Xbox 360 on "downside of its lifecycle"

Market research firm DFC Intelligence has suggested that Kinect will have a "negligible impact" on the Xbox 360's sales and that the console "has some good years left, but the platform is clearly on the downside of its lifecycle."

A monthly briefing by the company forecasts that the Wii and Xbox 360 will see a gradual slowdown in sales over the next two years, but with the PlayStation 3 enjoying an increase on a worldwide basis.

Although the briefing note is sceptical on the "overall vision for 3D in gaming", at least for systems which require glasses to be worn, greater concern is voiced over Microsoft's plans for the Xbox 360 and Kinect.

"Based on what we have seen, DFC continues to feel that Microsoft is going to struggle to expand beyond its core audience," said the briefing note.

"With Kinect, Microsoft is trying to follow after what has worked for other companies," said DFC. "There are numerous problems with this approach, but the biggest problem is Microsoft, at its core, is simply not an entertainment company."

"Almost every time Microsoft has tried to emulate successful entertainment products they have failed," said the company in a scathing attack. "With MSN and casual games Microsoft was able to attract a fairly large and diverse audience, but these products were free. We don’t know the price of the Kinect, but it is definitely not free."

The analysts did note however that the major exception to this supposed rule is Microsoft's efforts in PC gaming and the Xbox itself. Although they take time to criticise the acquisition of UK developer Rare.

"In its business software, Microsoft has been successful in analysing what works for users of other products and incrementally incorporating those features into Microsoft products. The problem is developing hit entertainment products simply does not follow that model."

"At the end of the day, we see Kinect has having some appeal to a well-heeled fitness audience. In terms of changing the overall videogame hardware platform market share we see it having a negligible impact," said DFC.

"The longer term issue facing the console manufacturers is that the business model of launching a new hardware system every five years simply no longer works," concludes the note.

"Products like Kinect and PlayStation Move are an attempt to get around this dilemma. Unfortunately, we think they are at best a temporary attempt to tackle a much larger strategic issue."

Both Sony and Microsoft have said that this generation of games consoles will remain on the market much longer than previous generations. Last week, Microsoft's Chris Lewis said that he believes Kinect can help the console remain relevant for another five years.