Gaming Industry Economic News

[Fool]

So I thought I'd start a thread that followed the industry as a whole apart from the console or company specific threads we already have. I'll think of a better title later.

Xbox Live tops six million users
Rob Fahey 15:12 (GMT) 06/03/2007 (Euro for March 6th, 2007)
Reaches key milestone four months ahead of schedule

The Xbox Live service has topped six million members worldwide, Microsoft has announced - demonstrating that the service is growing even faster than the company itself predicted.
Last year at E3, Microsoft pledged that it would double the subscriber base of Xbox Live from three million users to six million by the end of June 2007 - a milestone it has now reached four months ahead of schedule.

To mark hitting six million users on the service, Microsoft has released an update on key statistics related to Xbox Live - revealing that as well as the 2.3 biillion hours spent playing games on the service since its launch in 2002, Live is also coming into its own as a communication system, with over 2,000,000 voice and text messages sent between users every day.

Halo 2 remains the most popular game on the service to date, followed by Gears of War in second place and Xbox Live Arcade title Hexic HD in third.

However, while Microsoft revealed a number of statistics related to its Gold (paying) subscribers - such as the fact that on average, a Gold subscriber has 22 friends in his friend list - the company remains silent on the question of how many of its six million Xbox Live users are paying a Gold subscription, and how many are using a free Silver account. Silver users can download patches and content updates, chat with friends and access Xbox Live Marketplace, but cannot play multiplayer games online.

Today's announcement did, however, include an interesting update on the popularity of the Xbox Live Arcade service - and more specifically, on what the most popular games on the service to date have been.
Street Fighter II Hyper Fighting is the most-downloaded game on Arcade (based on downloads of the full version), followed by card title UNO in second, Bankshot Billiards 2 in third, and iconic launch title Geometry Wars: Retro Evolved in fourth.

Other games which have proved successful on the service are Texas Hold 'Em, PAC-MAN, DOOM, Contra and Ultimate Mortal Kombat 3, which fill out the chart from fifth place through to ninth place respectively. Overall, Xbox Live Arcade has seen 25 million downloads - and Microsoft estimates that almost 70 per cent of users who have connected their console to the network have downloaded from Xbox Live Arcade.

[Fool]

February Sales Numbers

http://biz.gamedaily.com/industry/feature/?id=15503

Nintendo Dominates February; Total Industry Sales Up 53%

If Nintendo keeps this up, they actually will be No. 1 again. The one-two punch of the DS and Wii is absolutely dominating. Overall, the industry had a spectacular month also. NPD's Anita Frazier tells GameDaily BIZ that she was "surprised by the sheer size of the increase." Data and comments within... Update: Comments from Michael Pachter

The NPD Group has released its video game sales data for the month of February, revealing an absolutely stellar month for the video game industry in what is typically a slower time. Total video game sales were up 53 percent to $978 million. Video game hardware was up 98 percent to $402 million ($289 million for consoles and $113 million for portables). Software sales rose almost 28 percent to $441 million ($334 million for consoles and $107 million for portables). Video game accessories totaled $136 million. Year-to-date (YTD), the industry is up 66 percent at $2.23 billion, but it's important to remember that YTD February '07 includes an additional week as compared to YTD '06.
Taking a closer look at the data, it's clear that Nintendo is dominating. On the hardware front the DS sold more than any other platform with 485K units, followed by the Wii with 335K units. The PS2 once again outsold the Xbox 360, 295K vs. 228K. Meanwhile, the PS3 sold a disappointing 127K, far below analysts' estimate of 200K. In fact, the old GBA even outsold the PS3, with 136K. Sony's PSP managed to sell 176K. Finally, trailing the pack (essentially on life support) was the GameCube with 24K.

On the software front, four of the top ten selling games were for Nintendo platforms. Here are the top ten, ranked by units, led by Microsoft's Crackdown.

