Wii To Dominate 2008?
With the Wii consistently selling out as soon as it hits store shelves, and the DS continuing to sell like hotcakes, 2007 was definitely Nintendo's year. According to Daniel Ernst of Hudson Square Research (whose fiscal 2009 outlook we also covered here and here), that momentum will carry Mario and co. right through 2008 as well.
For fiscal year 2008 (which ended this March), Sony sold 9 million PS3 units globally, Microsoft sold 9.5 million Xbox 360s and Nintendo sold 18.5 million Wiis. For fiscal year 2009 (ending next March), Ernst forecasts that Microsoft will sell 11.2 million units of the Xbox 360 worldwide, Sony will sell 12.5 million PS3s and Nintendo will sell 23 million Wiis.
"Microsoft got the jump on the industry with a one-year headstart, but nine months after its the launch, the Nintendo Wii overtook the Xbox 360 on a global basis. While the PS3, has struggled out of the gate, we note that since last fall, the console has been outselling the Xbox 360 in Europe, and in the first two months of this year has even outsold the Xbox 360 on its home turf, in the U.S. (In Japan, overtaking the Xbox 360 was almost immediate). With its strong slate of software scheduled for the coming year, we expect a material acceleration for the PS3 this year, but we believe the Wii will sell more than the PS3 and Xbox 360 combined this year," he commented.
With the DS dominating all hardware sales worldwide, the continued growth of the portable sector will also be a boon for Nintendo.
"With 69.8M Nintendo DSs and 38M Sony PSPs on the market vs. 24.3M Wii's; 20.6M Xbox 360's; and 12.6M PS3's, the addressable market for Portable Game systems is significantly greater than for Consoles," Ernst pointed out. "However, because the price points of portable systems are significantly lower than for consoles, total portable revenues account for just 28% of industry sales – masking the segment's greater contribution to earnings."
He continued, "Given that the development costs for a DS game can come in at less than $1M (vs. $15M to $30M for a next-gen console game), we believe the opportunity for profits in the portable market is significantly greater than the absolute size of the market suggests. Indeed, the DS and related software and royalties accounted for 63% of Nintendo's FY07 results and were the primary driver behind the company's 79% EPS growth in that year. Further... Nintendo platforms account for 69% of the portable market, and their 1st-party software accounts for over 70% of all software sold for DS/GBA portables, the benefits of the portable market have to date largely accrued to Nintendo."
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