Analyst: 360 to maintain lead, PSP to pull ahead

UBS's Mike Wallace thinks Microsoft and Sony will win the next-gen console and handheld wars, predicts 3 percent spike in 2006 software sales.

Citing the start of the next-generation console transition and the lack of a Halo 2 or San Andreas-level blockbuster, many analysts predicted game sales would shrink in 2005. And while US retailers sold $10.5 billion of combined gaming hardware and software--6 percent higher than in 2004--taken alone, software revenue did slide 3 percent, from $6.25 billion to $6.06 billion.

Now, more and more analysts are beginning to predict what 2006 has in store for the game market. The latest expert to join the chorus is Mike Wallace, the lead game analyst at the Wall Street investment firm UBS. "We expect US software sales to grow 3 percent in 2006 (up from a 3 percent sales decline in 2005)," he said in his most recent report. "This is up from our prior view of flat sales in 2006, with the year-over-year increase mainly due to 2005 being weaker than expected."

Wallace believes the increase will be fueled by the debut of the second and third next-generation consoles. "The launch of Sony's PlayStation 3 console later this year, along with the launch of Nintendo's Revolution console, should represent the official start of the new cycle," he said. He also agreed that the PS3 will miss its previously announced spring launch window and will go on sale across the Pacific first. "We think a summer launch [in Japan] is more likely, with the US and Europe launches still expected in Q4," he said.

As for which console will win the first round of the next-gen war, Wallace thinks that Microsoft's decision to launch first will pay off. "We are projecting meaningful sales of Microsoft's Xbox 360 (4 million units) in the U.S. this year," he said, going on to forecast that the PS3 and Revolution will sell around 1 million units each by the end of the year.

By contrast, the Xbox 360 sold only 607,000 units by the end of December 2005, thanks to widespread shortages. That said, Wallace predicts that the current drought in supply of the console will end in the spring. "Xbox 360 hardware supply continues to be constrained, which will probably hurt industry sales over the next few months," he said. "However, this situation should improve throughout the course of the year, as Microsoft works out its manufacturing issues with the console."

Looking farther ahead to 2007, Wallace believes the 360 will maintain a sizable lead over its rivals. "We are projecting the Xbox 360 and PS3 console installed bases to exceed 10 million units and 7 million units in the US that year, respectively, while the Revolution installed base should surpass 3 million units." He also said that a slowdown in PlayStation 2 sales will be somewhat ameliorated by a price drop from $149 to $99, most likely around E3 in mid-May.

As for other platforms, Wallace believes Sony will also cut the price of the PSP--a move that will lead it to pull ahead of the DS in overall sales. "The next-generation handheld installed base should also start to represent sizable numbers in 2007, as we expect the PSP and DS installed bases to reach 15 million units and 10 million units that year, respectively." However, Wallace stated that Nintendo's Game Boy Advance will give it an edge in the overall handheld market in 2006, saying "ongoing sales of GBA should be driven mainly by the continued popularity of the Game Boy Micro."

Peering even deeper into his financial crystal ball, Wallace thinks that the game industry will continue to grow at a healthy pace. He predicts that in 2008, the combined installed base of all three next-gen consoles (PS3, Xbox 360, and Revolution) will exceed 38 million units and will climb to a whopping 52 million units in 2009.

As for the portable market, he projects that there will be 34 million next-gen handhelds (that is, the PSP and DS) in gamers' hands by 2008, with the number rising to 43 million the following year. He did not give figures for the Game Boy Advance's installed base in those years.

302 Comments

  • lzorro

    Posted Feb 26, 2007 1:14 pm PT

    Now that's something you don't hear every day.
    My turn, Ford will retake Toyota as the world's second largest automaker thanks to the Ford Edge, Lincoln MKX, and renaming the Five hundred the Taurus.

  • deadmeat59

    Posted Feb 26, 2007 1:06 pm PT

    lol psp ftw?

  • genfactor

    Posted Feb 26, 2007 12:59 pm PT

    I guess this shows just seriously we should take predicions from the so-called experts. Everyting he said came true......um....no it didn't.