Top Selling Games
1. Crackdown (Xbox 360) – Microsoft – 427K
2. Wii Play w/ remote (Wii) – Nintendo – 371K
3. Diddy Kong Racing (DS) – Nintendo – 262K
4. Legend of Zelda: Twilight Princess (Wii) – Nintendo – 130K
5. Guitar Hero 2 w/ guitar (PS2) – Activision – 130K
6. Gears of War (Xbox 360) – Microsoft – 119K
7. Major League Baseball 2K7 (Xbox 360) – Take-Two – 113K
8. Lost Planet: Extreme Condition (Xbox 360) – Capcom – 111K
9. WarioWare: Smooth Moves (Wii) – Nintendo – 109K
10. NBA Street Homecourt (Xbox 360) – Electronic Arts – 102K

GameDaily BIZ spoke briefly with NPD analyst Anita Frazier, who said that she was really surprised by the February sales numbers. "The sheer size of the increase surprised me, because it's one of the slower months of the year," she remarked.

While all the focus is on the battle between 360, PS3 and Wii, Frazier pointed out that it's still the older systems driving the industry. "Yes, the newer platforms are certainly ramping up, and the 360 is now a major contributor each month to industry performance. But the #1 platform in unit contribution and the #2 platform in dollar contribution is still the 'oldest' of what I'll call the 'Now-Gen' platforms: the PS2. Using the term 'legacy' or 'previous gen' certainly seems inappropriate for a platform that is continuing to provide such a solid foundation for the industry - certainly it did last year during the console transition, and it is still holding its own against the newer entrants."

Frazier also cautioned that despite the slow sales for PS3 right now, it's way too early to make any judgment on the console race. "I stick with what I've said for a few months now - we won't know how the console race will turn out for months to come. Remember that the first few months of PS2 sales were relatively slow, and we know what happened with that platform. I think we will need to weigh this question at the end of 2007 - only then will we really know how all the new content and features will ultimately affect sales of the hardware," she concluded.

[UPDATE] Wedbush Morgan Securities analyst Michael Pachter has now issued his report on the February results, including some additional data. There were 10 games that sold over 100,000 units apiece and the average selling price was up 11 percent to $33.31. Cumulative hardware sales in the U.S. through February for Xbox 360 stood at 5.1 million units, while Wii has sold 1.9 million units, and PS3 has sold 1.1 million units. (Even for just the U.S., those are still conservative numbers compared to others I've seen.)

Regarding Sony, Pachter said, "Demand for the PS3 is tracking below our expectations, while demand for the Wii remains strong. Once demand for the PS3 picks up later this year, we expect a greater decline in PS2 software sales. Although we expect a year-over-year decline of 30 – 35% for overall current generation software sales in 2007, we believe that next generation software sales growth will more than offset this decline."

He also said that he was "pleasantly surprised by software attach rates and overall sales for the Wii and PS3 platform," adding, "Although overall hardware sales for the two platforms fell short of our forecast by 16%, overall software sales exceeded our forecast by 17%. This was due to this month's tie ratios of 3.4 and 3.6 for the PS3 and Wii, respectively, compared to last month's 2.2 tie ratio for the Wii and 2.7 tie ratio for the PS3. While some detractors may consider the next generation cycle off to a poor start, we think that improving tie ratios indicate strong demand for the relatively light software lineup on the next gen consoles, and we believe that once a greater variety of compelling software is released later this year, demand for the new hardware will increase."

Looking ahead, Pachter expects the good times for the video game industry to continue into the summer. "We expect double digit monthly sales growth to persist through July, with releases such as God of War 2 (March), Guitar Hero 2 for Xbox 360, Pokemon Diamond/Pearl, and Spider-Man 3 (April), Shrek the Third and Mass Effect (May), Ratatouille (June), and Transformers, Harry Potter, and The Simpsons(all in July) driving favorable year-over-year sales. Total 2006 software sales (including PC) were +6% compared to 2005, and we believe that 2007 software sales will be +17%, with strong sales in the first quarter (+41% in the first two months) moderating to low double-digit growth during the second and third quarters when year-over-year comparisons become more difficult."

[MikeMyers]

Xbox live is definately the best thing about the xbox. They have mastered online gaming.

