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December 10, 2006

Video game console vendors compete for Christmas stockings

Judging by the "temporarily sold out" displays on many US electronics retailers shop fronts, the video game market is starting to heat up just in time for the holiday season.

By CBR Staff Writer

Vying for leadership are newer systems like Sony Corp’s PlayStation 3, Nintendo Co’s Wii system and older systems like Microsoft Corp’s Xbox 360 and Sony PlayStation 2.

While Sony’s new PlayStation 3 has been grabbing the headlines of late, partly because of its scarcity on retailer shelves, Nintendo has also launched its latest rival gaming system on the back of an aggressive television advertising campaign and seems to be winning thus far with around 476,000 units sold in the US to date versus $197,000 for PlayStation 3. That’s an outsell ratio of over 2:1.

Microsoft Corp’s Xbox 360, which was launched a year ago still leads the market with over 511,000 units sold last month, taking its total up to 3.8m customers in the US.

Interestingly Sony’s PlayStation 2, which was introduced six years ago, was the top seller last month with 664,000 units shipped in the US.

Those figures come for market research firm NPD Group which estimates that sales of video game console hardware, software and accessories surpassed $1.7n in November.

NPD tracks sales data from most of the leading US retailers. But its does not include sales data from the biggest US retailer Wal-Mart Stores Inc; rather it estimates sales from this company.

Both PlayStation 3 and Wii were launched within a few days of each other in mid-November.

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Priced at $250, Wii costs roughly $250 less than a standard PlayStation 3 edition which starts at $499 — but an upgraded version of Sony’s system can run up to a bill of $599.

Each system includes novel features. Wii, for example, comes with a motion sensor for virtual action game-play. And PlayStation 3 boasts an integrated Blu-ray DVD player for more vivid graphics.

A high price-tag, along with shortages of units shipped and parts, might have had something with PlayStation 3 sales falling well below Sony’s sales expectations of 400,000 for the month.

The inclusion of the latest Blu-ray DVD has certainly bumped up the cost of PlayStation 3 and has slowed production. Some customers have also expressed their annoyance at Sony pushing a format that the rest of the market is not aligned as well. The strategy smacks of the old Sony Betamax-VHS battle which Sony lost out on. This time Blu-ray is competing against Toshiba Corp-backed HD-DVD format.

Microsoft’s Xbox system costs $400 and now includes an optional HD DVD player and has begun to offer full-length film and TV downloads in high-definition mode via its Xbox Live online gaming service.

Microsoft expects to sell around 10m Xbox 360s by the end of this year and pointed to a very strong Thanksgiving holiday.

However both Sony and Nintendo admit that sales PlayStation 3 and Wii could have been higher if their inventory levels matched demand.

Sony’s aim is to shift 6m PlayStation 3 units globally by March 2007. Those expectations might now have to be trimmed. But the company said it is airlifting consoles to the US to meet the Christmas demand. It has appointed a take over from PlayStation creator Ken Kutaragi to head up its games division.

Nintendo also has a similarly aggressive forecast of 6 million sales for Wii by March next year. Nintendo president Saturo Iwata said in a statement last Friday that he remains confident of shipping 4 million consoles globally by the end of this year.

Like Sony, Nintendo is struggling to keep production apace with demand in the US. The company I believed to be shipping in a quarter of million Wii units into the US every week.

Of course video game consoles often live and die by the variety of games they can play. The hot titles for the holidays that parents should keep an eye out for Gears of War (for Xbox), Final Fantasy XII (PlayStation) and Twilight Princess (Wii). Each of these games topped sales last month.

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