut of the second and third next-generation consoles. "The launch of Sony's PlayStation 3 console later this year, along with the launch of Nintendo's Revolution console, should represent the official start of the new cycle," he said. He also agreed that the PS3 will miss its previously announced spring launch window and will go on sale across the Pacific first. "We think a summer launch [in Japan] is more likely, with the US and Europe launches still expected in Q4," he said.

As for which console will win the first round of the next-gen war, Wallace thinks that Microsoft's decision to launch first will pay off. "We are projecting meaningful sales of Microsoft's Xbox 360 (4 million units) in the U.S. this year," he said, going on to forecast that the PS3 and Revolution will sell around 1 million units each by the end of the year.

By contrast, the Xbox 360 sold only 607,000 units by the end of December 2005, thanks to widespread shortages. That said, Wallace predicts that the current drought in supply of the console will end in the spring. "Xbox 360 hardware supply continues to be constrained, which will probably hurt industry sales over the next few months," he said. "However, this situation should improve throughout the course of the year, as Microsoft works out its manufacturing issues with the console."

Looking farther ahead to 2007, Wallace believes the 360 will maintain a sizable lead over its rivals. "We are projecting the Xbox 360 and PS3 console installed bases to exceed 10 million units and 7 million units in the US that year, respectively, while the Revolution installed base should surpass 3 million units." He also said that a slowdown in PlayStation 2 sales will be somewhat ameliorated by a price drop from $149 to $99, most likely around E3 in mid-May.

As for other platforms, Wallace believes Sony will also cut the price of the PSP--a move that will lead it to pull ahead of the DS in overall sales. "The next-generation handheld installed base should also start to represent sizable numbers in 2007, as we expect the PSP and DS installed bases to reach 15 million units and 10 million units that year, respectively." However, Wallace stated that Nintendo's Game Boy Advance will give it an edge in the overall handheld market in 2006, saying "ongoing sales of GBA should be driven mainly by the continued popularity of the Game Boy Micro."

Peering even deeper into his financial crystal ball, Wallace thinks that the game industry will continue to grow at a healthy pace. He predicts that in 2008, the combined installed base of all three next-gen consoles (PS3, Xbox 360, and Revolution) will exceed 38 million units and will climb to a whopping 52 million units in 2009.

As for the portable market, he projects that there will be 34 million next-gen handhelds (that is, the PSP and DS) in gamers' hands by 2008, with the number rising to 43 million the following year. He did not give figures for the Game Boy Advance's installed base in those years.

Can't say that I really agree with his analysis...the primary basis for his prediction of the 360 staying ahead revolved around the "it was out first" argument. History can be a great way of showing that's not really true (just ask the Dreamcast) It's just about impossible to make any kind of guess about installed bases years from now when neither the PS3 or the Revolution have

-A launch date
-A launch price
-Known launch titles

Just for starters. Then the predictions on the PSP were based around a yet unannounced price cut. I think most people would agree that the price would need to drop by more than just $50 (the most obvious cut) for it to pick up in popularity. Sony needs more exclusives and killer apps (as does the DS, while we're at it) to start picking up more users than the tech toy crowd.

[Beat]

If the PSP drops the price, it will win the handheld wars. As for the XB360, they've got a much greater ad campaign and use of killer aps to keep people to their system, something Dreamcast did not have.

Either way, it's going to be interesting to see.

[Artimus Gigan]

The Greatest Hits series is already out in Japan, it's only a matter of time before it hits america. Also considering they are priced around 20-25 bucks, it's a real bargain considering the quality of games like Wiepout Pure and Ridge Racer. This in turn would put pressure on Nintendo to lower the price of their games and make a Player's Choice line for the DS.

Consumer wins

[Noukon]

"The next-generation handheld installed base should also start to represent sizable numbers in 2007, as we expect the PSP and DS installed bases to reach 15 million units and 10 million units that year, respectively."

They've already sold 10 million DSes. This guy is ridiculous.