  • OhhSnap50893

    Posted Feb 26, 2007 12:54 pm PT

    The PSP's got nothing on the DS, nothing.

  • the_only_zigg

    Posted Feb 1, 2006 4:50 am PT

    I think that the DS will probably have the lead for the rest of its life thanks to the new version, but the PSP will be clsoe behind. It doesn't matter though becasue I own both. TEEHEE

  • god_of_shawn

    Posted Feb 1, 2006 4:22 am PT

    I think that the PSP will take over ds if the price drop.....i wun mind paying juz a bit more to buy a psp since the functions r so gd n the game graphics is way better than ds......for the ps3 n rev......always consoles that r released first will always lose in the end.....look at ps3's graphics.....compared to xbox 360....of course the ps3 will win.....the rev's design is better than these 2 consoles.....sony is smart to release later....since other ppl can hold thier cash on to buy a gd consoles....since every1 knows that xbox 360 cant beat ps3.....on graphics n mostly games sony will always win.....sony is so gd at making great games.....n this time xbox 360 wun beat them at graphics....they say that ps3 is gonna cost alot of $$$.....so u should save $$$ to buy....dun care abt other ppl having xbox 360....when u have the ps3 ppl will become jealous over ur console......so be smart n save the $$$.....have a great time reading......

  • deadfire24

    Posted Jan 31, 2006 4:01 pm PT

    The ds sucks compared to the psp and thats all there is to it, psp can go online, show live tv, play awesome games, store mp3 files, mp4(video) files as well as provide more and more software upgrades. The ds can do what....... oh yeah it can let you talk to other people. If i wanted to say something to someone i wud just say it. The ds has 1 or 2 good games, those consist of mario and mario kart. Wow ds really is great........NOT. PSP is WELL worth the xtra 100$ and is the best handheld system ever made, so far that is. The only one that will surpass it is psp 2!

  • deadfire24

    Posted Jan 31, 2006 4:01 pm PT

    The ds sucks compared to the psp and thats all there is to it, psp can go online, show live tv, play awesome games, store mp3 files, mp4(video) files as well as provide more and more software upgrades. The ds can do what....... oh yeah it can let you talk to other people. If i wanted to say something to someone i wud just say it. The ds has 1 or 2 good games, those consist of mario and mario kart. Wow ds really is great........NOT. PSP is WELL worth the xtra 100$ and is the best handheld system ever made, so far that is. The only one that will surpass it is psp 2!

  • Jebanvil74

    Posted Jan 31, 2006 3:18 pm PT

    The battle between the PS3 and the 360 will depend on the number of games and at what rate the top games are realesed on each console. As for the PSP and DS, it is a two sided story in that nintendo has the market for younger audiences, but Sony doesn't seem to care right now, which is proven by the price of the PSP. Sony needs to have a lot of more titles available and a cheaper price before we can discuss real comparisons.

  • ben_grasso

    Posted Jan 30, 2006 11:46 pm PT

    They will sell more PSP's if they drop the price, it would exceed the sales of the DS but then people will realise after a couple of months that the DS is way better and the DS will then exceed and claim victory. Well thats what I see anyway.

  • gtimandan

    Posted Jan 30, 2006 12:33 pm PT

    Jonesy, I'd be inclined to agree w/you that MS wouldn't succeed in the handheld market since the majority of their successful games lean heavily towards MSLive and are of the MMORPG ilk. How immersed could you get in such games w/a handheld that usually gets played for 10-30 mins? There are already too many handhelds on the market and ones trying to expand into it [Tiger Electronics, Nokia] are failing even w/decent offerings.

  • jonesyboy1

    Posted Jan 30, 2006 6:28 am PT

    Idiot.... Microsoft aren't going to join handheld market as they have announced. They will support nintendo though as their main rival is sony.

