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The latest from the video game analysts: The good, the bad, and the ugly

Filed under: E3 | GBA | Nintendo | Nintendo DS | Nintendo Wii | PS2 | PS3 | PSP | Sony | Video Game Politics | Xbox | Xbox 360
Posted by Allison on May 18, 2006 10:06 AM
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The good: NPD Funworld, a leading marketing information provider for the video game industry, has reported a 16% boost in sales for the month of April 2006 ($699 million), when compared with sales for April 2005 ($602 million). This boost puts the 2006 year to date sales shy just 1% of the 2005 sales for the same period. Not too shabby for a "transition period" which was supposed to show a significant decline in sales.

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The bad: PS3, PS3, PS3. First, Bloomberg, a leading source of financial news, predicts problems with the PS3 launch, which are primarily based on an anticipated delay in Sony's ablitity to get development kits to game developers in time to take, "full advantage of the system's capabilities".

Next, DFC Intelligence, another leading marketing information provider for the video game industry, predicts slow growth for the video game industry, as a whole, based on the $499 price tag for the cheaper of the two PS3 models being released this fall. According to DFC, "The video game business model has been to build an installed base of tens of millions of users in a very short time frame. A key factor in this model is relatively low cost hardware." So, take away the low cost software, you have slowed growth.

The ugly: Analysts drive me nuts. As pointed out in, "the good", sales are down only 1% year to date from the same period last year, despite being warned by a handful of analysts earlier this year that the video game industry was going to take a major hit this year. Analysts of the video game industy seem to miss the bigger picture, and they do so with regularity.

Look at the Bloomberg report. According to it, Sony will have launch problems because the games that will be available at launch won't take full advantage of the PS3. Can someone please let Bloomberg know that, of the consoles that have launched over the past decade, not a single one has taken full advantage of the system at launch.

Will the PS3 have launch problems? Absolutely. And do you know why? Because that's what happens when consoles launch (with the possible exception of Nintendo products). Granted, the PS3 price tag is so incredibly high, the demand could be less than expected, but that lesser demand won't affect that first round of consoles being released. If, and only if, the PS3 launches with a couple PS3 exclusive titles that people really want to play, that high price tag won't affect the next couple of rounds, either...but, really, the initial demand will be based on the software, not the price tag. With that being said, the price will have to fall relatively quickly, as the software will only outweigh the price tag at the beginning. When the hype burns off, we're still going to be left with a very expensive PS3...and that's where the trouble will really begin (assuming, of course, that Sony has fixed its launch problems by this time).

If Sony doesn't cut the price of the PS3 within the first year (or at the year anniversary), Sony will be in trouble. However, this, in no way, means the video game industry, as a whole, will be punished. The Wii is going to blow people away. The Xbox 360 will keep on keeping on. The PS2 will keep on keeping on. The PSP, the DS, and the GBA....each one will keep on keeping on. None of these consoles are tied to the success or failure of the PS3, not even the Xbox 360. And no console will be successful, and the video game will not be successful, if there aren't great games available to gamers. It's that easy. Anyone who tells you anything else is missing the bigger picture and should be ignored.






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