[Tash]

I disagree, mainly because their thoughts on the PSP fail to take into account that Nintendo has already pulled out some of the big guns, and the PSP will have to get a lot of good games FAST if they don't want people trading in their PSPs. Not to sound biased, but PSP has Megaman. That's about the only big-name title that they have. (besides GTA, but that's getting ported to the PS2 -_-)

[Juu-kuchi]

(besides GTA, but that's getting ported to the PS2 -_-) That's the biggest mistake Rockstar or Sony has ever done. Since that is the case now, why bother with the PSP to play the game when one can play it on the PS2. If the PSP had reduced its price and that was still exclusive, the system would have sank the DS.

But then again, Sony has been acting rather strange with the PS3 or something, so them pulling up in the console race I'm wary about. In the case of the DS though, Nintendo's really going to need to reveal some bigger guns sooner or later and have at least more than the FOUR Wi-Fi games that they have, not to meniton perfect their services.

[mookie75]

Was a crystal ball of some type used for these predictions? :p

And, while a GTA exclusive would have caused a temporary boost for the PSP, it would hardly be a long term effect unless they had other big games coming down the line. One can't live on GTA alone (and some of use prefer not to live on it alone). Of course, this isn't meant to imply that the PSP has nothing worthwhile on it, but implications that GTA alone can "sink" the DS are pretty ridiculous.

[Zyzzybalubah]

I can see what he means by X360 getting a competitive advantage over PS3 and Revolution by coming out earlier, but 360 is going to have to get their better titles out this year to keep pulling people in. What they have right now isn't satisfying enough. If PS3 is really $500 like many are speculating, I think some people will end up drawing the line (I'm surprised they didn't with X360, tsk tsk, :sad:.) Revolution may not end up selling all that greatly, but if it's at a real low price and have some fascinating launch titles, people WILL buy. Once PS3 pulls out some bigger titles, the sales will come in, but at $500, the system is going to be steep. Please Sony, come to your senses and release it at $400 or less (should be $300, IMO.)

As for PSP, I can't emphasize enough! Sony drop the price! Pull out the money for third party exclusives! If we don't see any highly quality titles on the system this year (that you can't find elsewhere), I may fear for Sony's PSP going the way of the Game Gear. Nintendo has some good titles for the DS this year (at least on the first party half), and except for We Love Katamari and some Sony first party titles, I haven't seen anything this year personally that made me feel like picking up a $250 PSP.

[The Dark Knight]

They've already sold 10 million DSes. This guy is ridiculous.I think it's safe to assume that this guy is only talking about the US. (Fun Fact: In North America the DS has only sold 4 million units.)

[Andrew T. Hingson]

I don't think Xbox 360 will hold on actually. An impressive machine without a doubt but until it's got some really great games to back it up they can't take the market away from Sony (Nintendo isn't a blip on the radar though... I'm just glad they're still at the party to spike the punch now and then). Though I can't say I've heard much if anything about what the PS3 will have to offer but Sony knows the console market inside and out now.

Handhelds though... they're still learning. But they are learning quicker than most. Even so PSP isn't going to pull ahead of the DS. At least not until they put out some really great games (not to say they haven't, but they'll need a lot more). Besides, Nintendo's biggest portable trump card isn't even on the market yet. We all know despite losing some popularity Pokemon on the DS is going to sell incredibly well and move a ton of units. Especially if it's Wi-Fi. Tetris DS will also be a big seller I imagine.

[Peter Paltridge]

Is he off or what? There's nothing good out for the 360 yet (actually, this didn't stop the PS2 from taking over last time....)

"The PSP will overtake the DS, but may find it hard to break past the Game Boy Micro"---the looniest statement in the article. The DS is winning this fight and no one is buying the Micro at all.

[Rasputin]

There is one potential pitfall I can see: If Nintendo releases a sequel to the GBA in 2007 while maintaining the DS as a 'third pillar', if the new Game Boy doesn't have backward compatibility with the DS (and there's no reason why it should if it doesn't have a touch screen) then people may decide not to buy it, having only just shelled out for a DS. The DS would remain popular but the GBA...A might have as much of a hard time as the PSP is having now, since two years isn't really enough space in the consumer cycle to allow another format to appear. Consequently if the PSP2 is released, having ironed out the bugs of the original PSP, in 2009, then that might be the right time in the cycle for a competitor to get some traction.

