WMS: PS3 to 'Win' Console War Because of Blu-ray

[Tekman]

http://biz.gamedaily.com/industry/feature/?id=16061

Wedbush Morgan Securities has issued a report on the video game industry for 2007 and beyond. Huge growth is expected, and analyst Michael Pachter believes the PS3 will ultimately win (just barely) thanks to the Blu-ray format, which he expects to defeat HD DVD.


In a massive 207-page report on the interactive entertainment industry for 2007, Wedbush Morgan Securities analyst Michael Pachter notes that while "the main driver of console hardware sales is the quality and quantity of the underlying available content," the high definition format war between HD DVD and Blu-ray could be a key factor in determining the console war outcome.


"Notwithstanding the efforts of the three console manufacturers to deliver compelling exclusive content, we expect the ultimate outcome of the console wars to be decided by the motion picture studios. Should the studios embrace Sony's Blu-ray standard for high definition DVDs, we think Sony will gain an insurmountable advantage over Microsoft; should the studios embrace Sony rival Toshiba's HD-DVD format, we think that Microsoft can maintain its first mover advantage and will dominate software sales for years to come," Pachter explained.


The wildcard, he said, will be "hardware manufacturers' ability either to develop content internally or to secure third-party commitments for software designed exclusively for a single platform." The playing field in this area is likely to be even for Microsoft and Sony, he said, while Nintendo will probably have the largest portfolio of exclusives.


So how does Pachter see the console war ultimately playing out? Despite Sony's early struggles with the PS3, he still believes Sony will come out on top.


"We expect the dominant console at the end of the next cycle to be the Sony PlayStation 3 (PS3), primarily due to our assessment that Sony will win the high definition DVD format war," he said. "However, we expect Microsoft's Xbox 360 to enjoy a first mover advantage for the next two years, capturing approximately 44% of U.S. and European combined next generation hardware unit sales by the end of 2007. We forecast the PS3 and Nintendo's Wii to capture approximately 21% and 35%, respectively, of the next generation hardware market in this same period. We forecast the Wii to take the lead in 2008, with 39% market share, and expect the race to even out in 2009, with all three console makers capturing between 30 – 37% of the overall market.


"Ultimately, we see Sony 'winning' the console war with 36% of the market, with Nintendo 'capturing' second place at 34% and Microsoft finishing third at 30%. We believe that this is essentially a dead heat, and each manufacturer will have sufficient market share to generate significant profits. These estimates do not include market shares in Japan, which we expect to be dominated by Nintendo (51% through 2011) and Sony (44%)."


Looking at the overall health of the industry, Pachter is forecasting the combined U.S. and European software markets to grow at a 16.1 percent CAGR from 2007 to 2009. WMS estimates that the addressable market opportunity for U.S. software publishers is a whopping $17.7 billion in 2007.


In a separate report from Lazard Capital Markets, analyst Colin Sebastian said he expects at least 15 percent software sales growth in North America this year. "We believe video game sales remain generally healthy year-to-date despite tougher year-over-year comps for the remainder of 2007," he said.

[BluThunder]

That's great news for Blu-ray and Sony.
The only negative thing in my opinion for Sony is: they should stop manufacturing the "so technically advanced PS3" in CHINA. It's just ugly to see a beautiful machine like this with a Made in China logo in the back; when instead it could carry a Made in Japan logo. Just where Sony comes from.




Strive for Made in Japan electronics.

[Ascended_Saiyan]

^^As long as quality parts are shipped to the Chinese installers, I don't see how the finished product could be much different. I think they are very adept when given quality components to assemble. IMO, a lot of companies that use Chinese labor don't concentrate on quality. They concentrate on keeping the price down by any means necessary.

That report is saying what a lot of us new already. Sony will win the console war.

[Tekman]

Apparently it isn't only Peter Dille who thinks that Microsoft's Xbox 360 Elite is an affirmation of Sony's strategy. GamesIndustry reports that Wedbush Morgan analyst Michael Pachter also sees the Xbox 360 Elite as a sign that Sony's game-plan was on target. Pachter explains:


Microsoft's move is an endorsement of high-definition output, and its inclusion of HDMI validates that Sony's initial strategy was correct.

...The 120 GB hard-drive is focused on helping the roll-out of IPTV, and I expect a progression of HDTV broadcast from the current 720p to the 1080p standard over the next few years, so the HDMI output will be relevant.

...On balance, this is a very smart move by Microsoft, but it appears to validate Sony's strategy, and serves as an acknowledgement that HD content matters.



Pachter sees the Xbox 360 Elite as a move by Microsoft to encroach on PlayStation 3 functionality, only this time, instead of offering an all-in-one package, Microsoft is giving consumers choices. Basically gamers get the option to get a system that has components relevant to their needs, at a price they're willing to spend.

Pachter goes on to say that Microsoft is probably seeing that Blu-ray will win the movie format war. Matt Martin of GamesIndustry speculates that given that Microsoft isn't offering an external HD-DVD drive as part of the Elite package is an omen of Microsoft's future plans: a Blu-ray drive for the Xbox 360 Elite.

Here's Michael Pachter's analysis:


It appears to me that Microsoft sees the writing on the wall – Blu-ray is going to win the format wars. ...Ultimately, Microsoft will likely offer a Blu-ray drive with the 360 Elite, and I think consumers will be able to select based solely upon other drivers.



At this point we feel that it is good to note that Blu-ray on Xbox 360 is starting to seem more likely as time passes. For one thing, Xbox UK boss Neil Thompson did note that "Whatever format wins it is highly likely we will offer a solution."

Pachter goes on to note that he hopes that Microsoft does not phase out the 20GB model, saying that he believes that most users will be perfectly happy with it. He also says that he believes that Microsoft is in a good position at the moment to lower the price of the US$ 399 version.
http://xbox360.qj.net/Michael-Pachte...g/49/aid/87851

[dakota81]

Originally Posted by Tekman

<snip>
Pachter goes on to say that Microsoft is probably seeing that Blu-ray will win the movie format war. Matt Martin of GamesIndustry speculates that given that Microsoft isn't offering an external HD-DVD drive as part of the Elite package is an omen of Microsoft's future plans: a Blu-ray drive for the Xbox 360 Elite.

Here's Michael Pachter's analysis:

[B]It appears to me that Microsoft sees the writing on the wall – Blu-ray is going to win the format wars. ...Ultimately, Microsoft will likely offer a Blu-ray drive with the 360 Elite, and I think consumers will be able to select based solely upon other drivers.
<snip>

Sounds like nothing more than official rumors targeted to halt sales of PS3s. "Hey everyone, don't buy a PS3 for Blu-ray movies! We might be releasing an add-on drive of our own down the road!"

It's the same line Microsoft has been using for decades to stop people from buying other company's products - promises of integrating the technologies, then never actually delivering.

[The Don]

if MS is smart, they'd use the BD add-on to play certain games....or pretty much all the games that are on both systems..so they don't look like...COMPLETE fools..

[dakota81]

Originally Posted by BluThunder

That's great news for Blu-ray and Sony.
The only negative thing in my opinion for Sony is: they should stop manufacturing the "so technically advanced PS3" in CHINA. It's just ugly to see a beautiful machine like this with a Made in China logo in the back; when instead it could carry a Made in Japan logo. Just where Sony comes from.

Strive for Made in Japan electronics.

Hey, my PS3 is still running, while oh so many xbox 360 users have seen the red ring of death. Whatever Sony's doing right now seems to be working well, so stick with it, whether be it made in China or in Japan.

I only wish they kept the face of the PS3 black, the chrome plate just looks bad.