Well at least this should be a good discussion.

http://www.gamedaily.com/articles/news/dfc-nintendo-to-supplant-sony-in-europe-xbox-360-biggest-loser/?biz=1

DFC: Nintendo to Supplant Sony in Europe; Xbox 360 'Biggest Loser'

Over the next few months DFC Intelligence will be releasing its forecast for the game industry. 2007 was a record year for the industry and it has resulted in some significant adjustments to our overall forecasts. The two most notable international growth trends highlighted in 2007 were 1) the continued strength of online PC games and 2) the success of Nintendo on a truly global basis. DFC believes that some of the most exciting growth opportunities for the video game business are in the European markets and DFC believes Nintendo will be the leader in Europe over the next few years.

Nintendo's growing strength in Europe is an important trend for the entire industry. DFC Intelligence has always argued that Europe in general has been an under-performing market for video games. In recent years, the Europe game industry has been dominated by Sony and its PlayStation systems. Of course, the PlayStation 2 (PS2) was the leader in all major markets, but in Europe the PS2 had over 80% market share among its generation.

Ironically, a great deal of the PlayStation 2's success in Europe was driven by more casual products designed to reach a broader mass market. Non-traditional game products published by Sony Computer Entertainment, such as the SingStar music games and the EyeToy camera products, were major hits in Europe, much more so than in the U.S. A key driver behind these products was Phil Harrison, the U.K. based president of SCE Worldwide Studios. However at the end of February 2008, Harrison left Sony. In many ways this departure is symbolic of how the torch in Europe seems to be passing to Nintendo.

The Nintendo DS and Nintendo Wii are enjoying tremendous success in Europe. In large part this is because Nintendo is following the mass market design philosophy that made Sony Worldwide Studios such a success. In 2007 sales of the Nintendo DS in Europe nearly doubled and the installed base soared past the 20 million mark. Meanwhile, the supply constrained Wii managed to pass the Xbox 360.

With the recent success of Nintendo, DFC Intelligence is now forecasting that over the next few years Nintendo's systems will supplant Sony's systems as the leader in most major European markets. Of course, the DS is already a smash hit in Europe and this is expected to continue. More significantly, DFC Intelligence now forecasts that, over the next five years, sales of the Wii will out pace both the Xbox 360 and the PlayStation 3.

The emergence of Nintendo in Europe marks a major change for the video game industry. Nintendo has had periods of major success in Japan and North America but, unlike Sony, they have never been a leader in all three territories (North America, Japan, Europe) at once. Europe is expected to be the fastest growing market and Nintendo's products are perfectly designed to appeal to European tastes. As mentioned, the Wii product line and control system are an evolution of what made the PlayStation 2 so successful in Europe. Combine this with the lowest priced hardware and software and you have a recipe for success.

Perhaps one of the most notable signs was with the recent release of Konami's Pro Evolution Soccer 2008. This title came out with versions for seven different game systems including the Xbox 360, PlayStation 3, and Wii. The Wii version received the highest overall rating on review aggregator sites like Metacritic and Gamerankings.com. Soccer is arguably the most important game genre in Europe and now the Wii has what many consider to be the best soccer game. This alone is likely to be a driver of significant Wii sales, especially among customer looking to upgrade from their PlayStation 2.

What will Nintendo's success mean for the other platforms? It is important to note that DFC Intelligence is also forecasting strong sales for the PlayStation 3 and, to a lesser extent the Xbox 360. This generation is not expected to be a case of one platform dominating like the PS2 did in the last generation. One factor that will increasingly take hold in Europe is what DFC has labeled the "second car in the garage. In the U.S. over 40% of game households now buy two or more of the current console systems. By comparison, Europe has largely been a one car in the garage market. In recent years, that car has been the PlayStation 2. As the game market in Europe grows we expect to see more consumers buying two or more systems (although not to the extent of the U.S.) The Wii is forecasted to be the market leader, but with a market share less than 50% compared with the PlayStation 3 and Xbox 360. Consumers will still need to play World of Warcraft, Grand Theft Auto IV, games on the go and so on. No one system satisfies all the diverse tastes in today's market.

Another significant point is that the Wii clearly will not be the only platform for software. One issue with the Wii is that it is designed to appeal to a more mass-market casual gamer. While DFC believes that the whole concept of bringing in senior citizens and other types of non-historical gamers is over-hyped, it is true that the platform does appeal broadly to consumers appreciative of a less intense video game experience, so the software-to-hardware tie ratio is expected to be lower for the Wii than it is for the Xbox 360 and PlayStation 3. In fact, DFC Intelligence forecasts that by 2011 software revenue from the PlayStation 3 will equal that of the Wii despite a lower installed base.

It appears inevitable that, for the PlayStation 3, Sony will lose a big chunk of its PS2 user base. However, in the long-term, DFC Intelligence believes the PlayStation 3 will be a fairly strong competitor. The biggest loser in Europe is likely to be the Xbox 360. Microsoft has seen its self-proclaimed fall 2007 "greatest holiday lineup in video game history" come and go with very little impact on the Xbox 360's position in the European marketplace. To spur sales in 2008, Microsoft is being forced to lower the price of a system that is starting to look like a senior citizen as it approaches its third birthday.

The Xbox systems have enjoyed much greater success in the U.K. than in continental Europe. In large part this is because the U.K. does not have a strong PC game market like those found in other parts of Europe. However, as in the U.S. and Australia where intense violence is more popular with gamers, U.K. gamers enjoy first-person shooter (FPS) titles and the Xbox 360 is clearly the leader in that category. Unfortunately, outside of the U.K., DFC sees the Xbox 360 continuing to struggle in Europe.

