The state of the next-gen video game console

The Xbox 360 became the first next-gen console to sell 10 million units in the United States.

(Credit: CNET Networks)

With the release Monday of Wii Fit, the exercise game that some video game analysts have predicted could become one of the best-selling titles of all time, it was Nintendo's turn to dominate headlines related to the so-called next generation of consoles.

The "next-gen" era began in November 2005 when Microsoft launched its Xbox 360 and then really kicked into gear a year later when Sony and Nintendo pulled back the wraps on the PlayStation 3 and Wii, respectively.

Being big business--video game sales in the U.S. alone in 2007 were $9.5 billion--everyone has been wanting to declare the generation's winners and losers since pretty much the first day all three consoles were on the market.

Doing so, of course, is a tricky proposition because console generations last for years, and sales ebb and flow according to a number of factors. But one thing that seems clear is that past success or failure is not a guarantee of future performance. And so while plenty of armchair quarterbacks have already written the results of the next-gen console wars, industry experts say the final results could turn current assumptions on their heads.

Here's where we are today: Nintendo has shocked the world with its Wii, bringing millions of new mainstream gamers into the fold with its innovative motion-sensitive controller, low price, and fun, easy-to-use games. The Wii was presumed the generation's sure third-place entry and now is seen as its winner.

Similarly, with the expected loyalty of more than 120 million PlayStation 2 owners, Sony's PlayStation 3 was expected to be the next-gen winner, especially with a built-in Blu-ray player and incredible graphics courtesy of its Cell processor. Yet, the PS3 is generally seen as next-gen's loser, due to high prices, the resulting lackluster sales, and the perception of a paucity of killer games for the platform.

(Credit: Shaun Charity/CNET Networks)

The Xbox 360 was expected to be a solid runner-up, but instead, it hit 10 million U.S. units sold first, dominates the list of must-have titles, and has seen its online component, Xbox Live--with more than 12 million users--become the class of the genre.

Too early to tell
But this is indeed a marathon, not a sprint. Previous console generations have had five-year cycles, but the next generation looks like seven or more.

"I think that the landscape still has a lot of change to go," said Michael Pachter, a video game analyst with Wedbush and Morgan. "Where we're at is still really early in the cycle."

According to Pachter, price is the one issue that could most drastically alter the next-gen console landscape.

Currently, the Wii costs $249--if you can find one--and top-end Xboxes and PS3s cost $349 and $399, respectively.

To Pachter, that's too much to ever attract PS2-like sales numbers.

"Consumers just have this image that consoles cost $199 or less," he said.

Pachter predicted that between now and the 2009 holiday season, both Microsoft and Sony will cut the prices on their consoles.

He expects Sony to slash $50 off the price this year and again next. That would mean a $299 PlayStation 3 for the 2009 Christmas season.

That could also mean the PS3 might finally start to give Sony the sales it has hoped for.

The PS3 was expected to be the next-gen winner based on the huge number of PlayStation 2 owners, but the new console stumbled out of the gate and is currently in third place.

(Credit: Sony Computer Entertainment of America)

In a report issued earlier this year, IDC analyst Billly Pidgeon projected sales numbers for the three next-gen consoles, through 2012.

Pidgeon suggested that by 2012, the PS3 will lead the pack, with more than 107 million units sold worldwide, while the Wii will be just behind, at nearly 107 million units.

In the shorter term, however, IDC suggested that the Wii is poised to be the dominant console, most likely overtaking the Xbox this year in total sales.

"Our forecast calls for the Wii outshipping the Xbox 360 and the PS3 through 2010," Pidgeon wrote.

To some, the big shock in Pidgeon's report is that the Xbox 360 will have fallen far behind by 2012, with just over 40 million units sold.

To Pachter, these predictions have the ring of truth.

"I think Microsoft has an image issue," said Pachter. "They've branded themselves as the hard-core gaming rig, and I just don't think that the hard-core audience is that big. Thirty or forty million, but not 120 million. I think they're going to keep capturing the hard-core, but they're never going to appeal to family, and Sony's always going to appeal to family."

Microsoft clearly disputes this conclusion.