  • gtimandan

    Posted Jan 29, 2006 10:34 pm PT

    Analysts can only speculate based on market trends, mfr output [chips, software], forecasts of currency strengths and such, but they don't have a crystal ball and are often somewhat or even GREATLY off target in their predictions which are typically based only on numbers, a lot of which are only being guessed upon. I'm sorry - Sony may reign supreme in the home console sector, but I will be truly surprised if they can beat Nintendo in the handheld market. Nintendo makes GAME systems, not electronic Swiss-Army knives. If you want to play GAMES [and what gamer doesn't?], the DS, GBA/SP or Micro is the way to go. I guess if everyone wants an iPod/PS2/DVD player/Net browser in one handheld machine, then maybe Sony will take over but I'm doubtful. One huge caveat: if the fragile PSP breaks or you lose it, you lose ALL of those devices vs. having separate machines that do those tasks individually and probably better. There's not much gaming innovation in the PSP, either. Not a Nintendo fanboy, btw...I've got everything but MS machines. And I *DO* mean everything. Having used the PSP for a few hours, I'm just not impressed by its only offering: An UBER cool-factor. And what's w/the PSP UMD movies costing MORE than their DVD counterparts?! Too much style and too little substance for my gaming dollars, at least right now. Drop it to $179 or less and bring out some decent games and I might bite. I see DS winning this war.

  • boolow407

    Posted Jan 29, 2006 8:02 pm PT

    Captain...The only reason the DS is beating the PSP is because its cheaper and the DS doesnt have many good games? Hmmm...Sony seems to shotgun their releases. Sony or third party developers will release 25 games and out of that you get 5 decent ones. Nintendo seems to put alot of time and care in their releases. Sure there are flops, but look at the ratings in Game Informer for PSP games vs DS games. Saying DS has no good games goes against what people are saying. Although this is the majorities opinion, you might like the style of games released for the PSP. Personally, I like the DS games, but I dont like the controls. I have pretty small hands and I feel like an ogre playing the thing. I wonder when MS is gonna jump on the handheld bandwagon.

  • brianurlacher

    Posted Jan 29, 2006 7:33 pm PT

    And oh ya, saif12345 its been more than 1 second.

  • brianurlacher

    Posted Jan 29, 2006 7:32 pm PT

    if this guy is so stupid how come he is the lead game analysist at wall street and you guys are some random kids who's diet consists 95% of pizza, mountain dew and doritos?

  • Hydrochronikz

    Posted Jan 28, 2006 4:24 pm PT

    Laughable...

  • ddrzeldafan

    Posted Jan 28, 2006 2:10 pm PT

    wow im sick of people not giving nintendo enough credit. The DS will still outsell the PSP for one reason and one reason only, the DS has really good games while the PSP only has GTA and maybe FFVII spinoff(whenever that comes out).

    Also this guy is predicting that the Revolution will sell way less the 360 or PS3. No doubt less than PS3, but still no one knows yet how much and how well the Revolution will change gaming. People might go crazy for it.

    Side note: no way will 360 outsell PS3 by end of 2007, no way.

    gamespot, i ask you, how could you post this?

  • PeeeU

    Posted Jan 28, 2006 1:07 pm PT

    This guy is an idiot.

  • The_Capitan

    Posted Jan 28, 2006 9:26 am PT

    I think that the PSP has a huge chance of beating the DS if the price drops because the DS doesn't have very many good games, the only thing better is that it's cheaper.

  • Blue_Dragon_7C

    Posted Jan 28, 2006 3:18 am PT

    he has such high hopes for the psp

  • pathogenb

    Posted Jan 27, 2006 10:51 pm PT

    "Sorry RionX but the lunch lineup was so completey weak for the Xbox 4 or 5 of the games were originals not just second rate upgrades if you can call them that."

    yeah. b/c Fantavision and The Bouncer were such great launch titles. nice try, mang.

  • saif12345

    Posted Jan 27, 2006 2:45 pm PT

    i think psp will beat the crappy ds in a second

  • illkas

    Posted Jan 27, 2006 12:55 pm PT

    Don't forget sometime around probably Q4 2007 Microsoft should have a HANDHELD of there own out w/ multimedia and other great wireless controling features.

  • nas6192003

    Posted Jan 27, 2006 1:01 am PT

    Sorry RionX but the lunch lineup was so completey weak for the Xbox 4 or 5 of the games were originals not just second rate upgrades if you can call them that.

