Analysts Predict Slow Console Hardware Demand

Market research company In-Stat/MDR has predicted that world-wide shipments of game consoles will reach only 19.3 million this year, compared to 35 million in 2003. Referring to the spate of significant console hardware price cuts that began last winter, analyst Brian O’Rourke has commented, “At this point, the market is much closer to the saturation point, even with the price cuts.” According to O’Rourke, hardware sales are not expected to increase until the next generation of formats are released. "It's likely the PlayStation 2 will have the biggest drop, because it has the furthest to fall," he said. Commenting further, he suggested: "I think the shipments for the new consoles will be less than current generation, at least initially. This generation has been so incredibly successful... and a lot of the people who have bought consoles in this cycle are casual gamers who are quite satisfied with what they have now. It's going to be a real challenge to try to convince those people to trade up to the new technology." Much of O’Rourke’s comments echo concerns made by other parts of the industry. For example, Nintendo have publically mused that the new jump in technology may not be so obvious to non-gamers, and that companies will thereby have more difficulty attracting mainstream consumers. Electronic Arts have also hinted at similar concerns – claiming that they will continue to support the PlayStation 2, at least, for many more years to come. Of further concern is the increasingly short shelf life of console hardware. The PlayStation 2 is still less than five years old (having launched in Japan in March 2000) and the Xbox (having launched in North America in November 2001, as did the GameCube) only recently celebrated its third anniversary. If the PlayStation 3 launches in the spring of 2006, as some suspect, it will have had a reasonable six year lifespan as Sony’s primary format. But to be suffering from such a rapid fall off in demand at this stage in its cycle is worrying. Although the PSone had a similar lifespan, before it was superceded by the PlayStation 2, sales remained energetic enough to see off rivalry from superior technology such as the Dreamcast, and to ensure new releases for several years after the PlayStation 2's launch. If the next-generation Xbox launches next Christmas, then that format will have had a shelf life of just four years. If companies are already concerned that consumers will not be able to distinguish between the abilities of the new and old hardware, then being forced to create them according to an ever shorter timescale seems a recipe for disaster.