Blog Post

Xbox Rising

So the ad campaigns have been launched, the lines have been formed, and the products (most of them, anyway) have been shipped. With holiday shopping in full roar, there’s little Nintendo, Sony, and Microsoft can do now to help the prospects of their next gen consoles, but wait for the market’s verdict. Here at GigaOM, we’ll be doing the same, waiting to see which console gamers spend their often capricious dollars on.

That said, the number of the week is 10 million. That’s the number Microsoft is sticking with; on second thought, make that 10 million plus change. Based on current market demand, that’s how many Xbox 360s that Peter Moore, the company’s gaming ubermensche, claims they’ll sell by the end of this year, worldwide. Next Generation also reports that Sony expects to have 2 million Playstation 3s on the market, and Nintendo, 4 million Wiis.

For those scoring at home, this means (assuming all of those units ship and sell), the world’s next gen market will break down like this at the end of the year:

Xbox 360: 62.5%,
Wii: 25%,
PS3: 12.5%

Previously I had predicted that Xbox and Wii would split the market evenly, with PS3 far behind, but looking at the numbers that way, I have to say, only the last part appears on target.

Microsoft’s lead seems unbeatable now, fueled by a one year head start, the raging success of Gears of War as 2006’s killer app (it’s already become Xbox Live’s most popular multiplayer game), and most recently, a blitzkrieg of promotion for Halo 3, scheduled for 2007. (The game’s ultracool teaser ad is now causing collective squeals of geek delight.)

10 Responses to “Xbox Rising”

  1. My 2 cents…

    Sony has a supply issue. They lost a battle. That is the bottom line. They will get it fixed. Sony will likely win the war.

    For the sake of the argument, let us assume that the the appearance of a single frame screen shot between the PS3 and the Xbox 360 are comparable.

    The PS3’s AI potential is by far superior. The raw processing power of the Cell BE will impact game play and visual realism in a variety of ways you can not deduce by comparing graphics alone.

    Sony’s pricing is not an issue. The price of an Xbox 360, hard drive and a HD-DVD drive come out to roughly the same. Sure you can find deals on 360’s but Sony doesn’t need to lower their prices or provide discounts. They can’t keep them on the shelves the way it is! The issue for Sony is supply and supply alone. This will not be an issue in short order.

    The Wii is an amazing system. It will carve a very nice place for itself. Who knows, perhaps it might win the Console war with regard to units sold? However, the next generation console is less about next generation controller technology and everything about the “Connected Home”. In this area, Nintendo falls far short.

    The XBox 360 and the PS3 are the tools that Microsoft and Sony are leveraging to define their broader consumer business strategy. In terms of gross revenue/profit, the collective market opportunity is much more significant to these guys than just gaming.

    Giving a consumer access to their photo, music and video collections in a way that can take full advantage of an HD display is part of the equation. So are the next generation DVD formats and the ability to access multimedia content through relevant online marketplaces. How about IPTV?

    This puts PS3 and the 360 in a separate league than the Wii.

    I’d bet on Sony…but hey, what do I know? Only time will tell.

  2. This is a crazy assumption. Both the Wii and PS3 have only been on sale for 3 weeks, and supplies are so limited at this point that to make an assumption based on production rather than sales is just wrong. Just to give you an idea, the PS2 is outselling both the Wii and PS3 on Amazon.

    Despite the crazy name, Nintendo will outsell both of them over the next six months. They were basically out of the game, but their Wii remotes are fantastic, a revolution in gaming, and something we will see on Sony’s and Microsoft’s next generation of systems.

  3. Hi Brad,

    sorry for a confusing post :-) What I meant is that Nintendo will win, because:

    1) Both consoles are subsidized, but Nintendo had lower development costs than Xbox (just google around for more info).

    2) Nintendo games cost less to develop, but cost similarly to XBox games. Therefore profit for game developer is higher and hence Nintendo’s share from the sales will be greater than MSFT’s as well.

    3) In this situation, it will take them many less consoles than MSFT to sell to break-even. But because of their technology, they have in-fact grown the market, so it seems that they will even outsell the others.

    So in the end they will generate far more profit than MSFT, while making both gamers and developers happy. Win-win situation indeed.

  4. Jeff,

    The cost between the consoles is another big factor there. Regardless of games, if you can pick up a Wii for your kid for $250 or an Xbox for $399 w/ the hard drive, which would you choose? I do have to admit that the price drop will help, but Wii will still move alot more units than the Xbox.

    Also, the publishers moving towards a more friendly and innovative development platform will alleviate some of the ‘still firmly in the hands of Sony’ effect that you have trickling down from contracts in the PS1 era.

  5. Who cares about the volumes.

    The eventual winner will most certainly be Nintendo – they will have managed to get more people into gaming & sell a lot of consoles while keeping their development costs much lower than both competitors. The price difference between Wii & XBox games is at most $10 – so discounting the distributor’s margin, the price difference is minimal.

    Anyone wants to guess who is going to be more profitable? Wonderful disruptive strategy…

  6. Nima Negahban

    This article seems very U.S biased. You fail to mention how Microsoft has not been able to create any sort of meaningful penetration in Japan (based off of consoles sold and partnerships made).

    Sure they have some inroads, but the big titles and the big Japanese Publishing Houses (Namco, Square Enix, Konami) are still firmly in the hands of Sony. That means titles like:

    Final Fantasy
    Metal Gear Solid

    Are PS3 exclusives.

    Why does Japan matter? Gaming is a bigger part of Society in Japan then in the U.S.

    The average consumer there spends a lot on gaming and more importantly the Japanese are far more accepting of new or different gaming ideas. This ‘openness’ lets Japanese development houses be more creative and while not all hits in Japan correlate to a hit in the U.S the ones that do will usually be in a partnership with Sony. Katamari Damacy is a great example of this.

    That said I own a 360 and love it, I hope it does well. But lets get all the facts out.

  7. I have to add that the Xbox Live! Marketplace should be noted as a considerable influence. In fact, I believe it to be the single most important aspect to the console’s success.

    The main problem that the last generation of systems saw was an inability to flourish between huge titles. You had launches like the new Tony Hawk game, Halo 2, or Super Smash Bros: Melee that would spur system sales for a short period of time but after that there was just a wasteland of monotony.

    Enter Xbox’s online system, literally providing endless hours of entertainment, all of which began with a few small games and exclusive videos during E3. Not only did Microsoft figure out a way to monetize these items via microtransactions, they continued to evolve their Live! system until it became a staple in every owner’s life which forced Wii and PS3 to follow suit.

    This ‘always on and accessible’ mentality displays the difference between the Xbox marketing team and your average Vista pusher. The Microsoft strategy of copy, improve, and release can be seen across nearly all of their products, but the Xbox 360 represents actual innovation.

    There’s a reason that every Digg comment on the Zune reads along the lines of, “Let Jay Allard have a swing at it.”

  8. this is the first time I won’t be a sony console customer. i’m going to make the jump to xbox. all my friends who have one just can’t say enough good things about it. and maybe later i’ll pick up a wii for the little ones.