Of course, no one can really predict what's going to happen in the next year, let alone in the next five, so I can't really qualify that statement. And a good thing too...I want Nintendo to succeed. I was just thinking that this might be a potential danger. I'd advise Ninty to wait until Sony unveils their sequel to the PSP before unveiling any sequel of their own. Then Nintendo would rule portables for all eternity...or until the oil runs out, which seems to be irritably soon...

[Beat]

Personally, I think this generation will be Nintendo's last hurrah for console's, at which point they'll make money off of portables until the end of time, or go the Sega route and become a software company.

PSP will need more killer aps in order to convince people to buy something besides UMD's for it. I still believe that's possible rather easily, however, PS3 and its connection to PSP will be a major factor in determining if people buy the things, second only to the need to drop the price fast.

[Tak Mazé]

I doubt Nintendo would ever become a software-only company. It just seems to me that they would never develop for another system out of pure pride and spite.
Who knows though... They're far from trouble yet. As they keep saying, they want to get into new areas of gaming so I shouldn't think huge profits are on their agenda. They just like to experiment with new toys I guess.

[Dogbert]

Personally, I think this generation will be Nintendo's last hurrah for console's, at which point they'll make money off of portables until the end of time, or go the Sega route and become a software company.I've heard that lots of times, but I still don't believe it. Sega had several failed consoles before they went under (32X was the start, but the Sega Saturn and Dreamcast finished them). Nintendo (Virtual Boy excluded) has NEVER had a failed console. N64 and GCN both sold well enough to be considered mildly successful. Right now, GCN is about tied with XBox for second place in worldwide console sales. Unlike XBox, however, Nintendo made a profit from every GCN system sold since launch. Nintendo also makes lots of money off their first and second party titles. They are also notorious to developers and educated consumers for their high licensing fees, which generate about twice the profit for each third party title sold in comparison to Sony and Microsoft. While Nintendo hasn't (to my knowledge) released profit/loss info for the GCN by itself, their huge profit each year seems to indicate GCN has been somewhere between neither a loss nor profit and moderately successful.

Plus, with the large amount of cash Nintendo has lying around (and I mean cash in the bank, not even tied up in investments/assets) they have plenty of time to keep at this until they're number one again (unlike Sega). Nintendo execs have said that the day Nintendo stops making systems will be the day they stop making games. While I doubt that's true, I just don't see that being a problem for quite some time. Only a horrible failure would doom Nintendo. With the low price expected for Revolution, I can't imagine it could be that big of a failure. I'm not saying the Revolution will be a success, just that the low price alone will sell enough for Nintendo to break even or at least come close. Of course, that's just my two cents...

[Mynd Hed]

Ah, good. Now we know what's NOT going to happen, because when's the last time the analysts were right about anything? I use the same theory to glean useful information out of the unreliability of horoscopes, weather reports, and any statement from a major branch of the federal government.

In all seriousness, though, it's easy to play the "it's too early to be making predictions" card in refuting analysts' predictions, but y'know, that IS what analysts do-- make predictions about things that it's too early to be making reliable predictions about.

[Noukon]

Personally, I think this generation will be Nintendo's last hurrah for console's, at which point they'll make money off of portables until the end of time, or go the Sega route and become a software company.

Dogbert hit the nail on the head in response to this (the Revolution could fail horribly and it wouldn't hurt Nintendo nearly as much as you think), but I want to add a thought.

The Revolution has serious potential to be a silent-but-deadly market share thief. Now that the negative buzz has waned, a lot of people are really excited for it. Most gamers who buy a 360 or PS3 may very well get a Revolution alongside it (mostly for the cheap price and inevitable unique games), and it will sell itself to the casual gamer much better than either other system. I wouldn't be surprised if both the 360 and PS3 did good numbers, and then the Revolution took a shocking lead with even bigger numbers just by virtue of being everyone's second choice.

