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Wedbush Morgan Securities Weighs In

Wedbush Morgan Securities analysts Michael Pachter and Edward Woo have analyzed the videogame marketplace and have come up with some interesting conclusions.

One is that the current generation of consoles haven’t run out of steam yet. There is still a lot of life left in the PS2 and GameCube. (I don’t know why they didn’t include the Xbox, because it’s a good system, but maybe it’s because Microsoft seems to be dropping it to focus on the 360.) Pachter and Woo “expect a transition to the next-generation consoles to occur gradually”. It is common knowledge that Sony has been pushed to move up their PS3 schedule because of Microsoft’s impending Xbox 360 release. Is Microsoft pushing the market where it doesn’t want to go? Plus, the fact that old systems don’t want to die might make it harder for the new systems to start their lives.

“There is an installed base of over 84 million current generation consoles in the U.S. and Europe,” the report reads. “To forsake the installed base and chase sales to an estimated installed base of 2.5 million Xbox 360s at year end would be insane.”

Pachter and Woo are also “unconvinced that online gaming will amount to anything more than a niche market until late 2008, citing concerns with the business model and the relatively few genres that have successfully made the transition online”. This validates my experience. I don’t play online. I bought a network adapter for my PS2 to play online, but after a little bit of experimentation I never use it. I think it’s a lot more fun to play multiplayer games with people in the same room than with faceless voices over a headset. So what does this mean for Microsoft’s Xbox Live initiative? I have to admit that the features they’re including in Xbox Live for the 360 are amazing. This is some really cool stuff. But if you sit on your comfy couch on movie night to watch Transporter or Revenge of the Sith, do you really want a buddy to interupt you with a gaming request? And what are the chances that your friend will have an Xbox 360 to do so anyway? Xbox Live is going to be really cool. But it might also end up being fully used by only a small subset gamers. Which makes me wonder: maybe Sony is right after all. Their online strategy doesn’t appear to be nearly as encyclopedic as Microsoft’s. Maybe they’re right to focus elsewhere.

Link: GamespotAnalyst sees growth, but not from next-gen consoles