October 29, 2002 11:04 AM PST

Xbox, GameCube scrap for second place

Sony will continue to dominate the video game business over the next few years, with Microsoft and Nintendo battling for second place, according to a report released Tuesday by research company In-Stat/MDR.

The report says 31.8 million game consoles were sold worldwide in 2001, generating $7.1 billion, with substantial increases expected over the next few years.

Analyst Brian O'Rourke, the author of the report, said he couldn't share specific market share numbers, but the race is clearly for second place. Sony had shipped 40 million units of its PlayStation 2 as of last month, while Microsoft's Xbox and Nintendo's GameCube were each edging past about a tenth of that.

"It's going to be very, very close for No. 2 between Nintendo and Microsoft," O'Rourke said. "It depends a lot on the region. Microsoft should have a clear advantage over Nintendo in North America, but the Xbox hasn?t sold as well in Europe, and it's had a really difficult time in Japan. Nintendo has done OK in all three markets."

The upcoming holiday season will be a critical test for Nintendo, O'Rourke said, because the Japanese game giant now has GameCube titles featuring franchise characters such as Mario and Zelda. "They sell machines based on the software much more than any other company," he said.

Advantages for Microsoft include the Xbox's appeal among consumers in their 20s and 30s, a group that's becoming increasingly important to the game industry. Nintendo's GameCube is more popular with younger gamers.

"The gaming demographic has really been skewing older and older each year," O'Rourke said. "It used to be that kids stopped playing video games at a certain age--now they're sticking with it into their late 20s and 30s."

The report also suggests support for the nascent market for online gaming via consoles, with half the consumers surveyed by InStat saying they'd be willing to pay $5 a month for such services, and a third saying they'd pony up $10 a month. Sony added online capabilities to the PlayStation 2 last month, while Microsoft's Xbox Live service is scheduled to debut in a few weeks.

O'Rourke cautioned, however, that interest in online gaming is not the same as willingness to do what it takes to extend an Internet connection to the living room.

"I think home networking and online console gaming are pretty closely tied," he said. "Unless customers want to run wiring through the house, that's going to play a big role in the success of online console gaming."

 

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