InStat/MDR expects Microsoft to launch new XBox in late 2005

Sony still controls the console market, with its PlayStation 2 (PS2) dominating the current generation. Sony shipped its 70 mlnth PS2 console in January 2004. And the original PlayStation console, now dubbed PSOne, continues to chug along. The console celebrated its 10-year anniversary with the shipment of its 100 mlnth unit in May 2004. Sony is attempting to extend the life of its PS2 by releasing a smaller, lighter PS2 console this month. Nintendo's GameCube has performed solidly over 2004. Sales increased significantly after its worldwide price cut in Q4 of 2003. Nintendo's challenge will be to continue that momentum through the next few years. Its two competitors have both deeper pockets and stronger technology backgrounds than Nintendo.

Microsoft has successfully launched the Xbox, its most ambitious hardware launch ever, as well as its Live online service. However, it has spent a great deal of money on both efforts, and is reportedly still a very long way from the break-even point. And it has engaged in significant price-cutting to increase shipments, further harming the bottom line. However, Microsoft can afford losses that would stagger most companies, and the company believes that the game console will be an increasingly important part of consumers' home entertainment options in the future.

The most interesting current topic in game consoles is the next generation of consoles. The next generation allows Microsoft and Nintendo the possibility of cutting into the impressive lead that Sony has built in the previous two generations. We expect Microsoft to be the first to launch a next generation Xbox console in late 2005. Sony is not likely to give Microsoft too much lead-time before launching its PS3 console, which should occur by mid-2006. Nintendo will try to launch its next-generation GameCube 2 console either before, or simultaneously with Sony.