It's such a massive wildcard right now that accurate speculation is impossible.


I think it's safe to assume that this guy is only talking about the US. (Fun Fact: In North America the DS has only sold 4 million units.)

Makes sense.

[Andrew T. Hingson]

The words that launch millions of units...

"Smash Bros. online"

It is afterall the top selling Gamecube game.

Even so, Nintendo isn't going to make it big with the REV. But I agree with the thought that many consumers will buy it because the price, the vintage material available and the uniqueness of the games.

[Noukon]

Even so, Nintendo isn't going to make it big with the REV. But I agree with the thought that many consumers will buy it because the price, the vintage material available and the uniqueness of the games.

That's a pretty definite statement... the truth is, we have no idea how well the Revolution might do. Few people thought the DS would be as successful as it is now. The Rev may absolutely explode for all we know.

[Killtacular]

The PSP does not look like it's going to eclipse the DS now that it has become the favored purchase of parents. Even if the PSP decreases in price it has the disadvantage of targetting itself at a demographic that doesn't REALLY play hand held games on the level that DS's demographic (kids) does.

His statements about next gen are mostly spot on except the Revolution will sell more than he claims. It won't catch up to Microsoft or Sony but it's surely not going to drop off by a whopping 75%.

I'm going to predict 9 million 360 units, 7 million PS3 units, and 5 million Rev units in 2007.


Is he off or what? There's nothing good out for the 360 yet (actually, this didn't stop the PS2 from taking over last time....)
That's kind of the thing. With good marketing, a decent launch window, and a healthy second generation of titles, your system will do well. The PS2 had an awful launch but a good second generation and marketing I can't disagree with since it drove demand through the roof. The 360 is in the position that the PS2 was in, NOT THE DREAMCAST. It's up to the developers to crank out games that will make the 360 must have.

Of course a lot of titles will be shared between 360 and PS3 anyway (Resident Evil 5, for example), so it's largely going to be a matter of preference. Do you prefer a $299-$399 system or a $399-$499 system, whose libraries will consist of 60% the same titles? I guess it'll be the remaning 40% that decides people's dollars.

And there are titles that I think are really good that are on the 360 that you can get right now: Condemned, Marble Blast Ultra, Geometry Wars, Fight Night 3 (due in a couple of weeks), Dead or Alive 4, and Call of Duty 2.


The Revolution has serious potential to be a silent-but-deadly market share thief. Now that the negative buzz has waned, a lot of people are really excited for it. Most gamers who buy a 360 or PS3 may very well get a Revolution alongside it (mostly for the cheap price and inevitable unique games), and it will sell itself to the casual gamer much better than either other system. I wouldn't be surprised if both the 360 and PS3 did good numbers, and then the Revolution took a shocking lead with even bigger numbers just by virtue of being everyone's second choice.
That's very optomistic but not likely. Noone is going to purchase two consoles at one time. It may very well be a second choice for many gamers but 'many gamers' will wait until there's a dry spell with the system they're currently playing before branching out. It will sell better than the Gamecube though, I would have to assume. But don't expect the gaming heiarchy to shift. Unless the PS3 is a horrible abortion of technology that fails to deliver on Sony's promises and lacks developer support it will probably catch up to Microsoft and sell the most in five years.

[email2003]

Go PSP!!!! :D

[Mynd Hed]

The Revolution has serious potential to be a silent-but-deadly market share thief. Now that the negative buzz has waned, a lot of people are really excited for it. Most gamers who buy a 360 or PS3 may very well get a Revolution alongside it (mostly for the cheap price and inevitable unique games), and it will sell itself to the casual gamer much better than either other system. I wouldn't be surprised if both the 360 and PS3 did good numbers, and then the Revolution took a shocking lead with even bigger numbers just by virtue of being everyone's second choice.

