NEWS - Thursday, October 27, 2005

Analyst Predicts Big Things For Xbox 360

Microsoft’s new Xbox 360 is gathering momentum ahead of its November debut. The console launching the first generation product cycle will break Sony’s market share dominance in 2006, leading with 54% of hardware unit sales. But Sony’s PlayStation 3 will eventually lead in sales that will peak in 2008, according to Kagan Research. “Console sales have declined for two years in a row, but in 2005, with the highly anticipated Xbox 360 slated to hit the market November 22, we expect to see unit sales start an upward climb with a 3% increase over 2004,” said Irina Mulvey, CFA, analyst at Kagan Research. Xbox 360 is expected to roll up sales of 1.6 mil. units in the U.S. by end 2005, forecasts Kagan’s Future of Video Games 2005 databook. By end 2007, Xbox 360 cumulative sales are projected to reach 11.1 mil. units. Sony’s PS3 hits the marketplace in the second half of 2006 and is likely to surpass Microsoft’s Xbox 360 in cumulative sales by 2008. Kagan forecasts 17.9 mil. consoles sold in the U.S. in 2008, with PS3 accounting for 54% of hardware units purchased that year. The third player in the video game console business, Nintendo, is readying its next generation platform dubbed Revolution and will reach the marketplace in late 2006, capturing 19% of the market by year-end. Future of Video Games 2005 also analyzes the following developments. Video game hardware revenue is expected to peak in 2007, as still strong sales of declining current generation console platforms (Sony’s PS2, Microsoft’s Xbox and Nintendo’s GameCube) combine with surging next generation product sales. Total video game console sales (all generations) are expected to climb to $6.4 bil. in 2007, though projected to slip to $5.9 bil. in 2008. Total video game industry revenue – hardware, software and accessories for all platforms – is forecast to peak at $16 bil. in 2007. That’s up from $9.9 bil. in 2004. Sony’s handheld PSP, which reached the marketplace in March 2005 is challenging Nintendo’s handheld line-up in the portable segment. Kagan expects Nintendo to retain a dominant presence in the market. Despite the video game industry’s healthy growth rate, media conglomerates have shied away from corporate acquisitions of game software companies. Video game software for all formats generated $6.2 bil. in 2004 sales.


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