To Aaron Greenberg, director of product management for Xbox 360 and Xbox Live, there are already stats demonstrating that the Xbox 360 is attracting broad appeal. One, he said, is that there are already 16 Xbox 360 titles with a million or more units sold in the United States, compared with eight for Wii and only two for PS3.

"Being first to market was a big advantage for us," Greenberg said, referring to Xbox's year head-start. "It allowed us to become the default platform for third-party (publisher support). We've got 12 million users for Xbox Live, the largest game lineup, and the most exclusive titles."

Microsoft, of course, has a stake in promoting the sense that the console wars are over before they really begin, but the numbers don't necessarily support that idea.

According to research firm NPD, through April 2008, Microsoft had sold 10.08 million Xbox 360s in the United States, Nintendo had sold 9.51 million Wiis in the U.S., and Sony had moved 4.29 million PS3s.

But despite the Xbox leading the pack so far, the Wii clearly has the momentum. It sold 714,000 Wiis in April in the U.S., compared with just 188,000 Xboxes and 187,000 PS3s.

"We can say we're pleased with the way consumers of all kinds have responded to the Wii," said Denise Kaigler, Nintendo of America's vice president of corporate affairs. "Everyone continues to have great experiences with their family and friends. Plus, NPD says that no video game system in history has sold so many so quickly."

Bumps in the road
Despite its amazing success so far, Nintendo has had trouble meeting demand for the Wii. So its sales could even be higher.

The Wii was not expected to appeal to very many people but it has been a sensation, opening up the video game industry to a large number of new players and selling out wherever it is sold. It is now expected to take over the next-gen sales lead in the U.S. in a matter of months.

(Credit: Nintendo)

Microsoft, too, has had bumps in the road. It also had console shortages and a very widely discussed series of problems with Xboxes breaking down.

But most agree that Microsoft's answer to its quality problems has been a case study in responsiveness.

"You have to give them a ton of credit," said Pachter, referring to Microsoft's offer of three-year warranties for Xbox 360s. "They didn't back away from it, and they didn't try to blame it on anybody else."

Sony's problems, of course, have been the most well-chronicled.

Sony was originally expected to follow its dominance with the PS2 into the next generation.

Instead, from the get-go, the PS3 was seen as being far too expensive at $599, built-in Blu-ray player or not.

Sony acknowledges the problems, but argues that the PS3 is finally ready to turn the corner.

"There were two main barriers to entry (to the PS3) for consumers: cost and content," said Patrick Seybold, director of corporate communications for Sony Computer Entertainment America, "and we have addressed both of those. We reduced the price...and we demonstrated an exceptional lineup of products that certainly separate PS3 from the rest of the industry."

But another problem for Sony has been the perception that there aren't very many must-have games available for the PS3 and that cross-platform titles sell better on Xbox. Hits like Grand Theft Auto IV, Assassin's Creed, Guitar Hero III, Electronic Arts' Madden football, and other cross-platform games seem to sell better on Xbox than on PS3, and the biggest PS3-only successes have been MotorStorm and Resistance: Fall of Man.

The Xbox 360, by comparison, has had a series of such hits, including Halo 3, Gears of War, and BioShock, which is being turned into a movie.

Similarly, new games like Fable II, Gears of War 2, and Halo Wars are coming exclusively to Xbox 360.

But PS3 owners can look forward to Metal Gear Solid 4 and Little Big Planet, both games that are expected to sell a lot of copies, and probably drive additional sales of the console itself.

Wii Fit, in the meantime, is expected to be the kind of game that appeals to a very wide audience.

"I think it's going to attach about a one-third rate to all Wiis," Pachter said.

But of course, the Wii has had its share of hit games, including Super Mario Galaxy, which was impossible to find last Christmas, Mario Kart Wii, and Boom Blox, Steven Spielberg's first game under his partnership with Electronic Arts.

So what happens now?

One thing seems evident: This is a good time for the video game industry. According to NPD, the whole business is booming, with $5.47 billion in sales through April, up 31 percent from $4.18 billion a year ago.

No one knows, of course, if Pidgeon's analysis of the future of the consoles will play out, but even if it does, it shows that all three console platforms have a strong future.

