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Analyst: PS3 the "light at the end of the tunnel"

FBR predicts US launch of Sony's console will reinvigorate game stocks, but Xbox 360's head start will make it market leader through 2010.

Today, Friedman Billings Ramsey analyst Shawn Milne today issued a game industry update to investors, painting a cheerier picture than many of his peers of late by focusing on next year and beyond.

Right off the bat, Milne calls the planned November US launch of the PlayStation 3 the "light at the end of the tunnel" that will bring investors back to game stocks, suggesting that the industry will experience double-digit growth for the next 4-5 years. The continued demand for the Xbox 360 outstripping Microsoft's ability to supply the console, a surging handheld market driven by Nintendo DS and PlayStation Portable sales, and higher price tags for next-gen games are all given as reasons for that growth.

Milne still expects 2006 to show signs of the console transition, with console sales down 3 percent for the year (and another difficult holiday season), but he says 2007 should bounce back in a big way, with "roughly" 18 percent growth in the console sector. Meanwhile, PC gaming will continue to face hard times, Milne suggests, pegging the market to slide 38 percent from its 2005 tally of $879.8 million to $545 million in 2010.

As for what will drive that 18 percent growth on the console side, Milne puts it on the shoulders of the Xbox 360 and the PS3, "less so for the Nintendo Revolution." Projecting console sales through 2010, Milne expects the PS3 to outsell the Xbox 360 each year after 2006, but not enough to overcome Microsoft's year-long head start in the console wars. Through 2010, Milne expects the PS3 to have sold 23.3 million units in the US, with the Xbox 360 claiming a domestic user base of 24.6 million. His projections for the Revolution are less impressive, expecting Nintendo to move 12.5 million units by the end of 2010.

Interestingly enough, Milne expects the PSP to outsell all the next-gen consoles through 2010, with 26.1 million systems in the hands of US gamers. While the DS currently has the edge on the PSP in domestic sales (3.8 million to 3.6 million by 2005 numbers), Milne expects the PSP to overcome that lead this year and never look back. Finally, Milne indicates there's a lot of life left in the Game Boy Advance, expecting it to sell 1.5 million units in 2010, with none of the other current-gen systems selling a significant number of units that year.

Moving from the platforms to the games they play, Milne downplays concerns about rising development costs negatively affecting publishers' profit margins. As he pointed out, "Since the first games of Pong in the mid 1980s, development costs have skyrocketed in the video game market, yet publisher operating margins have expanded significantly."

For example, Milne cites Halo 2 and its exorbitant development cost (he estimates $20 million), and then points out it went on to earn more than $350 million worldwide.

"The bottom line is that game development costs will continue to rise and further change the risk profile of the sector, however, we fully expect big-hit franchises to deliver significant cash flow and drive strong earnings growth from current levels," Milne wrote.

Brendan Sinclair
By Brendan Sinclair, Senior Editor

Brendan Sinclair has been a games journalist since 1999. His tastes are eclectic, though he has a definite affinity for games with arcade roots. He's Canadian, but has also been at home in Atlanta, Austin, Chicago, and San Francisco.

199 comments
rahxephon63
rahxephon63

Awwwww..come on..this is ridiculus..i mean i have high hopes for ps3 and xbox 360..saying that about nintendo..think again mr milne....

mr_pops238
mr_pops238

Everything he said was wrong. Fission mailed.

tejeruben
tejeruben

this guy is retarded how the ****** will the psp outsell the nextgen consoles when it cant even overperform the ds which ilove but has between N64 and gamecube graphics and is till beating the psp in sales dumb*** psp will beat next gen systems who will undoubtelty have bigger potential in graphics and gameplay as for the psp overcoming the ds's sales and not looking back right now the psp is struggling to sale as much as ds with umd movies going under the psp is just a ps2 portable with all of ps2 games ported to umd. No fun games to play instead they plan to milk the FF"VII franchise with crisi core just to keep up with the ds This is probably THE dumbest analyst i've read about