  • Desma

    Posted Jan 26, 2006 9:49 am PT

    I think the fact of the matter is, Nintendo is like an Independant company. I think they care more about what THEY want than what the majority of the public wants. Nintendo isn't stupid, they know exactly what they are doing, they're just not like SONY and MS. I respect Nintendo and we need to remember that they are the ones that created legendary characters, Mario, Zelda, etc. And to add to that they had they're own shows. They are the Grandparents of the Gaming industry and has survived longer than Sony. It will take a lot more to bring them down. . I believe Nintendo is all about innovation that doesn't cater to the typical gamer generation. I don't own a GC, DS, or GBA but I still respect them because of their choices and who they are. Sony and MS are just successful companies who know how to play the market, but it will take a lot to get to Nintendo's status, to achieve a name in the Gaming industry. For example, if you mention 'Nintendo' they will automatically know what you're talking about, and that's amazing. The name Nintendo is heard through out the world, I'm pretty sure aliens know who they are Sony and MS are just money makers, they are not interested in creating an art piece.

    I believe that SONY and MS will obviously dominate the market, but MS is very smart and they understand their audience. From reading the press conference, forgot what is was called, Sony is an arrogant company and I think will fall because of that.

  • dru26

    Posted Jan 26, 2006 8:52 am PT

    The 360 is one of the hottest items out right now. From the mouth of a Toys "R " us rep, "Having a 360 is the equivalent of finding gold".Until it is on shelves collecting dust, how could anyone consider the launch a flop. American sales statistics are all I care about. There is a clear patriotic bias against MS in Japan.

  • DangerousFat

    Posted Jan 26, 2006 8:14 am PT

    Innovation doesn't sell consoles. Price alone doesn't sell consoles. And if I hear one more person say the PSP doesn't have good games, I'll scream. Have you played Tokobot, Armored Core: Formula Front, Legend of Heroes, Metal Gear Acid, Kingdom of Paradise, and it's got some good ones coming up: Field Commander, Monster Hunter Portable, Generation of Chaos, Mega Man and Street Fighter for goodness sakes. That's just naming a few. These are good games, they are fun and a couple have some great replay value. The only issue I have with the PSP is that I think it's a niche handheld. Few people buy it just for the games, it costs too much. If you don't use it for movies, music, internet, AND games, then you're kind of wasting the system.

    As far as the 360 and PS3 go, the PS3 will continue the trend of the PS2. The PS-series of consoles have rocked this gaming world and continue to do so. More PS consoles have been sold than all other last, current, and next gens combined. The biggest reason for this is the library. There are more games on the PS's PERIOD. Beyond that, there are more games with higher ratings and sales than any other system. It's a numbers game, Sony's consoles have the power and the licenses. End of story.

    The Revolution will meet with mediocre success because other than the people that buy anything Nintendo makes, I don't think many other people will buy it. I want one because Nintendo makes about 3 good games a year and I want them. For my GameCube I have Resident Evil 4, Fire Emblem: Path of Radiance and will get the new Zelda. That's the 3 games that have and will sell that console. That and anything with the Pokemon name. Nintendo's biggest problem is it doesn't want to grow up with it's original fan base. We're all in our 20's now, and if you're not, then you're not a true Nintendo fan. We've played the original Nintendo, the 5 pound puke-green colored GameBoy screens, we've had a GameBoy Pocket, Pocket Color, we've had Super Nintendos, N64's and now GameCubes. Nintendo needs to sell more to us, we want to buy their stuff, they just give us next to nothing to buy.

  • peppergreen

    Posted Jan 26, 2006 8:04 am PT

    You guys are all too subjective to your personal tastes....you guys probably still drinking baby powder to even know what UBS is. In Asia, DS is a non-factor at all, everyone on the streets owns a PSP (thanks to much better Japanese software than the DS). If you look at the overall market in the world, PS2 sales in aggregate are much much more than Xbox or as matter of fact , N64. Its gonna be the same for next-gen consoles. Not a single soul buys an Xbox in Asia at all, not even 360 (softwares' genre not catered to region, too bulky, horrendous sales even at a shortage). Everyone seems to be waiting for PS3. Sony will win the battle hands down. Sony just has much better quality softwares (mostly through japan) to complement their systems.