"I think what's most exciting for the entire industry is the amazing growth we've been witnessing," said Greenberg. "The biggest entertainment launches are now in the games industry...We feel pretty bullish. We feel this year will be the biggest year in video games history."

On June 10, Geek Gestalt hits the highways for Road Trip 2008. I'll start in Orlando, Fla., and visit many of the South's most interesting destinations. Stay tuned, and be sure to keep up, both now and during the trip, with what I'm doing on Twitter.

[spm82]

"Consumers just have this image that consoles cost $199 or less," he said.
Is that why the PS2 was $299 upon release, and did not drop under $200 for quite a while? It still sold like crazy in the first year. I'll admit that the $400-500 price point is not accessible for a lot of households and is not attractive to casual gamers, but that quote is utterly ridiculous.

[Lerianis]

Yeah, I bought an original XBox when it was $300 dollars (only to have the price drop ONE DAY after I bought it).
Somewhere between 199 and 250 dollars is the price point where most people are willing to splurge on a new console.

[ahickey]

A genuine question on Xbox 360 shipments.
Does the 10+million include the units they had to ship to cover the quality problems they had or are they new sales?
Nothing I have read has made this clear to me (or is it just me)

[skelley_2]

No. These are retails sales/shipped numbers and not shipments of remanufactured units to non-retail channels. YOu could probaly add-on anotehr million for that! I'm not sure though if they count remanfactured units resold at retail as part of that number. Not that they have any to sell at retail since they are shipping all of them to customers. ;-)

[michael_o]

Whoever wrote this must be the statistician for Hilary's campaign. The Wii is outselling the PS3 4:1 in Japan; only lately have they caught up where there seem to be a few on the shelves of some stories -- PS3's and 360's are stacked up tall as a person. This generation's contest is over: it's Nintendo by a landslide.

[thenet411]

You must also think the science on global warming is settled and over too. You're funny.

[celticbrewer]

but its longevity will be half of the other two. If they can fix supply problems, Wii will sell this year more consolses than the other two combined. But after that... nothing. Sorta like Xbox, they've already hit their peak. I hear of people still going out to buy PS3s and Wiis- I haven't heard anyone lately say they're going to buy a XBox (unless it's to replace one that's died)

[aztec92154]

On the subject of Sony Playstation 3 Losses, Matt Peckham at PCWORLD says: "There are over 127 million PS2s sold worldwide. [What are the] chances of the PS3 replicating that success? I'd say today almost zero. The PS3's chugging along at 12.6 million units worldwide since its late 2006 launch. It'll be lucky to sell half as many systems by the time the PS4 shows up (as early as 2010, by the way). Sony predicts it'll sell another 10 million PS3s for the fiscal year through March 2009. That would make around 23 million. Compare that to the Xbox 360's 19 million and Wii's 26 million already today." SOURCE: http://blogs.pcworld.com/gameon/archives/006963.html

[Ravenlore]

if nintendo can continue to make games that use the controler well then it will continue to sell well. Until their next console in 2013. I do not need a Hit game each month but a few a year like Big Brain, Using per like fit to do snowboarding or other movements will go a long way to enjoy the console.

[X-C3PO]

IDC normally provide an "guessed" data to confuse people or try to lead people to do something.

[aaroberts]

Pidgeon's analysis is inane and he?s obviously being paid by Sony for it. No one even mentioned Xbox live which is the major reason people go with Xbox? idiot.

[Ravenlore]

This is just sad. The insane babblings of a child trowing a tantrum. - - Xbox live cost $50.00 a year after 5 years 2010 when the third Xbox is launched that will cost $250.00 PS3 is working on improving their service copying the best there is PC online games, and improving on it with Home!!

[adasha76]

You shouldn't mix worldwide and US only sales in the same context - it's highly misleading. The Wii overtook the XBox's overall sales worldwide last year. The US is the only territory where this has not happened, but probably will withing a couple of months.

Anyway analysts are usually wrong so why do we keep paying attention to anything they say?

[adasha76]

You shouldn't mix worldwide and US only sales in the same context - it's highly misleading. The Wii overtook the XBox's overall sales worldwide last year. The US is the only territory where this has not happened, but probably will withing a couple of months.

