Gaming groups pin hopes on new consoles

Battle is on to reverse declining fortunes

Three new consoles and price cuts for existing hardware are expected to give the video game industry a boost in 2011 after two years of declining sales.

Nintendo will announce US launch details for a hand-held console with a 3D screen on Wednesday, while Sony executives in Tokyo are expected to unveil the PlayStation Portable 2 next week. Analysts also expect Nintendo to announce a successor to the Wii home console in the next few months.

Revenues for the US video game industry, including hardware, software and accessories, fell 6 per cent to $18.6bn in 2010, according to figures released last week by NPD, the research firm. In 2009, they were down 8 per cent from the previous year.

Console sales fell 13 per cent to $6.3bn in 2010 with neither Microsoft, Nintendo nor Sony reducing prices for their respective Xbox 360, Wii and PlayStation 3 consoles during the year.

Accessory sales increased 13 per cent, helped by the success of Microsoft’s Kinect motion-sensing controller at the end of the year, when 8m were sold globally in its first 60 days on the market.

Michael Pachter, video game analyst at Wedbush Morgan Securities, said new hardware such as the Kinect, the launch of Nintendo’s 3DS, an updated Wii and Sony’s PSP2 could act as catalysts for the market.

“Just as Kinect has had phenomenal success because it was different from what we’d seen in the past, I think the 3DS will be really successful – it has a 3D screen and camera that makes it fun and hip and different.”

Mr Pachter thinks price cuts are inevitable to boost sales, with $50 reductions traditionally adding 5 percentage points to software sales growth as well.

“Sony is going to see itself falling behind further and will probably cut prices first, Microsoft won’t want Sony to take share, so they’ll cut, while Nintendo has to cut the Wii in order to launch the Wii 2.”

The console makers are under pressure from other forms of gaming. Apple’s iPod Touch and smartphones now compete with hand-held consoles. Sony Ericsson is expected to release a PlayStation smartphone during the next few weeks.

PC games are also enjoying a revival through social gaming on Facebook and the success of more complex role-playing games such as World of Warcraft.

PC software sales rose 3 per cent last year and NPD estimates US consumer spending on content was flat at about $15.5bn, rather than down in 2010, if new growth areas such as social and mobile gaming are taken into account.

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