xeidog69
xeidog69

LOL, I was almost in disgust by what this guy had to say, by 2010 the ps3 will have sold a whole lot more then that, 360 will even do better then that as well, and the way he dissed the rev sales is completely false as well, even a ps3 or 360 fanboy can easily agree that rev will sell far more then his estimation of units...this guy knows nothing...I actually see all three systems selling more then 30 million units by 2010..easily, sony and nintendo will sell godly amounts of consoles in japan alone,microsoft will sell alot in the us and europe and such..they all have there own markets and demographics, all will do well and this console war wont really be a war at all, sure sales will say otherwise, but fact is this GEN is gonna be far differant then any other ever, each will offer up differant ideas, differant features, differant experiences, many will end up owning all three once prices drop, by 2010 itll be a nice balance, and there wont be any losers in the sales department, even if rev sells a few million less units itll still have made just as much profit...by 2010 ill definately have all 3 consoles, and I will buy each consoles exclusives, if there is a fps game ill probably play it on rev if its available , just for the experience of the gameplay..ill play gta 10 for ps3 when im in the mood to wreak havok..and ill play halo 4 when I wanna have the ultimate online fps shooting experience..simple as that..screw this nimrod of an analyst, hes worse then the guy who said ps3 cost $900 to develope...it doesnt cost quite that much especially if the hard drive becomes optional, which it appears is the case...

MegamanX400
MegamanX400

I really don't think a system such as Revoulution which is cheaper will sell siginificantly less than the others....I just don't see it. Maybe it won't sell 26 million....but at least 15-20million by 2010, no?

SamejGink
SamejGink

*sigh* ANALYISTS ARE SALESMEN. AND NONE HOLD MAGIC CRYSTAL BALLS THAT CAN PREDICT THE FUTURE. IF THEY COULD, THEY WOULDN"T BE ANALYISTS AND THEY WOULD BE BILLIONAIRS ON THE STOCK/COMMODITY MARKETS! Analyists got Sony's stock in trouble by pounding into everyone's head day in and day out on CNBC that Sony is coming out in the Spring. Then they say it isn't coming out till 2007 and the stock gets slammed. Damage control by Sony releasing a date (november) stabalizes the panic. I'm just glad that they leave Nintendo alone (its all MS & Sony ALL DAY LONG, just watch CNBC a few days, its absurd)

CleptoPots
CleptoPots

Analysts don't know anything? I'll bet they know a whole lot more about how the market works than some 13-year-old kid typing out a comment on Gamespot.com.

buildar
buildar

microsoft isn't going anywhere because they are a multibillion dollar company that can afford to lose money on gaming. besides who cares what system wins as long as there are good games. i'm also tired of predictions that produce more speculation in the industry than necessary.

buildar
buildar

microsoft isn't going anywhere because they are a multibillion dollar company that can afford to lose money on gaming. besides who cares what system wins as long as there are good games. i'm also tired of predictions that produce more speculation in the industry than necessary.

Landshark
Landshark

Wow, a guy gives his EDUCATED OPINION and everyone wants to cut out his heart. Calm down and grow up people. I thought this was a very interesting article and we should thank everyone who makes any contribution to the gaming industry, gamespot and gamers everywhere.

HottLatinoBoi
HottLatinoBoi

for you fan boys that think that ps2 is even better than xbox. please, do your home work. Ps was out 1 1/2 years before xbox made its mark, in that time, microsoft was able to bite into the Sony market with better graphics and top rated games. Sony may have lead because they have been out longer, but they lost last christmans when Xbox out sold then ps2. So that should tell you that Microsoft has a pretty good fan base that Sony lost. I work for the video game industry and I can tell you that when you have 80 percent fan base and it falls to 60 percent due to another system, anything goes. you fan boys can drool over you ps2, but Xbox made gaming fun, made seeing what graphics are all about. Grand theft Auto: Vice City, much better on Xbox, same with San Andreas. Game plays smoother, looks better and allowed you to ad your own music. Madden, much better on Xbox. Just about every game out there, looks clear, sharp and not choppy. Doom, not able to make it on PS 2, why... Hummm, maybe because the ps 2 cant do that graphics.... Halo and Halo 2 rocks.... Sorry dude, Sony lost Square Enix to microsoft.... and exclusive EA stuff too... Rock start is next. Give it time... Microsoft is not going anywhere..

