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London 26 February 2007: The latest research from media analysts Screen Digest reveals an increasingly difficult environment for games publishers as rising development costs and small user bases means that return on investment in next generation games development is unlikely to be achieved before 2008.
Screen Digest modelled the sales required for single and multi-platform releases to cover development costs in the key US market. The results indicate that only a tiny proportion of next generation titles are likely to achieve profitability in the near future. This analysis is from Screen Digest's latest report "Next Generation Consoles: Games publishing, hardware analysis and forecasts to 2010" which examines global markets for next generation hardware and software.
Screen Digest also surveyed major games publishers to assess their attitudes to next generation game development. The results confirm that an already uncompromising industry just got tougher; development times, team sizes and complexity have been exacerbated by increasingly demanding next generation games. Publishers have responded by employing risk reduction strategies, including outsourcing, releasing games on as many platforms as possible (including handheld and last generation consoles), making sequels to popular titles and producing games based on popular movies.
Sony's strategy has been to increase its own capacity to make games: it has doubled the size of its internal development resource since the launch of PS2. Sony Worldwide Studios now employ around 2,200 development staff across 14 studios, all but one of which are devoted to making games for PlayStation 3. Only Ubisoft and Electronic Arts can boast more staff devoted to making games. Given that gamers choose consoles largely because of the games available for it, Sony's investment in its studios has given it a powerful weapon in driving PlayStation3 sales momentum.
Although endowed with relatively large teams themselves, the other hardware manufacturers have responded differently. Microsoft has aggressively forged relationships with third parties, such as Epic, to make games exclusively for Xbox 360, a strategy that is starting to bear fruit with the success of Gears of War. Nintendo has focused on game play innovation and has shunned high-definition graphics, ensuring the cost of making Wii games has not increased as dramatically as its counterparts. Nintendo appears to be following a similar strategy to its handheld DS platform: accessible hardware and software designed to appeal to a wider range of consumers, such as young women who would not usually consider gaming to be part of their lifestyles.
Report author Ed Barton commented "While the previous generation was quickly dominated by Sony's PlayStation 2 across all major territories, this time we anticipate a more competitive situation where market share is likely to be split on a territorial basis.
Xbox360 has a 12 month advantage, but whilst it has built a strong position in the US, it hasn't been able to achieve the traction needed in Japan, and Southern Europe remains a challenge. Nintendo's Wii has attracted an impressive level of third party support relative to its predecessor, but must maintain momentum into 2008 or risk declining levels of publisher support. We believe that a combination of Sony's investment in next generation games content and a strategy to position PS3 at the heart of the broadband enabled, high definition living room will enable it to build the largest global user base by 2010."
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About this report
The data and analysis from this press release is taken from the new Screen Digest report, Next Generation Consoles; games publishing, hardware analysis and forecasts to 2010 by Ed Barton, Analyst at Screen Digest. The report analyses the key roles games catalogues and publisher support play in driving console sales. It assesses the publishing strategies of the platform owners and third parties in producing games to drive the transition from the previous to the next generation of console gaming.
About Screen Digest - Global media intelligence Screen Digest is the pre-eminent firm of industry analysts covering the global media markets. We employ a team of 30 specialist analysts covering television, broadband, mobile, home entertainment, cinema and gaming. Our online services and reports provide the information and analysis that hundreds of media companies worldwide base their decisions on.
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