  • ZtingerViper

    Posted Jan 26, 2006 7:05 am PT

    I don't know but nex-gen consoles just don't look like next gen anymore, i'm thinking of picking up a psp and a clevo laptop with a nVidia Geforce 7800 Gtx 256MB video card with an athlon 2 and skip next gen consoles and maybe trow in a good gamepad, i can still play pes5 in my lappie before these morons decide to lower the prices a bit and consoles hava a proven lineup, they have messed the processors BTW, onli ati or nvidia chips are saving next gen consoles

  • raquor

    Posted Jan 26, 2006 6:57 am PT

    Now children....

    PSP...DS....got em both...neither is any better than the other...the pros and cons of each balance each other out and in the end the hurt on your wallet is the deciding factor for most.

    Myself, I"ve always loved Metroid, Mario, Zelda, and now Pokemon. I'll be grabbing a revolution when it comes out and speaking of it check out this rant:

    Revolution is not going to OUTSELL sony or MS, BUT that doesnt make it a failure...Nintendo doesn't overreach its bounds by creating a system that they must lose $120 on in order to sell. They'll make a nice happy profit, enhanced by liscensing and take it to the bank. Meanwhile Sony and Microsoft are both going to push the liscensing as far as they can in order to make back all the money they lose on the hardware. Sigh...so sad really, the crummy games and constant sequels are what make me think I wont get a PS3 OR a 360 this time around. Nintendo just has the ability to make better, quality, fun, GAMES...not useless space wasters taking up valuable space for what could be GREAT games. I really dont need a 6th Dynasty Warriors afterall unless they plan on fixing glitches and adding some interesting new features.

    End rant.

  • Zinimus

    Posted Jan 26, 2006 6:53 am PT

    The moral of the story is business analysts are like weatherman; most of the time they're pretty close to being right but sometimes they're really off the ball.

  • brotherscampos

    Posted Jan 26, 2006 5:47 am PT

    I want my PS3 now,
    but I don't want a X 360 and the Psp is nice but I prefer my DS or GBA than the PSP because before play with my PSP i play PS2

  • azizrulez

    Posted Jan 26, 2006 4:58 am PT

    so whats the moral of the story?

  • tienchiha

    Posted Jan 26, 2006 3:49 am PT

    [This message was deleted at the request of a moderator or administrator]

  • donkeyfly

    Posted Jan 26, 2006 2:58 am PT

    ...this guy dont know what hes talkin about.

  • shrum91

    Posted Jan 26, 2006 2:36 am PT

    if this guy thinks that sony is going to win the handheld war he is on meth...

  • robbristow

    Posted Jan 26, 2006 2:36 am PT

    Im a ps3 and psp fan, but unless the psp gets some new games that are actually good, it is unlikely to surpass the ds netime soon. As for the 360 being 1st, maybe for a year or 2, its the only 1 out atm, but it is very unlikely to keep the lead, ps3 has alot of high quality games and popular series, and the ds, for the most part has its own part of the market, and is more on the side of new innovations than simply new story in a familiar style.
    For the most part ppl are against changes, which is 1 of the reasons y the 1st console released often ultimately loses, nintendo's restyling method works well for the handhelds, and they already hav control of the market, but when it comes to the consoles it is unlikely to hold up very well against the ps3 and xbox 360

  • sonic_spark

    Posted Jan 26, 2006 1:35 am PT

    fozforic... I shake my head at your trolling.

    For people who don't like the Revolution controller, I've said it a million times and Miyamoto and Aonuma say the same thing. The bottom slot of the controller can be used to plug other types of traditional controllers, you don't like the remote, well theres other options.

  • SnuffDaddyNZ

    Posted Jan 26, 2006 12:53 am PT

    I disagree about the PSP selling more this year, with respect to the probability of Nintendo unveiling their true next generation handheld at one of this years shows like E3 or TGS.

    I envision that the next generation Nintendo handheld platform would forgo backward compatability with existing systems, and instead would be a true replacement of the GBA or DS.

    If they were planning something crazy, I'd like to see some sort of videoscreen headset with a built in compass and tilt sensor, for some "look down, shoot down" first person action on the go. Hell, I'd like that for PC games actually.