That about sums up my hopes for the Rev as well, except that I seriously doubt that it will actually take the number one spot. If the Freehand controller pans out and the third parties give it enough support, though, I could definitely see the Rev making up a lot of the ground Nintendo has lost in the last generation or two.
I don't really have the numbers to back this up, but it seems like this last generation was the first one in which a significant portion of gamers bought a second console in the same generation (which probably had something to do with the fact that it was the first generation that successfully supported three major consoles at once). Last gen, it seems like most people bought a PS2 and then supplemented it with an Xbox once the Xbox started coming into its own as the most powerful console in the mid to late generation, while a smaller minority of Nintendo fans bought a 'Cube and supplemented it with one of the other consoles for variety.
As Matt mentioned, this gen the 360 and PS3 are shaping up to be pretty similar when all is said and done, so I see the majority of the two-console gamers going Sony/Nintendo or Microsoft/Nintendo and far fewer going Sony/Microsoft or vice-versa. Add to that the loyal core of Nintendo fans who will be Rev gamers primarily no matter what plus however many non-gamers the Freehand controller can pull in, and I wouldn't be surprised to see Nintendo become a major player again. If either Sony or Microsoft managed to pull a major boner of some kind (in Sony's case, an overly high price point or a delayed launch, in Microsoft's, a failure to pull together a satisfactory second wave of software titles to counter the PS3 and Revolution launches), I could even see Nintendo taking the number two spot before this generation plays out.

Regardless, I'm hoping for a much closer race all around this gen than last gen.

One thing's for sure, though. I've said it before, and I'll say it again, but anyone who thinks Nintendo's going to pull out of the home console biz in favor of developing handhelds exclusively or going software-only is fooling themselves. In my experience, most people who make such predictions are just wishful thinkers who don't want to buy a Nintendo console for some reason but still want to play those wonderful Nintendo-developed games.

[Jon Hanson]

That's a pretty definite statement... the truth is, we have no idea how well the Revolution might do. Few people thought the DS would be as successful as it is now. The Rev may absolutely explode for all we know. Well the DS was fighting on Nintendo's home turf, Nintendo has had the handheld market all wrapped up for years. The Rev wil be coming out as the underdog, having to deal with the fact that it's predecessor was in 3rd place out of 3 players last generation.

[Rasputin]

I'd add my voice to the opinion that the Rev will do much better this time around. The whole 'second console' thing I hadn't entirely thought about, but the Rev would also be thoroughly excellent for drawing in people who don't usually play games with the combination of the Freehand and a low price point. In fact, I'd go on to say I'm expecting a real 3-way race this time round, with maybe 50 million consoles out each world-wide by the end of the next generation.

I'm looking forward to a state of affairs more like the SNES/Megadrive era and the craaazy mid-'90s. I'm sure I'm not the only one who thought the last generation was a tad stale. Just having one console to rule them all doesn't do wonders for creativity. Look what happened with Atari.

[Noukon]

That's very optomistic but not likely. Noone is going to purchase two consoles at one time. It may very well be a second choice for many gamers but 'many gamers' will wait until there's a dry spell with the system they're currently playing before branching out. It will sell better than the Gamecube though, I would have to assume. But don't expect the gaming heiarchy to shift. Unless the PS3 is a horrible abortion of technology that fails to deliver on Sony's promises and lacks developer support it will probably catch up to Microsoft and sell the most in five years.

It's true that a hierarchy change isn't probable, but I wouldn't discount it. Hell, I wouldn't discount anything at this point. The game market is due for some shaking up, and this generation looks like it will be doing some shaking.


Well the DS was fighting on Nintendo's home turf, Nintendo has had the handheld market all wrapped up for years. The Rev wil be coming out as the underdog, having to deal with the fact that it's predecessor was in 3rd place out of 3 players last generation.

The DS was just an example. The factors for the Revolution are certainly different, but there's still room for a lot of maneuverability there.

[Tak Mazé]

According to some sites, the DS is back in stock in Japan and is once again selling twice as many units as the PSP, which took the lead because of the shortage. At least I think it was Japan.