ApisBee
ApisBee

The only thing I got out of the read is; Developers now have more incentive to continue producing great content and earning my money.

HottLatinoBoi
HottLatinoBoi

who ever wrote this report is really smoking something... PS3 is not going to lead in the system wars. As time goes by and many months come, things can very well change for the Microsoft big wigs, do these people really think Microsoft is going to say, oh well, Sony will have the edge and we are going to have to deal with it. Really, I love when people who don't know anything about the video game market make claims like that, why don't they just keep playing the stock market number and wait to see what happends. I think the delay of the PS3 is really going to hurt PS3 really bad, while 360 jumps to better and larger library of games, second gen graphics and top games like gears of war, oblivian, and even Halo 3, Plus boys keep in mind that 360 will have an HD DVD player too. There would be no reason other than some esclusive games that would tell me that PS 3 will out sell the 360. There is nothing that PS3 will give me that I already have now. Not to mention that the PS3 will cost way above what people are willing to spend these days. I don't see PS 3 really making it this time. There are things really riding against them. More so, the Price, the harddrive, blue ray, the games, and the time frame.

anubis8515
anubis8515

i think this gut has no idea what he is talking about...people that dont know any thing about games should not talk about games....if some one was smart they would become a game analysis...so they would know what they were talking about

snakes2solid
snakes2solid

analyze this!!! ( insert my tool here)... analysts know crap about games...they look at trends and give an opion...well " opinions are like a** Hol*s".." everyone has one...

tubbs8719
tubbs8719

This article does nothib but give estimated numbers. The Ps3 will blow out the xbox360. The ps2 was a much better console than the xbox and the same goes for next-gen. even with a year ahead of sony, microsoft will not sell more 360s than sony's ps3.

bobreturns
bobreturns

analysts don'y do anything he could not be more wrongno way can the psp outsell the DS when it has failed to do so yet

Ne0zEEd
Ne0zEEd

Good stuff..gues we gotta wait and see

darkraven5000
darkraven5000

Its so funny seeing all the sony fanboys freaking out. What makes it even better is alot of them are worried this will actually happen. The truth is yes ps3 will probably sell more systems worldwide but this is an article about the US and in the US sony doesn't have the blind following it has in japan. If they expect to win the battle here it will not come easy especially if they decide to come out at 500 dollars and keep the batarang.

fmcuk
fmcuk

I can't believe there are individuals that pay lots of money to idiots like this ANALyst for such crappy criteria....

Gigagamer2
Gigagamer2

perhaps the X360 will become rly unpopular and lose sales lol. thes analysts know nothing

nellaby
nellaby

thank god it wasnt just me thinking that this report was mojory dodgy, few ~Nick~

NeoJedi
NeoJedi

With the release of the PS3 and Revolution and the continued growth of the 360, what else do you expect? Hell, I could've analized that!

BlueEyesGR
BlueEyesGR

This analysis together with any other that I have read is totally stupid because it ignores some basic facts. First of all, it is a fact that PS2 worldwide sales are almost (if not for sure) double from the XBOX ones. It is also a fact that both of the console owners, in more that 90 percent, are fanatics about their console. Which means that a PS2 owner, normally will buy a PS3, and an XBOX owner will buy an XBOX 360. Doing this simple thinking, how is possible XBOX 360 to outsell PS3?

Kwiksilva
Kwiksilva

no way super wack these predictions are totally of in my opinion the xbox 360 will not outsell anything especially not the ps3

Warrior1991
Warrior1991

I think he is right, about the ps3 the Lens could damage if it is trying to read CDs,DVDs,and BLU Rays. it happened to me before with the ps2

chrisdojo
chrisdojo

teh boomerang at the end of next gen (at least sony better be in last this time around)

MaSt3RT57
MaSt3RT57

ah so that's when the ps3 is coming out. what was this guy talking about again?