  • haggardcakes

    Posted Jan 26, 2006 12:35 am PT

    psp is a million times better than ds, it has way better graphcis which does matter and the **** touch screen for the ds does nothing for me, xbox 360 is the greatest and will be better than 360 because bill gates knows how to push my buttons and he pushes them jsut right

  • FoZFoRiC

    Posted Jan 25, 2006 10:21 pm PT

    [This message was deleted at the request of the original poster]

  • FoZFoRiC

    Posted Jan 25, 2006 10:20 pm PT

    Nintendo sux i havent bought anything from them since I put my fist through the stupid toploader-tray thing with the huge wafer cartridges... and Ive' never really liked the ps1 or 2 cuz of sonys tactics.. i mean look at how many titles there are for ps2 (what around hundred more than xbox) and they cant even come up with 10 that are rated above 9 on this site... BUT i do love the psp now, games on the go that i can shut down in an instant and pick back up again later fit more into what i have time for. and its wi fi multiplayer is light years better than the ps console games ( another thing i never liked about ps was it only had 2 controllers, the multi-tap is BS, if people have to buy it extra programmers are less likely to write stuff for it)... in fact the two main reasons i got an xbox (besides they redesigned that mothership controller) were that it had 4 controllers and it wasnt nintendo.

  • Jeff_Blaze

    Posted Jan 25, 2006 10:18 pm PT

    Nintendo rules!!!

  • MacBrother

    Posted Jan 25, 2006 10:12 pm PT

    In handhelds you have to launch early and build up your software and make the system cheap just like the DS has done. Graphics don't count nearly as much (check Gameboy vs. Gamegear vs. Lynx). And in consoles you have to build up hype and come in with a lot of software just like what Sony is doing with the PS3. Graphics do count a lot. This guy has it ALL WRONG.

  • foxhound_fox

    Posted Jan 25, 2006 9:06 pm PT

    The Xbox 360 has been on the downhill slope since it first came out, it will never surpass the sales of the PS3, or even the PS2 and 1 for that matter.

  • Kwiksilva

    Posted Jan 25, 2006 8:45 pm PT

    This guy is totally inaccurate and doesnt know what he's talking about the PSP will not beat out the DS cause it already is crushing the PSP in overall sales and every thing the price isn't whats keeping gamers from buying it it's software which the PSP doesnt have nor does it have any innovation at all.

  • 007christmas007

    Posted Jan 25, 2006 8:39 pm PT

    Xbox 360,PS3, Revolution.....all willl have their own pros and cons. I personally look for inovation and good games. I have never been a big xbox fan except for the halo game which for me ties with golden eye and perfect dark (n64). 360 may have advantage of coming out first but the best is yet to come and u cant base numbers for revolution with out knowing its full potential.....there are still secrets for it. As for psp and ds......ds owns....i have not seen a psp game yet sell over million copies. everyone just buys it for the multi media features which they all suck unless u want an all in one thing.

  • MastrCake

    Posted Jan 25, 2006 7:51 pm PT

    FInally!! The big black box, err, i mean, "sexy white beast" is gonna win! At least, I hope. You may think this guy is a joke, but his statement sounds pretty logical to me. At least, I hope.

  • ywingpilot

    Posted Jan 25, 2006 5:50 pm PT

    I will throw my hat into the ring. I don't think that Sony can ever win this war in the hand-held market against Nintendo. Even if ithey were to beat the DS , I do not believe that they could beat the GBA and DS all combined. This is not the first time that Nintendo has faced competition in the handheld market, think the wonderswan, neo geo, game gear etc. This analyst is under the assumption that if the PSP cuts its price, Nintendo will not . I will guarantee that if Sony cuts prices, Nintendo will do the same. The weakest link in the chain for the PSP is the games, it sometimes feels like a rehash of PS and PS2 games. There doesn't seem to be a future game for the PSP in 2006 that will push it ahead to the DS. However I hope that the Valkyrie Profile:Lenneth sells well as the orginal was a great game. On the on other hand the DS has MP:Hunters coming out, a complete remake pf Final Fantasy III and Mario bros.

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