25% annual decline in 2012 for game consoles

2012 saw just under 30 million game consoles shipped from Microsoft, Nintendo, and Sony (excluding PS2)– roughly 10 million fewer than the previous year. Despite these results ABI Research looks at 2013 (and beyond) with cautious optimism, but the company expects Microsoft and Sony to determine future prospects for the game console, not Nintendo. Senior analyst Michael Inouye commented: “Nintendo’s Wii U’s troubles are not indicative of the expected market reception for the remaining 8th generation of consoles. In fact, the Wii U will likely prove a closer fit with the current generation than the next. The software released to date also bears out this assessment with many cross-platform games that were previously available from Microsoft and Sony. While the Wii U Gamepad offers some novel gaming elements it has not yet resonated with core gamers.” 2013 is expected to start a chain of positive growth years for the game console market, ending the previous annual declines. This optimism, however, is predicated on several factors. First, that the Wii U receives a price reduction in 2013. Second, that next gen consoles from Microsoft and Sony launch with adequate time and production to meet holiday demand, with pricing below $450 and ideally at $350. Finally, that the next generation consoles don’t adopt significant consumer unfriendly practices that will cause consumers to rethink their purchases, such as steps to inhibit the used game market or requiring an always on DRM/Internet connection to prevent other forms of piracy. TV & Video practice director Sam Rosen added: “Mobile gaming has certainly diminished the opportunities for console manufacturers in the casual gaming market and this has impacted Nintendo the hardest. The evolving business models and added competition have also created additional pricing pressures that encourage price cuts sooner than manufacturers would like. New entrants into the console market will add an additional layer of complexity, which should make things interesting, but we still anticipate the market will prove a difficult one for the upstarts.”