Screen Digest – Q4 Prediction

Since the late 2005 launch of Microsoft’s Xbox 360 marked the beginning of the current next-gen home console generation, all three platforms have had to contend with the issues of hardware supply problems, paucity of games releases and transitioning gamers from previous generation (128 bit PS2, GameCube, Xbox) console platforms to current platforms.

Naturally, publishers of proven multi-platform franchises have been swift to offer next-gen versions. However a critical mass of platform exclusive games exhibiting an ample differentiation from previous generation titles and a quality and breadth of appeal necessary to drive the sales of hardware has arguably been lacking.

The end of the third quarter of 2007 and the key Christmas shopping season promises, for the first time since the generation began, a perfect storm of plentiful hardware supply and games catalogues to interest millions of potential purchasers, as well as value oriented bundles and hardware price cuts.

It seems that the factors which will move next-gen home console platforms from the transition and launch phases of the hardware cycle squarely into the mass adoption phase have arrived.

Much has been made of the Xbox 360’s year-long headstart and there is little doubt that this has conferred a number of advantages on the platform.

* From a software perspective the primary advantage is simply offering more games to potential purchasers: since launch in 2005 to the end of 2007 we believe that there will have been in the region of 250 Xbox 360 titles released compared with around 130 for the PS3 and 230 for Nintendo’s Wii.

* One might question whether Microsoft has fully capitalised on the head start. Certainly vis vis Sony’s PS3 the current indications are that the Xbox 360 has maintained a significant lead in terms of software support and subsequently the volume of titles and exclusives available to consumers. Despite unfulfilled expectations in the Japanese market, Xbox 360 will end this year with nearly double the number of titles available to consumers.

Nintendo will, however, be encouraged by the level of support Wii has managed to garner since launch at the end of 2006.

* By the end of the year the Nintendo Wii will have barely twenty less SKUs available for Wii owners and will surely surpass Xbox 360 in early 2008 if current trends persist.

* Multi-platform software publishers have openly commented as to how the pace of Wii hardware sales had caught them somewhat unawares and subsequently shifted development resources towards the platform (with the inescapable corollary that the support resources in question have been deprived from the other next-gen platforms).

* Since launch, software release volume for Wii has surpassed Xbox 360 releases on a quarterly basis and by the end of the year will have almost caught up with the Microsoft platform cumulatively.

* The marked acceleration in Q4 2007 in terms of number of releases for Wii, when we anticipate around 85 Wii releases compared with fewer than fifty for Xbox 360, is likely to mark the point at which Wii gained parity with Xbox 360’s games library before surpassing it in 2008.

Such shifts in development resource commitments can take months to materialise at retail. However a degree of urgency has been provided by Wii hardware’s current market-leading sales. Unsurprisingly publishers have proved reactive to the hardware trends: Naturally there is an installed base imperative.

However, given Wii architecture’s similarity with predecessor GameCube, it is certainly true that increasing Wii development entails less resource than doing likewise for Xbox 360 and PS3 platforms, both of which boast substantially different architectures to their predecessors.

The issue now is whether such resource shifts can be maintained and whether third parties can appeal to Wii owner’s games tastes as effectively as their principle competitor: Nintendo itself.

Although we expect third-party support for the PS3 to refocus, switching resources to a more expensive platform will not be as straightforward or as risk averse to the publisher as shifting resources towards cheaper Wii development. If this situation is left to persist and Nintendo’s third-party momentum carries forward, Sony will find it increasingly difficult to offer a suitable alternative to re-enact the kind of third-party support it enjoyed on the PS2.

Screen Digest

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