Games consoles have often been cast in the role of the
lost child of the new media age, scorned for years as mere electronic toys. But
the games industry has quietly evolved into a multi-billion-dollar shining star
in a gloomy multimedia sky. Worldwide sales of games software are now $10bn
([pounds sterling]6.1bn) and rising. A three-way battle for market share
between Sony, Microsoft and Nintendo is driving this wave of growth.
The outcome of this battle will be important for all
in the new media sector, as each company views its platform as the Internet
home gateway of the future.
Sony has sold more than 50m PlayStation 2 systems
worldwide since their launch in Japan three years ago. Neither Microsoft's XBox
nor Nintendo's GameCube has yet reached one-fifth of that figure. In fact, this
battle is a bit like watching the Falkland Islands play Greenland for the right
to meet Brazil in the final. One of the minnows will win the match, but the
odds on either of them beating the favourite would frighten even the most
optimistic punter.
One of the reasons for PS2's dominance was that it
launched 18 months before its rivals. But its strength also demonstrates the
power of the PlayStation brand, which has almost become synonymous with the
games console for many gainers young and old alike.
The PlayStation story is a remarkable one by any
measure; it's difficult to believe that Sony launched its first console only
eight years ago. By 1998 more than 40m units had been sold and PlayStation was
well on its way towards market domination.
The games business has traditionally been
characterised as a two-format market. In the 1980s and early 1990s Sega and
Nintendo did battle. Then it was Nintendo and Sony. Now Microsoft has joined
the fray, but all the signs are that the market can still only sustain two
players. The cost of developing a leading title, which can now reach more than
$10m, means that developers can't afford to support a platform unless it's
likely to gain a substantial base of users. Strategy Analytics has estimated
that the survival threshold for any games platform is at least 20m consoles
installed worldwide.
Both Microsoft and Nintendo still have some work to do
to reach that point. Neither platform has got off to an auspicious start.
Microsoft made a crucial mistake in the early days by pricing its console too
high. But it learned its lesson, and is now steadily increasing the range of
titles available. It's also putting its substantial resources behind XBox Live,
a service offering broadband users access to online games and, in the future,
other services.
Whatever your views on Microsoft, it can't be accused
of giving in, and we expect XBox to be around for years to come.
GameCube, on the other hand, appears to be in trouble.
Nintendo has already revised downwards its sales estimates, and games
publishers have revised down their forecasts for sales of GameCube software. In
spite of Nintendo president Mr Iwata's assurance that the company will launch a
successor to the GameCube in 2005/06, we remain doubtful. There's every chance
Nintendo will eventually follow Sega's route and concentrate on developing
titles for other platforms.
It will be fascinating to watch as new opportunities
emerge from the arrival of online games on broadband consoles. Both Sony and
Microsoft see their systems as replacing the PC for home Internet access, and
will spend many more billions ensuring that their vision becomes reality.
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