Anyway analysts are usually wrong so why do we keep paying attention to anything they say?

[adasha76]

ahh stupid cnet comment system

[samkass]

The article is also very skewed because it's only counting cumulative sales, not yearly sales. Right NOW the PS3 is outselling the XBox360 worldwide by significant margins, and has been all year. The XBox360 is *already* in third place in market share this year and falling further behind each month.

Yes, the Wii will have the most numbers because of its price. I suspect many Wii owners either also own one of the other consoles, or would never have bought one of the other consoles, though. So it's not really taking a lot of sales away from the other two, I suspect.

[superman9956]

Wrong the xbox 360 has been outselling the ps3

[aemarques]

Sorry, but the Wii is NOT a Next Gen console: no high definition video, no media center, no nothing. I very much doubt that it will have staying power.

[superman9956]

the wii is a nex gen console the other are not game consoles

[StiC1138]

Why? Is the Wii a car, or the title of the latest #1 best seller in paperback fiction? No it is a video game console competing with Sony and MS for consumers and developers Although the graphic capabilities are certainly not next gen, there is no denying that the interface is new, intuitive and a lot of fun.

[rnieves1977]

NEXT GEN simply means the next generation or incarnation of something whether it has the HD or not... It is Nintendo's Next Generation Console...

[skelley_2]

It is next gen... not for graphics or HD but for gameplay mechanic and contoller design. Personally. I think Nintendo had more innovation in their console than the other two and I own a 360. PS3 and 360 might catch up but they'll need to do it through innovative games and not hardware.

[Lerianis]

superman9956 is right that the PS3 and XBox360 are not SOLELY gaming platforms like the Wii. They are more 'media center replacements', in all honesty.

[gerrrg]

The biggest problem with the forecasting, is that it doesn't appear to take into account that even while Sony may cut prices, there's nothing holding back Nintendo from slashing prices to maintain momentum. From $249 down to $149, that baby will be selling like hotcakes. I'm betting that since Bluray STILL hasn't caught fire with consumers, it'll be some time before the cost of manufacturing will drop significantly such that Sony is willing to suck it up and become price competitve at $250.

[skelley_2]

Totally agree with your statement. Microsoft could also dramtically change the game by dropping their price to 199.99 for a core this fall and 250.00 for a pro. These forcasters are just dumb, they have no idea of the future competitive changes each company might make, what add-ons, what games, etc. You think Wii Fit is the only hardware add-on thing coming out for the Wii this year?

[None51]

Nintendo is king, at least until xb and ps3 come down in price, and figures at this point are misleading, xb has been on the market for years, the other two just came out much later and demand is still relatively high. When prices catch up, you will see xb AND ps3 overtake Nintendo!

[rdupuy11]

Wii is still at its launch price, because as Nintendo has made very clear, there is no point in dropping the price, when they cannot make enough of them, and there is none in stock.

But, they can combat any price drop on the part of sony and ms, with a price drop. They can well afford to drop the price. There may be a point where price is not as important, but Nintendo can compete on its library of titles anyway.

Those arguing the Wii isn't part of this gen based on spec..thats pure sophistry. The Wii is playing this generations titles....Super Mario Galaxy, Wii Sports, and Wii Fit

[cgamboak]

I love PS3 but not buying any japanese goodies until they stop the wales kiling, 1000 authorized for this year only....

[david__B]

Pretty much shows price rules. The PS3 will always be the most expensive period. The Wii will slow way down in sales, like the Gamecube did when it's games start looking really really bad against the PS3 and the Xbox360.

I wouldn't expect the more expensive PS3 to ramp up sales like the PS2 did. The original Xbox and PS2 where priced the same, the PS3 will always be more expensive then the Xbox 360 and the Wii and all things being equal, when the parent goes to buy he's not spending more for a console that has less games, many of which are/will be on both the 360 and PS3.

