Analyst: Xbox 360 challenging Sony supremacy

Michael Pachter's 188-page 2006 market analysis says Sony faces big risks with the PS3 launch; movie studios could determine next-gen console war outcome.

Wedbush Morgan Securities analyst Michael Pachter has released his 2006 Interactive Entertainment Industry Report, and in the middle of 188 pages of history, research, graphs, charts, stats, interpretation, and prediction, he concludes that the outcome of the next-generation console wars will rest not with the game publishers, but with the movie studios.

By Pachter's reasoning, the movie studios will choose a winner in the current battle between the Blu-ray and HD-DVD high-definition disc formats by virtue of which one receives better support, and that battle will have a trickle-down effect on gaming to tip the balance in favor of the PlayStation 3 or the Xbox 360. Sony is using a Blu-ray drive for the PS3, and while Pachter thinks that decision has greatly increased the cost of the system and allowed Microsoft to get a yearlong head start on the PS3, he says it could still pay off.

"If Sony is successful with its strategy, we think its console will outsell the Xbox 360 by a factor of 2:1," Pachter writes. "If not, we think that the company will be faced with a choice between conceding significant share loss to Microsoft, or subsidizing the Blu-ray drive by essentially giving it away for free."

The risk is there, but so is the reward. On top of winning the console war, Pachter estimates that Sony stands to reap nearly $2 billion a year on royalties from games and movies sold using the Blu-ray format.

Regardless of whether or not it moves the most hardware of the three next-gen systems, Pachter believes Microsoft can thrive in the current generation and projects that the Xbox 360 will command a significantly larger market share than the original Xbox ever did. Even though he projects Sony and Microsoft as taking the top two spots, Pachter thinks highly of the Wii, calling Nintendo's strategy "risky and brilliant." While he finds the Wii unlikely to finish first, Pachter still expects Nintendo to grab a larger market share than it did with the GameCube.

Over the course of each system's lifetime, Pachter expects the PS3, Xbox 360, and Wii to rack up US sales of 41 million units, 32 million units, and 15 million units, respectively. All three of those numbers are higher than what the companies' current-generation units have managed to move. Pachter projects the PS2 to be retired with 40 million units sold in the US and the GameCube's final tally to come in at around 13 million systems, but Microsoft looks to gain the most ground according to his numbers. Pachter expects lifetime US sales of the original Xbox to come in at 15 million, less than half his projection for the Xbox 360.

Pachter also offers his speculation about the PS3 and Wii launches, as well as Microsoft's strategy to counter them. He expects the PS3 to launch at $499.99, with the Wii selling at or below $299. As far as price cuts go, Pachter doesn't expect Microsoft to make one on the Xbox 360 until 2007, and even then he expects the price on the premium system to drop to somewhere between $349 and $379. Pachter also adds fuel to speculation that a GameCube price drop is in the works, anticipating the system to start retailing for $79 sometime before the launch of the Wii.

For the industry as a whole, Pachter reiterated his projection of domestic software sales being down 3 percent for the year. However, once the PS3 and Wii are on store shelves and the next generation begins in full, he expects booming growth in 2007 and 2008, with US software sales jumping 16 percent and 17 percent, respectively.

He even projects that the gaming industry will start to overtake some of its media rivals. While it still doesn't hold a candle to the film industry (which Pachter estimates tallied roughly $33 billion in US box-office, rental, and sales revenue last year), he is expecting game sales to overtake domestic music sales in the next two years.

205 Comments

  • jd14

    Posted Sep 18, 2006 8:06 pm PT

    i alway knew that the blu ray thing would create probs why cant sony just make it a hd dvd

  • Hoopin4thelove

    Posted Jun 2, 2006 10:19 am PT

    CivicDream14
    i dunno about this blu-ray thing...remember, sony failed with UMD'S and Mini Discs. Hmmm...maybe the third time is the charm. (select an action below) ______________ Report Abuse To Moderator Posted May 29, 2006 9:49 pm PT
    ..........................................................................................................................................
    or not!

  • Hoopin4thelove

    Posted Jun 2, 2006 10:18 am PT

    based on sales figures and analyst this seems 2 be valid, sony has 2 much of an uphill battle to climb...................(: to bad guess im getting the x360 not the crapS3, but i may be spending lots of time on WII

  • CivicDream14

    Posted May 29, 2006 9:49 pm PT

    i dunno about this blu-ray thing...remember, sony failed with UMD'S and Mini Discs. Hmmm...maybe the third time is the charm.