[Fool]

PSP price drop

GamesIndustry.biz reports that Sony has officially dropped the PSP price here in the US. Other markets will have to wait and see about a reduction in cost, but stores are already selling the portable console for $169.99, down from $199.99. "When asked if Sony has any plans to cut the price in Europe the spokesperson replied, 'We have no announcements to make about the PSP in the European market at this time.' The PSP competes in the handheld market with the Nintendo DS Lite, which has a lower price point of USD 129.99 / GBP 99.99. Last month Nintendo announced that more than 3 million DS units have now been sold in the UK, securing Nintendo a 68 per cent share of the market. "

[Moodini31]

Top 10 games for March 2007, based on number of units sold:
1. God of War II--PS2--833,000
2. Ghost Recon Advanced Warfighter 2--Xbox 360--394,000
3. Guitar Hero 2--Xbox 360--291,000
4. Wii Play with Wii Remote--Wii--273,000
5. MotorStorm--PS3--199,000
6. Diddy Kong Racing--Nintendo DS--189,000
7. Spectrobes--Nintendo DS--165,000
8. MLB 2K7--Xbox 360--165,000
9. MLB '07: The Show--PS2--164,000
10. Def Jam Icon--Xbox 360--148,000

[Fool]

WMS: PS3 to 'Win' Console War Because of Blu-ray

Wedbush Morgan Securities has issued a report on the video game industry for 2007 and beyond. Huge growth is expected, and analyst Michael Pachter believes the PS3 will ultimately win (just barely) thanks to the Blu-ray format, which he expects to defeat HD DVD.

In a massive 207-page report on the interactive entertainment industry for 2007, Wedbush Morgan Securities analyst Michael Pachter notes that while "the main driver of console hardware sales is the quality and quantity of the underlying available content," the high definition format war between HD DVD and Blu-ray could be a key factor in determining the console war outcome.
"Notwithstanding the efforts of the three console manufacturers to deliver compelling exclusive content, we expect the ultimate outcome of the console wars to be decided by the motion picture studios. Should the studios embrace Sony's Blu-ray standard for high definition DVDs, we think Sony will gain an insurmountable advantage over Microsoft; should the studios embrace Sony rival Toshiba's HD-DVD format, we think that Microsoft can maintain its first mover advantage and will dominate software sales for years to come," Pachter explained.

The wildcard, he said, will be "hardware manufacturers' ability either to develop content internally or to secure third-party commitments for software designed exclusively for a single platform." The playing field in this area is likely to be even for Microsoft and Sony, he said, while Nintendo will probably have the largest portfolio of exclusives.

So how does Pachter see the console war ultimately playing out? Despite Sony's early struggles with the PS3, he still believes Sony will come out on top.

"We expect the dominant console at the end of the next cycle to be the Sony PlayStation 3 (PS3), primarily due to our assessment that Sony will win the high definition DVD format war," he said. "However, we expect Microsoft's Xbox 360 to enjoy a first mover advantage for the next two years, capturing approximately 44% of U.S. and European combined next generation hardware unit sales by the end of 2007. We forecast the PS3 and Nintendo's Wii to capture approximately 21% and 35%, respectively, of the next generation hardware market in this same period. We forecast the Wii to take the lead in 2008, with 39% market share, and expect the race to even out in 2009, with all three console makers capturing between 30 – 37% of the overall market.

"Ultimately, we see Sony 'winning' the console war with 36% of the market, with Nintendo 'capturing' second place at 34% and Microsoft finishing third at 30%. We believe that this is essentially a dead heat, and each manufacturer will have sufficient market share to generate significant profits. These estimates do not include market shares in Japan, which we expect to be dominated by Nintendo (51% through 2011) and Sony (44%)."

Looking at the overall health of the industry, Pachter is forecasting the combined U.S. and European software markets to grow at a 16.1 percent CAGR from 2007 to 2009. WMS estimates that the addressable market opportunity for U.S. software publishers is a whopping $17.7 billion in 2007.

In a separate report from Lazard Capital Markets, analyst Colin Sebastian said he expects at least 15 percent software sales growth in North America this year. "We believe video game sales remain generally healthy year-to-date despite tougher year-over-year comps for the remainder of 2007," he said.


by James Brightman

http://biz.gamedaily.com/industry/feature/?id=16061

[Fool]

Bach: Xbox Business Profitable Next Year

Microsoft's Robbie Bach (right), president of the Entertainment and Devices Division, has said that the Xbox 360 business will become profitable in 2008 and he outlined the ways in which Microsoft plans to make money with the console.

