By George T. Chronis**10/1/2004
OCT. 1 | Some blockbuster sequels and new videogame hardware are expected to drive consumer excitement and boost traffic for retailers this fall.
Sony Computer Entertainment of America is releasing games such as Grand Theft Auto: San Andreas (Rockstar, PS2), Halo 2 (Microsoft, Xbox), Gran Turismo 4 (Sony, PS2) and Metal Gear Solid 3 (Konami, PS2).
And perhaps equally as importantly, Sony is releasing a smaller version of the PlayStation 2 on Nov. 1. The new PS2 is one-quarter the size of the original.
Meanwhile, Nintendo of America will debut the DS handheld game console Nov. 21 domestically. That's two weeks earlier than its Japan launch.
Thanks to console price cuts so far in 2004, expectations are that the installed base of current-generation systems in the U.S. has increased between 30% and 35% this year. Investment firm Harris Nesbitt figures that installed base will generate retail sell-through of GameCube, PlayStation 2 and Xbox games somewhere between 85 million and 90 million units from September to December. That would translate into software sales growth of between 10% and 20% to just under $3 billion for the period. Approximately 60% of all game sales occur during the last four months of the year.
Driving that sales growth are the arrival of the highly anticipated titles, follow-ups to best-selling games that consumers have been waiting on for between two and three years.
"Collectively, we believe these four games could represent approximately 12 million to 13 million units this holiday season, or approximately 14% of the holiday season's total expected unit sell-through," said Harris Nesbitt senior VP Edward Williams.
Just as film studios jockey their releases to avoid harsh competition, Williams believes many game publishers have cleared their decks of titles to avoid these heavy hitters launching this holiday season, pushing a number of titles into the first quarter or beyond.
That could be good news for retailers, as early 2005 could shape up to be a stronger sales period. Games moved out of the holiday period include Splinter Cell 3, Brothers in Arms, Battlefield: Modern Combat, The Punisher, STALKER, Devil May Cry 3, The Warriors, Midnight Club 3: Dub Edition, Area 51, Narc and Advent Rising.
Other good news for retailers is the added traffic that the marketing push behind the restyled PS2, and the new Nintendo DS should add during the holidays.
The new PS2's smaller and more lightweight footprint is almost the same dimension as a hardcover book. But the new design has not been reduced in price and will sell at the same $149 that was announced last May.
Sony's marketing may further boost awareness of videogames, and Sony will definitely save money on per-unit production costs, but Yankee Group analyst Michael Goodman said he doesn't believe the smaller PS2 will drive any meaningful increase in hardware sales at $149.
"At $149 you are selling into a diminishing segment of hardcore gamers who already own a PS2," Goodman said. "Even $129 would not dramatically reach out beyond the hardcore crowd. Only at $99 do you open up the value segment."
Goodman is much more upbeat about the $149 Nintendo DS handheld launching Nov. 21 in the U.S. Nintendo of America is getting the new dual-screen system to retailers before Thanksgiving, as well as committing to the U.S. market prior to the home release in Japan on Dec. 3, which is a first.
"Technically speaking, it's an interesting product that looks more like a consumer electronics device than the more toy-like designs Nintendo is known for," he said. Goodman says Nintendo is smartly taking advantage of Sony's inability to launch its PSP handheld this year, or set a firm launch date for it, as confirmed last week in Sony's PS2 announcement.
Sony also confirmed last week that PlayStation 3 will use the Blu-ray disc high-density optical format. Blu-ray will provide up to 54 GB of storage, or about six times the size of a DVD. The next generation of videogame systems are expected to feature much better graphics, and game discs will need the extra capacity to support the enhanced visual quality.