  • linmukai

    Posted May 6, 2006 7:11 pm PT

    If you check the employment history of such folks, my guess is you'll find positions in weather forecasting on their resumes, another field where you can predict what you like, be totally wrong, and continue to be employed. :-)

  • pyth0n13

    Posted May 6, 2006 2:20 pm PT

    this guy seems pretty sure of himself. i wonder how they come up with these conclusions

  • SavoyPrime

    Posted May 4, 2006 7:11 am PT

    Interesting stuff.

  • utesrule

    Posted May 3, 2006 6:07 pm PT

    iAll i can say is the so called experts said when microsoft launched the original x-box they would be last and likely out of the game business within 2 yrs yep thats what happened. but i still have my ps2 and might still get the ps3 someday , but i am happy with the 360 the games and graphics will get better but in the end it will come down too 2 again sony and microsoft.

  • deeewooh

    Posted May 3, 2006 6:01 pm PT

    How many units has the xbox 360 sold?

  • Morten-K

    Posted May 3, 2006 4:51 pm PT

    You are so correct Eglsgmr7. It is about the gaming experience at the end of the day. I bet even some of the mainstream* people will come to understand that when they've had the chance to try all the systems.

    *Mainstream people=Jerks who only plays the top-of-the-chart-games and never give really good games a chance. There is more to say that will define mainstream jerks, but it's late... good night

  • Eglsgmr7

    Posted May 3, 2006 4:39 pm PT

    It is pretty pathetic to think that the difference in who reins supreme rides on the rails of the movie industry. It would be nice if it was just about the quality gaming experience. This is, after all, what it's supposed to be all about, right?

  • Morten-K

    Posted May 3, 2006 4:37 pm PT

    I think Sony is making a big mistake with the Blu-Ray system. This will make the price too high for most people. I put my money on the then well established XBOX360 and the cheaper (and extremely interesting) Nintendo Wii.
    Well.. Time will tell..

  • BadMrSnake

    Posted May 3, 2006 4:27 pm PT

    That analyst is oviously on crack! PS3 can have nothing but crap games & still sell more systems than Xbox360 will!

  • washere12

    Posted May 3, 2006 4:18 pm PT

    Pop off Sony, Pop off!!

  • cleopatara

    Posted May 3, 2006 2:48 pm PT

    hmm we wil have to see if this comes true

  • xbox_gamer1

    Posted May 3, 2006 1:41 pm PT

    Go Microsoft!!!!!!!!!!!!!!!
    But whats the point os speculation?They just give there stupid opinions. Its not like there all going to come true.

  • santiagochile

    Posted May 3, 2006 1:39 pm PT

    Wii for $299? YEAH RIGHT! Wii for $150 is more like it!

  • JLCrogue

    Posted May 3, 2006 1:39 pm PT

    His predictions sound quite likely to happen, especially the part where the videogame industry surpasses the music industry.

  • DiscGuru101

    Posted May 3, 2006 1:37 pm PT

    Supermodified drives a mean point. No one has analyzed the "Hitch" factor. Who can withstand the power of Hitch on Blue-Ray?

  • santiagochile

    Posted May 3, 2006 1:37 pm PT

    DS ruleZ!

  • linkman2005

    Posted May 3, 2006 1:26 pm PT

    Why don't analysts ever think that Nintendo has a chance? Just because the PS3 has the Sony logo branded onto it doesn't mean it's gonna sell as well as its predecessors. Sony could put their logo and to turd and it wouldn't sell because it was Sony. It would sell because there are actually people out there who would pay for a turd... I think.

  • tremo01

    Posted May 3, 2006 1:19 pm PT

    Hmm... Blu-ray has a good chance of winning

  • dergy

    Posted May 3, 2006 1:12 pm PT

    meh in the end i never care who is better or worse in standing...its the games!!! Gamecube sucked, but it had smash!!! so i played it!!!! just like the gameboy......it had pokemon...and i was in love! so, in the end..i'll get a 360....just for Halo 3.

  • skyvader

    Posted May 3, 2006 1:12 pm PT

    Take netflix for example. They had been offering hddvd before the first player was sold. And yet there were many complaining there wont be enough content. Go check out their site for hddvd and you will find they have lots of new stuff. I dont see them offering blueray. Maybe they will and maybe they wont. One thing for sure is that thousands use netflix and they all see the hddvd link on the site so it is adding to the awareness of that format. Add in the ability of the 360 to eventually play them and you have the home entertainment side locked in. I did not say anything about the gaming side, just the movie/home entertainment.