Microsoft has been in the console video game space for nearly six years now, and the Xbox business has yet to be profitable. In fact, one analyst believes it's been a "disastrous endeavor" for the company. For the nine months ended March 31, Microsoft's Entertainment and Devices Division (EDD), which houses the Xbox business, just reported an operating loss of $693 million.
EDD President Robbie Bach doesn't expect the losses to keep piling up, however. In a new interview with eWeek.com, the executive explained Microsoft's thinking behind making money on Xbox and he promised that the business would indeed be profitable in 2008.

"Right now we're doing a pretty good job," he said. "We're humming pretty well in the business. Our costs are a little higher than we'd like, [but] we're pushing those down; there are good initiatives underway to drive that. Game attach rate [is at the] highest level in history for a game console at this stage in the life cycle. The same with our peripheral attach rate. Xbox Live has over 6 million members.

"The pieces are in place to drive the proverbial billion dollars. Specific date—oh, that's going to depend on what happens in pricing, which partly we control, partly we don't. You know what happens in component costs—mostly we have pretty good influence over that, but there are places where we don't. Pricing on memory goes up and down seemingly like a yo-yo, so [we have to manage] through that. So, it's a business that will be profitable next year—we'll make money next year and that will be the first time, which is pretty exciting. And then the next two or three years are the place where you need to make tracks, and the next two or three years are where you have to make money."

Bach also explained the ways in which Microsoft can make money, mostly focusing on the standard "razor and blades" model, but also adding in services like Xbox Live and the sale of peripherals.

"There are three ways to make money on an Xbox," he stated. "Generally it's not on the hardware itself; we'll probably be gross margin neutral on that over the life cycle of the product and try to break even on that. The second thing you try to do is you make money on the games themselves, and there are two models there. One is first-party games that Microsoft produces. The other is games that Electronic Arts or an Activision produces, and we get paid a royalty on those games. The third place you make money is on Live, and where we actually have a very nice service that's scaling very well, and that is a business model that's subscription, ad-based, and download-based. It kind of has the full gamut of business models associated with it, and I think you're going to continue to see that grow. And then the final place you make money is on peripherals, so game controllers, cameras, steering wheels, a whole other set of things."

http://biz.gamedaily.com/industry/feature/?id=16047

[Moodini31]

Report: Sony facing massive PS3 losses

Analysts estimate game division could post quarterly loss of $1 billion, according to Bloomberg report.

Sony is expected to report its quarterly earnings tomorrow, and a group of analysts are bracing for bad numbers, according to a Bloomberg.com report. The financial news site obtained predictions of Sony's quarterly results from 11 industry analysts, and the group's median estimates for the electronics giant were a company-wide loss of 75.8 billion yen ($630 million), with revenues up 9.5 percent to 2.02 trillion yen ($16.8 billion).

As for the culprit behind those projected losses, they appear to be due to the game division and then some. Bloomberg said responses from five of the analysts pegged Sony's game group as posting a quarterly loss of 121 billion yen ($1 billion), completely wiping out expected profits from the rest of the company's divisions. The gaming business more than offset gains from Bravia HDTVs and the box office performance of Spider-Man 3, according to the report.

http://www.gamerankings.com/itemrank...?newsid=156826

Sony needs MGS4 now.

[Glenn]

I don't know shit about this stuff, so this could be the wrong thread (move, if so, Mood), but I heard on the way to work today that Sony just announced a $100 price break for PS3 (down to $499).

They also announced a new version of the PS3 with 20 more GB of hard drive space.

Just sayin'

[Moodini31]

I don't know shit about this stuff, so this could be the wrong thread (move, if so, Mood), but I heard on the way to work today that Sony just announced a $100 price break for PS3 (down to $499).

They also announced a new version of the PS3 with 20 more GB of hard drive space.

Just sayin'

This spot works for me Glenn, but I think Fool posted the same info in the PS3 bashers thread. I guess it works in both spots....it's all good. Still not getting one though. I'm going to need another price drop, Metal Gear Solid 4 and God of War 3 first.