[megustansalchichas]

i was a ps fan gen 1 and gen 2 -lots of games, lots to choose from. then the ps3 hit and the price was ridiculous. then when they brought down the price they took out ps2 compatibility -***? i've heard of brand loyalty, but i'm not stupid, it's just a toy.
With the ability to play online games and a much larger library of old school arcade titles the Xbox looked more attractive -I purchased, and am impressed by the service, if not the hardware. make it more fun and people will buy -because that's the purpose of a TOY.
So it should be no surprise that people are moving to purchase something that promises to make it even more fun to play against others. Imagine marble madness against a friend with the wiimote -I can't wait. why do people argue about these things like they're mutually exclusive -aren't most kids nowadays waaaay too spoiled with all the toys they could ever want? not to mention adult kids, who purchase most of these things.
For the price of a top end PS3 you can buy a wii today and an xbox next year, and be able to play everything except ps3 only titles. no big loss there.
Until the ps3 shows some smarts -actual fun games at a good price, it deserves to be in third place.

[PFreak]

$399 for a PS3 buys you a whole lot more than $349 for an Xbox. The PS3 is, in fact, the cheaper machine if you want similar specs.

[pfletcher]

its a platform - doesnt matter how much better it plays the same game in pretty much the same resolution - makes no sense - your comment

[ralfthedog]

Why are people upset at a $400 game system. That may sound like allot of money, however, it is only the cost of one gallon of gas. If you need the money to buy a PS 3, just ride the bus to work for one day.

[lil-yankee]

It is true that this gaming war has alot to do with the wallet and the savings as must americans now consider themself in crisis for many different reasons. Now, price has a significance and gaming machines or consoles are not a toy like you claim, they are mahcines. Taking Nintendo Wii out of the picture, both the Ps3 and the 360 have super computing power. When you opt to buy a wii or a 360 price shouldnt be the motive as many fail to see but quality and services. If you decide to go with a Wii then you are asking for pure gaiming. If you ask for a 360 you are in the same market as the Ps3 but then are crippled in some areas. See the hardware in the ps3 is the holds the most potential out of the three and it also sets you back with a blue ray disc drive that most people will now not prioritize in. As sony made it clear this isnt a race this is a maraton and its very long (10 years) approximately. as we move in to 2009 and further we should be expecting blue-ray to be more widely available and cheaper just as dvd's did and the ps3 will be at the top of everybody's list since it plays games has many more features than a blue-ray player and its a very solid future proof player. Now, when sony gets a price cut it would open the doors for those consumers like you that do not have enough money to get a ps3. Im not saying that people would just go and buy it, there are people that dont like it, it happens to all companies, but more people will enter the ps3 clan as prices get reduce. The wii will then reduce teh prices too but this wont matter as the market for people who can affort a 200 dollard machine is just stupid. Someone that doesnt have it in his heart to take a more than 200 for a gamin console is just a waste in society, probably doesnt have a tv and is most likely homeless, thats what I say. [Editors' note: Ad hominem comments have been removed.]

[DehumanizerBR]

These forecasts are ridiculous. The Ps3 will finish 2008 with 23,5 kk units sold? It need 1,4 kk per month sonce now to achieve this number at the end of the year, it's completely nonsense. If the person who made this projection didn't think well even about the number of 2008, I think about the the next years... lol

[djmob7]

I have both a Wii and a PS3. Money wasn't really a factor for either. The Wii I bought primarily for my daughter who is currently 7 and the PS3 for the BlueRay player.

We have probably 10-12 games between the two systems, but the Wii gets played (by everyone) much more. Although not the best graphics, the Wii is just more fun to play. Even my wife who never plays any type of video game will go a couple of rounds of DDR on the Wii. As for gaming on the PS3, with the exception of CoD4, none of the games I've played have held my attention for more than a few days.

I do think PS3 is a good value though when you factor in the cost of the BlueRay player, but I also think that BlueRay may become an enthusiast-only technology (i.e. SACD) as streaming/downloadable movies gain popularity.

[smokified]

Why is it that when people refer to BluRay they only think about movies? What about games and data storage? I even have a thing that will make a frisbee out of a 120mm disc.

Look at the whole picture as opposed to only what you know about. there is more out there in this world, and people who are a lot smarter than you are inventing this technology. Don't think that the engineers at Sony overlooked something that every idiot American keeps spouting off about.