  • faridmon

    Posted May 3, 2006 12:50 pm PT

    i've never thought am going to say this about analysys but: - WOW thats the most intresting analysys news i've ever heard before and it can actually be right about it.
    Wii rocks.

  • greks224

    Posted May 3, 2006 12:28 pm PT

    "the Wii selling at or below $299" i think wii will be much cheaper... I say at or below $199

  • Supermodified

    Posted May 3, 2006 11:52 am PT

    Silly analyst. He missed the MAJOR PS3 selling point. If you have a PS3, you can watch "Hitch" on Blu-Ray HD-TV out of the box. Therefore, there is no way way MS or Nintendo can catch Sony. The logic is inescapable.

  • DiscGuru101

    Posted May 3, 2006 11:41 am PT

    Did he say $499 for PS3? That must be without the HDD heh.

  • Dwango_basic

    Posted May 3, 2006 11:34 am PT

    My favorite part is the Movie Industry will determine the fate of the console wars. Lets see, I have 80 dvds. The price of a blu-ray disc will be $40 . To replace my collection will cost about $3200. All this for some minor improvements in the look of the movies. And I have a small collection.

    I don't care what movies the industry puts out on blue-ray or hd-dvd. I'd rather keep my dvd collection until they drop prices to a more reasonable level. I'm buying a console for the games, not the movies. For an "expert", he sure did not seem to recall the way UMDs on the PSP were such a failure. Movie industry did not help much there.

  • Spiderman_Ps3

    Posted May 3, 2006 11:31 am PT

    sony ps3 going to kill the xflop360 in sales and so shut up Bill Gates and you stupid Microsoft company.

  • martoon96

    Posted May 3, 2006 11:14 am PT

    blu-ray could suffer since hd-dvd will have a few months head start.

  • sasuke55

    Posted May 3, 2006 10:50 am PT

    I have said it before and I will say it again I don't give a crap who wins the console war or which format wins. But I will take the better games that will result from this. Also I wish I could get paid to say that. How many people on here could have said what that guy said. No college necessary.

  • mr_squibble

    Posted May 3, 2006 10:37 am PT

    Too bad we don't get to read the entire 188-page article.

  • dukerav

    Posted May 3, 2006 10:27 am PT

    As much as I do like Nintendo and I do wish them well and all because I will be getting a Revolution about a year or so after its released, but when 360 and PS3 games are being put to their full potential ie graphics, gameplay, etc. the Revo will truly feel outdated. Its sad to say but for the most part and maybe im wrong but ppl do love to see preety shiny graphics and any inovation seems to get kicked to the curb, so if things stay that way I would expect history to repeat itself at least with Nintendo still finishing in 3rd. They will gain market share this time around I have no doubt about that.

  • jepeto8

    Posted May 3, 2006 10:13 am PT

    i think blue ray and hd dvd are already old and worthless formats compared to the luxury of mpeg videos that i can watch anywhere, anytime on my video ipod, and these players will always be cheeper. Sony definately shot itself in the foot with this one.

  • dukerav

    Posted May 3, 2006 10:08 am PT

    He makes some interesting comments, tho I still dont believe all the things these guys say. Also Im getting really tired of all these people on here saying bla bla bla the 360 will be in 3rd place this time and the weeeee!!! will take 2nd. As Nintendo fans why have 2nd when you could have 1st. No sense in predicting or assuming which console will finish where because well all three arent out yet so they cant compete with each other yet. Its gonna be a long while before any of us see whether or not these analysts or all the rabid fanboys are correct in their assumptions. The bottom line is that its not ever going to be like it used to be where Sony was the clear cut winner by a mile, things are gonna tighten up a bit.

  • spr4yp4int

    Posted May 3, 2006 9:58 am PT

    So... Basically he says, in a complicated way, that ps3 may or may not outsell the x360.
    Yeah, that sounds like a typichal expert nowadays...

  • Hellisunreal

    Posted May 3, 2006 9:17 am PT

    Whatever.......

  • decebal

    Posted May 3, 2006 9:04 am PT

    Remeber there are more movie fanatics than there are hardcore gamers.

    The movie fanatics will decide who wins the console war. The harcore gamers, are a very limited market in comparison....

