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Microsoft Pri0

Welcome to Microsoft Pri0: That's Microspeak for top priority, and that's the news and observations you'll find here from Seattle Times technology reporter Matt Day.

July 10, 2007 at 2:23 PM

E3: Thoughts on a competitive game console race

SANTA MONICA, Calif. — The 9 a.m. Alaska departure from Seattle to LAX, a flight packed with people from Microsoft and other companies bound for the E3 Media & Business Summit, finally made it here about a half hour ago. Don’t ask us about the emergency landing back at SeaTac.

It’s cloudy and a comfortable 70 degrees here. Perfect weather to stay indoors and play/talk about video games for three days (OK, not really), which is what the 3,000 or so people arriving here from around the world intend to do.

More signs are pointing to a very competitive, and interesting, cycle for video game consoles. I’ve seen a lot of recent analysis of the video game industry that suggests unlike the last hardware cycle, no one console will dominate this time around.

While the Nintendo Wii is sprinting through its first full-year on the market, Microsoft’s Xbox 360 has a solid lead in total installed base as a result of its early launch in 2005 (this despite the hardware problems plaguing the console). Sony’s PlayStation 3 is off to a rough and costly start, but it’s hard to write off a company with Sony’s depth of experience in the industry. The company is already cutting prices to get back in the game.

On Monday, JupiterResearch released a new report backing the view that the current cycle will be much closer than the last one, which Sony’s PlayStation 2 dominated. The report also estimates the size of the purse these competitors — gathered here for three days to make their moves for the coming holiday season — are playing for: potential cummulative U.S. sales of $66 billion through 2012.

A press release describing the Jupiter report stated it this way: “Competition for console households over the next five years will be fiercer than ever and will result in a close sharing of the installed base of systems among platform suppliers.”

“Each platform supplier brings a special set of strengths to the market and to competition in current generation of systems,” Jupiter vice president and research director Michael Gartenberg said in the press release. “On top of that we have seen a dramatic rise in the proportion multiplatform releases from independent publishers over previous generations. This is no longer the winner-takes-all market of the past.”

2007 will be the high-water mark in terms of console revenue, the report concludes, with potential sales of $12.8 billion. Next year, Jupiter predicts, more than half of all U.S. households will have a video game console.

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