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Video Game Forecast Bright

5 Jul, 2005 By: John Gaudiosi

Total U.S. video game hardware, software and accessories sales will leap to $16 billion by 2007, when the next-generation hardware makes inroads with more consumers, said a recent report from Kagan Research.

The report, Future of Videogames 2005, forecasts that sales in 2007 would post a 61 percent increase from 2004's total of $9.9 billion.

Video game software sales alone are expected to grow to $8.1 billion by 2008, which is up 30 percent from 2004's $6.3 billion. The report does not include PC game sales.

Kagan forecasts that by 2010, 54 million U.S. households will own at least one console, and most will own both a fixed and a portable system.

The new report paints another victory for Sony, which will be late to the next round of hardware by as much as a year if PlayStation 3 launches in the United States next fall as expected.

Microsoft's Xbox 360 is expected to sell 11 million units by 2007, including an estimated 3 million hardware devices this year. Approximately 1.5 million Xbox 360s are expected to ship and sell through for the North American market launch this November, according to the study.

“We believe Sony PS3 will be the strongest seller of next-generation video game consoles,” said Kagan analyst Irina Mulvey, who wrote the report. “However, Microsoft's Xbox 360 will narrow the gap with Sony to come within 28 percent of the PS3 installed base — selling almost twice as many next-gen consoles as Nintendo Revolution by 2010.”

Nintendo is expected to enter the next-generation battle as early as summer 2006 with its Revolution, which is expected to retail for $200 — much less than the anticipated $300 price of Xbox 360 and $400 price of PS3.

Peter Moore, Xbox corporate VP of worldwide marketing and publishing, said at the European ELSPA Games Summit's opening keynote that Microsoft would sell 10 million Xbox 360s in its first 16 months. He added that being first to retail with its next-generation hardware will be one of the keys to the new console's success.

Sony was able to sell 20 million PS2s worldwide before Microsoft shipped a single Xbox in the current generation war. And it took Microsoft a full year to sell its first 1 million Xbox consoles.

According to the report, by the end of 2006, Xbox 360 will have 54 percent of the next-generation market share, followed by PS3 with 27 percent and Revolution with 19 percent. By 2007, the study projects Microsoft's lead will be gone, as its market share is expected to drop to 37 percent as Sony's PS3 rises to 45 percent and Nintendo holds its 19 percent.

In addition, the higher price points for Xbox 360 and other next-gen games — which are expected to be $60 at launch instead of the $40 to $50 of current generation software — will propel video game sales to $6.5 billion in 2005 and $8.1 billion by 2008.

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