$47 billion

DFC Intelligence say that the worldwide videogame and interactive entertainment industry turns over about $33 billion per annum and that this will rise to $47 billion by 2009, which is over 40% increase in just two years.  Their biggest predicted growth area is online followed by mobile.

Looking at what is happening in the market this looks entirely feasible. If the market goes the way that it could then the growth might be even greater.

Online casual gaming for bored housewives and young children is a great phenomenon and I instigated Codemasters’ move there several years ago. Xbox live and Sony Home will both grow far more than 40% over the next two years and MMORPGs still have to grow out of their swords and sorcery roots. But yes, online overall will grow massively over the next two years and has the potential (as I have said repeatedly) to grow even faster and be a more compelling entertainment if more social networking is integrated into the gaming.

Mobile is going to grow on three fronts. Firstly the DS is just going to become more and more massively massive, such a must have purchase that nothing can stop it from becoming the best selling dedicated electronic gaming machine ever. Secondly Nokia may possibly get their act together at last. We know that they want to, they just don’t seem to have what it takes. If they do it could rival the DS. Then there is Apple and their softly, softly approach with the iPod/iPhone. If they get serious and press the go button it will release a great potential. As they want to make a lot of money there is no reason for them not to. Notice that the PSP doesn’t come into this. Quite rightly.

Where I strongly disagree with DFC is their analysis of the home console situation. They see the Wii as number one through 2008 with the PS3 competing with it in 2009 (but ahead on software revenue) and the 360 coming a distant third.

I see the Wii as being unassailable throughout this generation. They are providing great entertainment for normal people and so hugely expanding the market. They are also very strong in every market worldwide. The attach rate will go up as more great entertainment for normal people is released. Buy Konami shares now because Dance Dance Revolution: Hottest Party is going to do a Brain Age. The Wii is going where no console has gone before in terms of demographics and it is changing the market forever.

Microsoft are going to come second. Over Sony they have substantial first mover and retail price advantages and a big online lead. Most of all they have truly realised the advantage of unique content and have invested massively in it, to the point where the 360 is a must have purchase for any keen gamer. Also to the point where they seem to have overdone it! Their lineup of exclusive AAA blockbusters going into Q4 this year seem destined to take sales off each other. I cannot see Microsoft being able to make enough 360 consoles to keep up with the resultant demand over the next four months. After that they will be so far ahead that Sony will be unable to ever catch up. The only fly in the ointment is Japan. But this is a case of softly, softly. I would love a job in the Microsoft team trying to crack this market.

As for the PS3, I can see no compelling reason for anyone wanting to buy one. Sony have shot themselves in both feet repeatedly. They have lost a lot of the goodwill of the development and publishing community and their offering of games (which is what it is all about) is never going to catch up with the 360. They are going to come third by a long way in America and Europe and coming second in Japan will not make up for this.

Obviously DFC have far more analytic resources at their disposal than I do. So the balance of probabilities is that they will be closer to what happens than I am. But what do you think? Use the comments function to give us your predictions. Or even just to criticise mine.


  1. A good analysis — thanks for your comments. I agree with most of your points. However, I suspect that DFC is right that the PS3 will substantially surpass the 360. The progress on the PS3 has been slow, but relentless — Sony has steadily addressed nearly all the criticisms thrown at it. With a new controller and a $399 price, the PS3 is not only a better high-end console than the 360, but it is a better long-term value. Xbox Live is “better” than Sony’s online efforts, I suppose, but Home is more innovative. And by early 2008, there should be more games for both consoles than any gamer can ever afford or find time to play.

    More importantly, the numbers seem to show that most gamers have not yet made their next gen console choice. And for gamers who have delayed this long to buy a next gen console, there simply is no longer a compelling reason to choose the 360 over the PS3. Although the 360 will sell extremely well this holiday season, I suspect that the bulk of the PS2 and Wii gamers, when they begin to upgrade in 2008 and 2009, will choose the PS3 over the 360.

    Finally, the 360 has simply not made as much ground internationally as it needed to in order to sustain a lead over the PS3 worldwide. Clearly, Microsoft has done a great job of improving their position against Sony compared to the last gen, but it looks like it will take at least one more generation before it can sustain a lead over Sony. And, of course, I suspect that Sony has also learned a few lessons this time around which it will apply to future gaming initiatives. Competition is a great thing!

  2. Thanks for that Evan, interesting stuff.

    I think Halo 3 will have an immense effect on the position of the 360. That and the 100 other games Microsoft are releasing this holiday season should convert quite a few Sony fanboys over.

    Against this Sony have announced that PS3s with rumble will not be available in Europe and America till next year. This will at best delay many purchasers, at worst it is more incentive to switch brand this generation. The delay to the Home online system does not help either as Xbox live goes from strength to strength.

    Another major factor to consider is that Microsoft will have a lot of leeway next year to reduce their system price. It is a lot cheaper to make than the PS3 so they will be able to maintain a healthy price advantage right through the generation.

    I remain convinced that Microsoft will stay ahead of Sony this time. Things are going to need to change a lot for it to be otherwise.

  3. Bruce, good points all. I am a 360 owner myself, and, like you, I believe the 360 will continue to thrive. Certainly, Halo 3 and this holiday season are crucial for Microsoft because the honeymoon for the 360 will end in 2008 as the PS3 finally gets its act together.

    I am hoping that Sony figures out the right steps. From a business perspective, I share your criticisms of Sony. But as a gamer, I am delighted that Sony shot for the moon with the PS3. I am not in the Wii demographic, so that was not a choice for me. The 360 is a solid machine, pretty much what I expected of a next gen console. But the PS3 has been a bit of a surprise — several new and interesting features, a bigger jump than I expected. The over-reaching on the PS3 has hurt Sony financially, but it has given gamers a distinct choice that they would not have if Sony, like Microsoft, had played it safer. If I didn’t own a 360 now, I would definitely snap up a PS3.

    Also (this is entirely anecdotal), the staff of my local game store tells me their PS2 customers are holding out nearly 8 to 2 for the right time to get a PS3. I don’t know how universal that statistic is, but it is a good sign for Sony if it holds up.

    And, of even more interest, the game store staff tells me that most of the pre-teens and teens who got a Wii last holiday season are clamoring for a 360 or PS3 this season. I don’t think this is bad news for Nintendo because the opportunity for new Wii customers is huge. But it may be good news for Microsoft and Sony — it looks like the Wii might eventually bring new gamers to the 360 and PS3.

  4. Evan, it will be interesting to see if the PS3 turns out to be much better as a gaming platform than the 360. We will have to wait and see what the development community come up with. I certainly think that Microsoft are concentrating on exclusive content whilst Sony still seem fixated with the technology.

    As to last year’s Wii customers now buying a 360/PS3. I reckon that they will keep both attached to their TV and then just buy the games they want to play, some of which will be on one platform and some on the other.

  5. Bruce, you are right. Sony got over-enamored with technology this time around. I just read about Sony’s comments at the TGS, and it appears that Sony recognizes this and is making an effort to re-connect with the game developers. Let’s hope it works out for both Sony and Microsoft. Competition is good.

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