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Nintendo takes the lead in the video-game console software market

Oct 31, 2007

Nintendo displaced Sony Corp. as the leader in the video-game console software market in the third quarter of 2007 as it introduced a flood of new titles for both its Wii video-game console and its portable DS system, according to iSuppli Corp.

Worldwide revenue for Nintendo DS and Wii gaming software amounted to $1.2 billion in the third quarter, up 31.4 percent from $943.6 million in the second quarter and more than double the $611 million from the third quarter of 2006.

In comparison, Sony Corp. in the third quarter generated $1 billion in gaming software revenue for its PlayStation 3, PlayStation 2 and PSP players. Microsoft Corp. posted revenue of $317.8 million for Xbox and Xbox 360 software. In the second quarter, Sony generated $1 billion in gaming software revenue for its gaming platforms, while Microsoft was at $271.9 million.

"Nintendo is likely to maintain its lead in this area, as it expects by the end of 2007 to ship about 200 additional titles, adding to the more than 150 games already released, many from outside publishers," predicted David Carnevale, vice president of multimedia content and distribution at iSuppli. "Company software sales should be further boosted by the addition of a new flagship title for the Wii, dubbed Wii Fit, which encourages players to engage in full-body exercises using Wii Balance Boards, performing activities including yoga, push-ups, aerobics and stretching."

Wii software revenue is expected to rise to $1.1 billion worldwide by the fourth quarter of 2008, managing a Compound Annual Growth Rate (CAGR) of 29.6 percent from $66 million in the first quarter of 2006. For those expecting the Nintendo DS to go away anytime soon, the portable gaming device will keep on ticking, with its software revenue reaching $1.2 billion by the fourth quarter of 2008, rising at a CAGR of 12.6 percent from $333.2 million in the first quarter of 2006.

The company is pursuing a strategy of enlarging the market for its software with plans to target casual gamers. Other games that will further expand the Wii's appeal include Mario Kart Wii and the upcoming Super Mario Galaxy.

Appeasing the masses
The Nintendo Wii has mass-market appeal and sports a number of interactive games that are slowly winning over mainstream consumers.

In contrast, Microsoft's Xbox 360 console is aimed at more serious gamers, with cutting-edge titles like Halo 3. Microsoft is banking on the hype surrounding the release of Halo 3 to help propel sales during the all-important holiday season.

Sales of software for Sony's PlayStation 3 have been suffering due to the console's high price point, combined with a lack of compelling titles. The problems have begun to affect even the third-party publishers, including leading game maker Electronic Arts (EA), which has banked heavily on the success of the PlayStation 3 platform. EA is losing revenue due to meager PlayStation 3 sales and the company is rooting for price cuts and improvements to the console in order to encourage software sales.

Perhaps hearing EA's plea, Sony this month announced a $100 price cut for the PlayStation 3.

However, because Sony was slow to reduce the price of the PlayStation 3 and to produce compelling games, third- party game publishers are flocking to other platforms.

If the PlayStation 3 can't promote more game sales, developers may begin to feel working with Nintendo outweighs the benefits of working with Sony.

Find out more about the game console software content market in Carnevale's latest report entitled: Internet Protocol TV Battle Heats Up. For more information on this report, please visit: http://www.isuppli.com/catalog/detail.asp?id=8973

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