MadonnaProject
MadonnaProject

It doesnt matter, microsoft needed to gain the edge on sony and nintendo so they had to release their console early to get a foothold.True next gen pc and gaming was always going to start in 2007, but it is good to get an early taste o it through xbox 360 right now. My experience with the xbox has been that of an awesome one especially since after CONSTANT ABUSE, of being kept without care, and being kicked about by my baby siblings, even being slammed upon in rage at being beaten by ninja gaiden, its worked flawlessly for me. And my xbox has a thomson drive. The dirt on it would shock most of you if given photographic proof. The gamecube has been a passable, but underwhelming performer in my view. However metroid prime 1 and 2 are absolute essentials for any gamer, anywhere. The ps2 has given me constant hell. With three onsoles under the belt. Whats my biggest fear is that since the ps2 is NOTORIOUS for its bad lenses and dirty disc errors, its obviously a cause of sony sing cheap materials to cust costs. Imagine the nightmare a customer will have to suffer to bring home a super expensive ps3, which will obviously be wrecked by sony trying to cut costs with cheap lenses and materials. Then having problems with the lense reading discs since there would be more of a strain on the lense because the same lense has to read cds, dvds, blu rays and other writable and re-writable fromats. I for one, cannot imagine being ok with having to buy multiple ps3's.

golden_ashen
golden_ashen

Well, if PS3 doesnt win next gen, hopefully PSP will :) So we are betting on two things :P

KiLLer_ba
KiLLer_ba

I dont like analyst predicting whats console is going to sell through 2010, even though they dont know how much will the Ps3 & Revolution and games are going to cost.

dross555
dross555

Message to Cloning I find it funny you can just make a simple statement of Xbox 1.5 = DEAD Nitendo Rev = Coma ( waiting to Die) PS3 = Winner You present no case for your prediction I am very curious as to why you think this will occur. I also find it rather lame how people call the xbox 360 the xbox 1.5 and the only true next gen machine is the PS3 because it uses a new chip type(cell) and blu-ray disc. I do not think you have played Elder Scrolls , GRAW or Fight Night on a good quality HD TV running 1080i or 720. To me it is about game play and grahpics improvements that make a next gen machine not how much money a company has poured into R and D for custom tech that they really have other motives for producing ( do not believe that Sony has spent money on the cell and blu-ray out of the goodness of there hearts for their PS fans they have eyes on owning a format and the cell becoming a PC standard. My prediction is all the 3 companies make a butt load of money and we are all left picking up the TAB

mardigrasmorgan
mardigrasmorgan

ummm, the real thing here is to look at what this guy does for a living. Who are his clients, what stocks do they own and where they actually make their money? If you get an unbiased list from all the above, then give this guy another listen. But since none of us actually believe one word of what this guy is predicting..... we don't need to....

Crutch20
Crutch20

Who DIDN'T think the ps3 would be delayed a few months ago? Hey crunching numbers is an analysts job, but I really could care less. I'll play what seems fun to me wether it sells the most or not.

jemini12
jemini12

To continue my rant; for instance, there was an article a couple of months ago where an anylist predicted Ps3 will be delayed until November or possibly Jan 07. What happened? Well we all know what happened. You can hate on these guys all you want but they know what they are talking about. These guys are basing their info off facts: Not fanboyisms. End of discussion.

jemini12
jemini12

Are these fanboys a bunch of 13 year olds? Listen guys, these anylists know what they're talking about. I have studied them and rarely are they're wrong. You can sit there and argue over what company makes the best system all you want, the bottom line in 2 years all three systems will be out, pushing out basicly the same games with the same graphics! I have all three systems for the current generation and I enjoy all three (Xbox, Gamecube, and PS2). Although I find myself playing the Xbox and gamecube the most, I don't devote my time and money on 1 system. If I had to choose it would be Microsoft because 1 they are known for quality products, and 2 its a American company. The great thing is, I won't. I saved up and bought a 360. I enjoy it. Fight night round 3 is great game! I will save up to get a PS3 when it comes out. Bottom line ( especially to you PS freaks) you guys need to chill! There are pros and cons to every system. Its up to you ( or your parents for you 13 year olds!) to decide which system is right for you. Don't just blindly decide to buy a PS3 simply because it has playstation on it. Make sure its in your budget. Make sure it has good games. I believe every word of the story frankly because these guys are hardly ever wrong.

