sonycowboy
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A very pro-Microsoft article that rates their prospects very highly for the next generation. They do seem to take a little liberty with facts such as the installed bases (comparing WW Xbox vs US PS2) as well as with the PS2 online base. They also expect the Xbox to be profitable by 2007.
Microsoft, Sony in video-game joust
$10 billion U.S. market about to move to new level
NEW YORK (CBS.MW) -- The video game industry is at an inflection point, a Microsoft officer told analysts at the software giant's annual meeting last week, and whoever dominates it will "win the next console cycle."
Whereas game console sales used to be driven by the unit's power and speed, said Bryan Lee, CFO of Microsoft's Home and Entertainment Division, sales will now come from the software that supports them. That includes the online platform, where players can play on a worldwide stage via mobile devices, computers or their game consoles.
"The company that can define those scenarios and execute on them will win the next console cycle," said Lee. "That company will either be Microsoft or it will be Sony."
A lot of money is at stake, with $10 billion a year spent in the U.S., roughly the same amount Americans spend on movies and music.
"What you're seeing is video games are rising to be an entertainment icon that's on par with a lot of other parts of the more established entertainment medium," Lee said.
Lee added, however, that while box office receipts are largely flat and the music industry's sales are falling, spending on video games has risen 60 percent over the past six years.
"And when you think about what can happen in the future, there are actually a lot of reasons why that trajectory can continue," said Lee.
In the U.S., he said, barely more than a third of U.S. households have a video console. In foreign markets, such as India and China, the numbers are even lower.
"The industry is ripe for a lot of growth," he said.
Microsoft's contender in the video game industry is the Xbox, with a total of 15.5 million sold since its introduction in late 2000. For each Xbox, the company has also sold an average of 6.9 games.
Microsoft's main competitor in consoles, Sony's (SNE: news, chart, profile) PlayStation 2, has sold about 25 million units.
Online gaming
But the real growth prospects are in the game sales and the expansion of gaming online, where players battle over high-speed Internet connections.
Microsoft's foray into that market is its Xbox Live service, which offers about 100 games and typically costs $50 a year. About 1 million customers have subscribed.
Microsoft plans to introduce "Halo 2" on Nov. 9 and add 50 more titles with online capability by the Christmas season. Lee expects the number of Xbox Live subscribers to swell to 1.5 million by the middle of 2005.
Sony has sold 3 million PlayStation 2 versions equipped with Internet connections in the U.S. This service is largely free, and the number of users has been about 1.2 million.
Showing the importance of the online segment, Lee said that Xbox's success will be based on its Xbox Live system, which he said is "redefining what gaming is about. We are the undisputed leader in online."
Analysts at the meeting appeared most impressed by the launch of Halo 2, which a McAdams Wright Ragen analyst called "one of the most anticipated games in history."
Next-generation consoles
Many analysts wondered about when the new version of the Xbox (dubbed "Xbox2") would be launched.
"Microsoft and Sony are in a game of Prisoners Dilemma as they strategize about when to release the next-generation console," said analyst David Hilal, at Friedman, Billings and Ramsey.
Goldman Sachs analyst Rick Sherlund said he expects Xbox2 to be introduced by Christmas 2005, which will beat Sony's introduction by about a year. With this introduction, he added, the company's Home and Entertainment division should reach profitability by fiscal year 2007. The division lost $1.2 billion in fiscal 2004.
In a note to clients, Morgan Stanley analyst Mary Meeker appeared more impressed. "The most important takeaway from the Xbox business should be what Microsoft has done and on how little time it has accomplished it," she said. "It has achieved a No. 2 market position, established a true consumer brand for the home, generated strong IP franchises, and developed third party relationships."
A very pro-Microsoft article that rates their prospects very highly for the next generation. They do seem to take a little liberty with facts such as the installed bases (comparing WW Xbox vs US PS2) as well as with the PS2 online base. They also expect the Xbox to be profitable by 2007.
Microsoft, Sony in video-game joust
$10 billion U.S. market about to move to new level
NEW YORK (CBS.MW) -- The video game industry is at an inflection point, a Microsoft officer told analysts at the software giant's annual meeting last week, and whoever dominates it will "win the next console cycle."
Whereas game console sales used to be driven by the unit's power and speed, said Bryan Lee, CFO of Microsoft's Home and Entertainment Division, sales will now come from the software that supports them. That includes the online platform, where players can play on a worldwide stage via mobile devices, computers or their game consoles.
"The company that can define those scenarios and execute on them will win the next console cycle," said Lee. "That company will either be Microsoft or it will be Sony."
A lot of money is at stake, with $10 billion a year spent in the U.S., roughly the same amount Americans spend on movies and music.
"What you're seeing is video games are rising to be an entertainment icon that's on par with a lot of other parts of the more established entertainment medium," Lee said.
Lee added, however, that while box office receipts are largely flat and the music industry's sales are falling, spending on video games has risen 60 percent over the past six years.
"And when you think about what can happen in the future, there are actually a lot of reasons why that trajectory can continue," said Lee.
In the U.S., he said, barely more than a third of U.S. households have a video console. In foreign markets, such as India and China, the numbers are even lower.
"The industry is ripe for a lot of growth," he said.
Microsoft's contender in the video game industry is the Xbox, with a total of 15.5 million sold since its introduction in late 2000. For each Xbox, the company has also sold an average of 6.9 games.
Microsoft's main competitor in consoles, Sony's (SNE: news, chart, profile) PlayStation 2, has sold about 25 million units.
Online gaming
But the real growth prospects are in the game sales and the expansion of gaming online, where players battle over high-speed Internet connections.
Microsoft's foray into that market is its Xbox Live service, which offers about 100 games and typically costs $50 a year. About 1 million customers have subscribed.
Microsoft plans to introduce "Halo 2" on Nov. 9 and add 50 more titles with online capability by the Christmas season. Lee expects the number of Xbox Live subscribers to swell to 1.5 million by the middle of 2005.
Sony has sold 3 million PlayStation 2 versions equipped with Internet connections in the U.S. This service is largely free, and the number of users has been about 1.2 million.
Showing the importance of the online segment, Lee said that Xbox's success will be based on its Xbox Live system, which he said is "redefining what gaming is about. We are the undisputed leader in online."
Analysts at the meeting appeared most impressed by the launch of Halo 2, which a McAdams Wright Ragen analyst called "one of the most anticipated games in history."
Next-generation consoles
Many analysts wondered about when the new version of the Xbox (dubbed "Xbox2") would be launched.
"Microsoft and Sony are in a game of Prisoners Dilemma as they strategize about when to release the next-generation console," said analyst David Hilal, at Friedman, Billings and Ramsey.
Goldman Sachs analyst Rick Sherlund said he expects Xbox2 to be introduced by Christmas 2005, which will beat Sony's introduction by about a year. With this introduction, he added, the company's Home and Entertainment division should reach profitability by fiscal year 2007. The division lost $1.2 billion in fiscal 2004.
In a note to clients, Morgan Stanley analyst Mary Meeker appeared more impressed. "The most important takeaway from the Xbox business should be what Microsoft has done and on how little time it has accomplished it," she said. "It has achieved a No. 2 market position, established a true consumer brand for the home, generated strong IP franchises, and developed third party relationships."
