E3 06: Analysts react swiftly to console news
[UPDATE] Wii scores points with controller, GTA on 360 seen as significant; with sky-high pricing and conventional controller, Sony "has a lot of catching up to do."
LOS ANGELES--While gamers continue to work away at getting hands-on time with the new games and upcoming consoles (and significantly, new controllers), industry and financial analysts have already made their assessment as to who among the majors turned in the best showing in the pre-E3 parade of press conferences.
And while it's too early for analysts to call the race over--seeing as how the Nintendo Wii and the PlayStation 3 have yet to be released--enough was revealed at this week's pre-E3 press events for even the most casual observer to read the writing on the wall: Sony's supremacy in the competition to sell the most consoles will be tested severely in the coming years.
The current generation's war is functionally over, with the PlayStation 2 having sold over a 100 million units worldwide (to Microsoft's less than 50 million Xbox units and Nintendo's 21 million GameCubes). But the race that pits PS3 versus Wii versus Xbox 360 seems far from decided.
A combination of factors contributes to the unpredictable future for the house that Kutaragi built. One is the head start Microsoft has with the 360, a game machine rushed to market in late 2005 that should have about a 10-million-unit installed based by the time the PlayStation 3 and Wii hit the marketplace in November. Another is the price advantage both Nintendo and Microsoft will have when compared to the PS3--the premium Xbox 360 is priced $100 dollars below the cheaper of the two PS3 iterations, and the Wii, with a price many speculate at between $199 and $249, could be a whopping $300 less than a PlayStation 3.
Lazard senior research analyst Colin Sebastian said in a memo that the "10 million milestone prior to the PS3 launch would put Microsoft on solid footing to compete with Sony for market leadership position in the next-generation cycle," and that Nintendo "has a very good opportunity to gain market share in the next cycle" with a "value-priced console and unique and innovative controller."
Speaking with GameSpot immediately following the Nintendo press event, Sebastian offered his response to the company's presentation: "Nintendo accomplished the task of convincing publishers, developers, retailers, and the investment community that they have a compelling system. While some critics might say [the Wii is] a GameCube with a motion sensing controller and not much in addition to that, the fact is the other [hardware manufacturers] are moving toward much more costly platforms--development costs are doubling for the PS3 and Xbox. Nintendo has something that's differentiated, and people are going to like that."
Pricing and software both contributed to UBS analyst Mike Wallace's assessment that Sony could find itself at a disadvantage this holiday season. "A $599 PS3 will mean that a consumer will be able to buy both an Xbox 360 and a Wii for the same price as a high-end PS3," he said on Tuesday. "We think Microsoft and Nintendo will both have big advantages heading into the new cycle based on their lower console prices."
In addition to pricing, Wallace pointed to a number of elements on the software front that could trump any advantage Sony may have when it comes to technology. Wallace noted that the release of The Legend of Zelda: Twilight Princess will mark the first time a Zelda title will be timed to release at a console launch for Nintendo. "This is notable and should help the console...given the popularity of the franchise."
Lending weight to Microsoft's Xbox 360 initiative is the simultaneous release of the next title in the Grand Theft Auto franchise, which will release on October 17, 2007 for both the PS3 and 360. Previously, GTA releases have launched exclusively on the PlayStation. "We think the GTA exclusivity sold tens of millions of PS2's for Sony, so eliminating this is a big deal and will help Microsoft immensely," Wallace said. "Microsoft will now have GTA and Halo, the two biggest franchises out there."
Sebastian wasn't so quick to write Sony off, however. "We still have a lot to see from Sony and the PS3," Sebastian told GameSpot. "It's very easy to underestimate Sony based on what we saw [at their press conference]. The fact of the matter is there are 100 million PS2s out there, and most of the third parties are going to support the PS3 with a lot of content. At the end of the day, it's going to be software that wins the hearts and the minds of the gamer."
While Wedbush Morgan senior analyst Michael Pachter still puts his chips on the PlayStation 3 to own the next-gen race (see our interview with Pachter here), others remain unconvinced.
"In our view," Wallace concluded in his memo to investors, "Sony has a lot of catching up to do."
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