  • gt4freak1985

    Posted May 3, 2006 9:03 am PT

    dont forger the dvd space required now. a few ps2 games have already reached the dual layer dvd. gran turismo 4 is 5.5gig, and xenosaga is 8.2gig. that with the smaller ps2 textures too. so how much space do think call of duty 2 or quake 4 takes up on a dvd? Also BlueRay will have a faster read time and seek time than dvd will. hddvd and blueray laser are more precise and accurate than red lasers. i think hddvd will fail because its not bundled in a console. look what ps2 did for dvd. no one is gonna buy a 360 and then buy a hddvd usb drive to watch movies. thats $100+ dollars min to watch movies when they could get two games instead. and to Ruby4ever, your right about storage, in my pc I have a 12gig as my main os drive, 250 gig as my back up drive, and in my ps2 is a 200gig hd. so stuff that xbox. ps3 will use a cheaper 2.5 60gig hd. allow users to easily upgrade the hd just like the ps2. the os is not stored on the hd like xbox. so i could throw prolly a 300gig hd in a ps3. the ps2 can handle up to a 200gig.

  • neoand12

    Posted May 3, 2006 8:58 am PT

    Games rules, Box office drools!!!!

  • raptorz546

    Posted May 3, 2006 8:58 am PT

    "analyst are dumb. they are always analyzing thing sit annoying" lol that's funny.

    I love how everyone complains about the analysts, but honestly i'm going to take there speculation over everyone else's fanboy remarks. They get paid a ridiculous amount of money by Micrsoft, Sony etc. so obviously they have some idea what they're talking about.

  • Rugby4ever

    Posted May 3, 2006 8:55 am PT

    Bigger storage capacity will win out. As a game player I certainly wouldn't want to have to stop playing to switch to another disk, that's just annoying. Besides history shows that the need for bigger storage capcity will be a deciding factor; just look at how big hard drives need to be these days.

  • gt4freak1985

    Posted May 3, 2006 8:53 am PT

    analyst are dumb. they are always analyzing thing sit annoying. they also said the ps2 would fail because of its price and the new medium called dvd. Also that the xbox should outsell it because of its more powerful specs and halo. hahah what a bunch of idiots. I wish gamespot would stop posting this bs news.

  • DemonJD138

    Posted May 3, 2006 8:52 am PT

    Furthermore, I can tell you who categorically wins the "console war."

    We do. The gamers.

  • RoboticZombie

    Posted May 3, 2006 8:50 am PT

    these are only speculations, the guy speculates thats why he gets paid. dont understands why ppl act like this is official. though its amusing how fanboys fight over which system is better.

  • DemonJD138

    Posted May 3, 2006 8:50 am PT

    I think it's weird that this guy gets paid for this. Especially since I don't think he knows what he's talking about.

    I'm layin' it out now. Sony finishes first, again, when all's said and done. Microsoft gains a bigger market share than Nintendo, but still manages to lose hundreds of millions, if not billions (again) on hardware. Nintendo gets less of a market share, but still outdoes Microsoft in terms of profit.

    PS3 drops at $399, Wii at $199. See if I'm wrong.

  • japanesegoth

    Posted May 3, 2006 8:46 am PT

    ok...so he thinks wii is gonna be $299 at most? ...yeah... it's most likely going to be $199 like every system they've put out.

    and at least they think the outcome of a video game system will be decided on its ability to play certain types of dvds...that's so dumb. seriously, if people buy a video game system because of a certain type of media in the form of a disk that it will use is stupid.

  • grnidbandit

    Posted May 3, 2006 8:41 am PT

    first off the UMD was never ment to replace any other format there, its just another medium to put games movies and I think in some places music. Second if a PS2 malfunctions or breaks down, and you run out to the store and buy a new one, then sorry bu your not very smart, I was faced with the same dilema like everyone else has and my warranty was expired, I called sony and complained that as a consumer who takes good care of his system should not have to deal with these kind of problems like a dvd that stops reading data. They replaced my DVD drive free of charge. I have faith in the blu ray just for the fact it will store more data VS a HD DVD and developers like the idea of having alot of space to make their games.

  • alvarotarazona

    Posted May 3, 2006 8:40 am PT

    SONY will Win PS3 will rule i'm way more excited about PS3 than X360 althought i already have a X360 I tell u the Truth PS3 packs more technology cheaper than u think $499 or $599 is not a lot of money for a Blu-ray drive remember one blu-ray drive that only play movies cost around $1500 while PS3 brings everything for a mere 500 o 600 dollars X360 is bringing the Hd-dvd drive for movies come on who that hell is going to buy that crap I want more space in a disc and Blu-ray delivers it.

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