Older Consoles Lift Game Publishers
Sony PS2 and Nintendo DS
Drive Sales as Newer Models
Get Set for Holiday Launch
By NICK WINGFIELD
October 31, 2006; Page B3
The buzz in videogames is all about new hardware, including the imminent launch of Sony Corp.'s PlayStation 3 and Nintendo Co.'s Wii consoles, along with the prospects for Microsoft Corp.'s Xbox 360 in its sophomore holiday season.
The biggest money in games, though, is coming from older, less sexy machines such as Sony's PlayStation 2, which has been out for six years, and the Nintendo DS portable console, which has been out for two years. That should become apparent Thursday when Electronic Arts Inc., the world's largest publisher of computer games by sales, reports financial results for the quarter. After a rough patch for publishers, Wall Street analysts have become more bullish on the videogame sector in recent months because of unexpectedly strong sales of software for older consoles.
"I would say PS2 has been one of the two major surprises of this year, the other being how strong DS has been," said John Taylor, an analyst at Arcadia Investment Corp. in Portland, Ore.
Many publishers posted weak sales and profits late last year and early this year, a side effect of the transition to new consoles. Often these shifts, which take place every five or six years, cause consumers to curb spending on games until they get their hands on new machines.
The Xbox 360 came out this past November, but it was difficult to find on store shelves. Microsoft has sold more than six million Xbox 360s, but there aren't enough in homes to give the game industry a boost. The PS3 and Wii go on sale in mid-November, and they also are expected to be in short supply.
Consumers are spending more on games for older hardware than analysts expected, giving a lift to publishers such as EA. Mr. Taylor said the Redwood City, Calif., company saw strong sales last quarter of the PS2 version of its flagship football product, Madden NFL.
Previously, analysts were predicting no growth or a slight decline in sales in EA's most recent quarter, from $675 million in the same period a year ago. But earlier this month, analysts bumped up their revenue estimates for EA following the release of strong game-sales figures from NPD Group Inc., a firm that tracks U.S. retail trends.
Evan Wilson, of Pacific Crest Securities, raised his revenue estimate for EA to $725 million, or 7.4% growth from a year before. Analysts still predict a decline in EA earnings for its most recent quarter, in large part because of the investments the publisher is making in developing titles for the latest consoles.
One reason PS2 game sales are doing so well is price. Sony earlier this year dropped the price of the console to $129 from $149, a move that appears to have attracted a lot of new game buyers. In fact, the PS2 is outselling the Xbox 360, even though it is a far less advanced machine. Mr. Taylor, citing NPD data, said Sony has sold 2.4 million units in the U.S. this year, compared with 2.1 million units for the Xbox 360.
The trend has helped strengthen the PS2's position as the dominant videogame console, with more than 106 million shipped world-wide.
Sony PS2 and Nintendo DS
Drive Sales as Newer Models
Get Set for Holiday Launch
By NICK WINGFIELD
October 31, 2006; Page B3
The buzz in videogames is all about new hardware, including the imminent launch of Sony Corp.'s PlayStation 3 and Nintendo Co.'s Wii consoles, along with the prospects for Microsoft Corp.'s Xbox 360 in its sophomore holiday season.
The biggest money in games, though, is coming from older, less sexy machines such as Sony's PlayStation 2, which has been out for six years, and the Nintendo DS portable console, which has been out for two years. That should become apparent Thursday when Electronic Arts Inc., the world's largest publisher of computer games by sales, reports financial results for the quarter. After a rough patch for publishers, Wall Street analysts have become more bullish on the videogame sector in recent months because of unexpectedly strong sales of software for older consoles.
"I would say PS2 has been one of the two major surprises of this year, the other being how strong DS has been," said John Taylor, an analyst at Arcadia Investment Corp. in Portland, Ore.
Many publishers posted weak sales and profits late last year and early this year, a side effect of the transition to new consoles. Often these shifts, which take place every five or six years, cause consumers to curb spending on games until they get their hands on new machines.
The Xbox 360 came out this past November, but it was difficult to find on store shelves. Microsoft has sold more than six million Xbox 360s, but there aren't enough in homes to give the game industry a boost. The PS3 and Wii go on sale in mid-November, and they also are expected to be in short supply.
Consumers are spending more on games for older hardware than analysts expected, giving a lift to publishers such as EA. Mr. Taylor said the Redwood City, Calif., company saw strong sales last quarter of the PS2 version of its flagship football product, Madden NFL.
Previously, analysts were predicting no growth or a slight decline in sales in EA's most recent quarter, from $675 million in the same period a year ago. But earlier this month, analysts bumped up their revenue estimates for EA following the release of strong game-sales figures from NPD Group Inc., a firm that tracks U.S. retail trends.
Evan Wilson, of Pacific Crest Securities, raised his revenue estimate for EA to $725 million, or 7.4% growth from a year before. Analysts still predict a decline in EA earnings for its most recent quarter, in large part because of the investments the publisher is making in developing titles for the latest consoles.
One reason PS2 game sales are doing so well is price. Sony earlier this year dropped the price of the console to $129 from $149, a move that appears to have attracted a lot of new game buyers. In fact, the PS2 is outselling the Xbox 360, even though it is a far less advanced machine. Mr. Taylor, citing NPD data, said Sony has sold 2.4 million units in the U.S. this year, compared with 2.1 million units for the Xbox 360.
The trend has helped strengthen the PS2's position as the dominant videogame console, with more than 106 million shipped world-wide.
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