ao_bomber
ao_bomber

O RLY? PSP outselling DS? This analyst has lost his credibility.

jimbo102671
jimbo102671

That's right, dev costs have gone up, mainly because more people work on a single game now than ever before. It's because of the big financial risk involved of trying something new that we're seeing a boatload of sequels, copycats, and even compilations. That won't keep the industry going forever, and it doesn't take an analyst to eventually come to that realization.

Myugenjin
Myugenjin

1.5m GBA sales, well in China Nintendo does sell their old consoles at much cheaper prices. They have an handheld N64 (iQue) with I think flash mem cards that you can download games onto so thats not impossible. The only thing I disagree with is the sells figures by 2010. In 4 years time the Rev. should be at least at 22m with the Xbox at 40-50 and PS3 near 60 just like last time!

FuguNabe
FuguNabe

The only part I completely agree with is the rise in gaming cost. This will no doubt be a major factor. Everythingelse is don't know... hogwash... standard opinionated analyst crap. A lil farfetch predicting 4-5years from now me think.

jimbo102671
jimbo102671

About the only thing I can agree with this analyst is the rough holiday shopping season, as gamers' demand for the PS3 will outpace initial supplies. One thing I know he's wrong, though: Pong was released in the 1970s, not the 1980s. As for the rest, it's pretty much wait and see. (But 1.5M GBA sales in 2010? If eBay is not part of that equation, I don't really see that happening.)

mrblah00
mrblah00

I love how people go: "Haha look at all the fanboys. Xbox will kill all your mothers with its billions of dollars this guy is so right but you just dont want to admit it because your all fanboys LOLLL!"

rbunnell
rbunnell

Microsoft will reign supreme - that's a no brainer.

Game13a13y
Game13a13y

there's nothing i agree with what this guy has crapped out.

8bitantichrist
8bitantichrist

As endlessly entertaining as watching the fanboys bicker is, you guys need to give it a rest. Why throw blind, unwavering faith in a machine? Are you guys friends with Kaz Hirai? Bill Gates? Shigeru Miyamoto? Do you think they even know you exist? While I have no doubt they appreciate your support, it's incredibly childish to write post after post of "M$ sux" or "ps3 will rule". While I own a 360, I have no plans for buying a PS3, but it goes without saying that Sony had a huge hand in helping the industry get to where it is. I have no doubts about Nintendo, they don't spend over 20 years in the business by not knowing what they're doing. Microsoft? I'm behind them only because I would like nothing more than to see an American company leading the industry again. In the end, support what you love, buy what you want, but have the maturity to respect the opinions of others.

samekila
samekila

dont care who is #1 i love my 360 and have to get me a revolution i will get a p3 when the p5 or 6 come out

V-Nine
V-Nine

Given the fact that some high profile titles are starting to go non exclusive, Microsoft could have a chance(albiet a small one). But as for that 2010 nonsense, we will most likely see the Xbox 720, Playstation 4, Nintendo Eon, and perhaps some new comer/upstart by then as they are always in a rush to have the next best thing. I am truely concerned about the xbox 360 because in the middle of all the shortages I was able to walk in a store late this past Jan. and purchase one with no waiting. Has the buzz worn off that early? And all that preloaded data on the HD sure takes up alot of space(compression or bigger drive anyone?...yea yea delete someting:p). Its true Sony is rolling in the dough reguardless since they own the rights to the cd/dvd tech. and no one wants to go through Phillips who is the other owner. Not to mention the funds Sony can tap from Columbia/Tristar pictures and there many other do-dads. I do like how much moola Gates has thrown at this problem(not enough) but I kinda feel Microsoft held back some(Not going 100% nex-gen and still no friggin reset button, heh). I doubt an analysis will ever predict acurately whats going to happen unless they are stating what's already obvious, but I could be wrong.

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