A strong Nintendo presence in Europe is a major event for the game industry. However, as always, it is important to highlight that in Europe, like the rest of the world, the key trend is platform diversity. Not only are there three new console systems to compete with the PlayStation 2, but PC games and portable products continue to have increased sales. The good news is that sales in Europe continue to explode on all fronts. Look for 2008 to break all kinds of sales records.

Courtesy of DFC Intelligence

Is this really news? Nintendo is winning in Europe?

Nintendo is winning. Wow I would like to be an analyst and get paid for statements like these. LOL

Isn't this the same analyst firm that predicted the Wii to only sell a few million this year and die?

hmm, interesting read...

For the record, DFC has also predicted the PSP will catch up the DS.

Only 37 million to go (and counting)...

At least they're not as flat-out awful as iSuppli

My, my - what a difference a year makes. I tracked down the same group (DFC)'s report from last June. Reposted for the curious:

http://www.gamasutra.com/php-bin/news_index.php?story=14527
http://www.vgchartz.com/forum/thread.php?id=3662 (VGC thread)

DFC: Will The PS3 Run Last In The Console Race? [June 29, 2007]

In the latest report from DFC Intelligence, the analyst group returns to an earlier report on whether the PS3 could find itself running last in the console race, answering their own question in light of the past year with "a hedging 'probably not.'"

The full text of the report, released on the analyst firm's website, follows below:

"This time last year DFC Intelligence asked the question: "Could Sony go from First to Worst?" At the time we were just raising the issue of whether both the Microsoft Xbox 360 and the Nintendo Wii could possibly beat the PlayStation 3 (PS3) in this new generation of systems. This was a period when Sony seemed to have a stranglehold grip on the console market and thus merely raising the possibility of a third place PS3 finish attracted attention.

A year later, the PS3 is in third place and now all kinds of people are questioning Sony's strategy. However, from the perspective of DFC Intelligence, we would now answer the question "could Sony go from first to worst" with a hedging "probably not."

It should be admitted that at DFC we don't have a true crystal ball into the future. We build forecasting models based on past behavior and anticipated future products. DFC doesn't develop the software, determine the pricing, run the marketing campaigns, or try and influence the latest consumer fads.

What DFC does do is try and build forecasting models that say if Company A delivers hardware system X, at price Y, with product line and marketing campaigns of Z, what is sales likely to be. How will that sales change if the price is lowered, a hit new product mix is introduced, etc? How will sales change if Company B introduces a competing product line at similar or different price points? How are sales likely to change based on various combinations of these factors? What is the likelihood of each of these factors occurring based on what we now know?

So as we said last year, when it comes to forecasting video game hardware performance the specific forecasting factors include:

1. Brand, Current Market Position and Past Consumer Behavior relative to all players in the marketplace.

2. Current Software including Software Diversity, Third Party Support, Exclusives and Big Hits.

3. Current Software for the Competition looking at all the above factors.

4. Expected Upcoming Software looking at all the above factors.

5. Expected Upcoming Software for the Competition looking at all the above factors.

6. Current Price

7. Current Price for the Competition.

8. Expected Future Price.

9. Expected Future Price for the Competition.

10. Hardware, Extra Features, the "Wow Factor," Intangibles and the Ability to Pull a Rabbit Out of a Hat.

The problem the PlayStation 3 faced at launch was a $600 price tag and very limited software library. In contrast the competition was exciting new products at half the price and a more compelling software library.

The Wii had buzz, brand, price and representation by most of the major Nintendo franchises in the first six months. Using the above forecasting model matrix the Wii was almost destined to win the first few months by default. However, the matrix is always changing.

Clearly right now Nintendo is very hot. In terms of market valuation, Nintendo is not simply competing with Sony Consumer Electronics, but the consumer electronics/media giant that is Sony Corporation. This is the Sony that has its hands in not just about every major consumer electronics product, but also owns a massive library of movies, music, television shows and other entertainment products.

However, in today's hype driven market, having the hit consumer product of the moment, be it a game system, music player, phone, is everything. In today's media and investment environment, long-term strategy becomes meaningless if a product isn't 1) selling like hotcakes right now or 2) has not yet been released so the buzz hasn't yet met with reality.

With the DS and Wii, Nintendo has two hit consumer products and in the minds of the investment community that can make the company as valuable as all of Sony Corporation.

In an interview with DFC Intelligence this week, Sony Computer Entertainment America president Jack Tretton said trying to compare Sony to Nintendo is like trying to compare Sony to Nike. In other words, these are two very different companies, with very different products and very different strategies. With the video game market, the analogy to racing and running shoes may be an enlightening comparison.

Sony's strategy has been slow and steady wins the race, much like the tortoise from the legendary fable. Sony has always talked about a decade long vision for its hardware platforms. With the first two PlayStation systems, Sony pretty much put their money where their mouth was. That track record is a very important factor in any analysis of a new Sony system like the PlayStation 3.

It is when looking at the concept of a decade long vision that we concluded our analysis in June 2006 with the statement "a $600 price point is okay for launch but it will not fly in holiday 2007." In other words, we didn't think it would flying out the door at that price point and we felt price cuts would be needed toward the end of 2007 if the PS3 was going to pick up momentum.

So far there has not been a price drop, but it is only the middle of 2007 so that doesn't tell us much. As Jack Tretton put it, it is hard to evaluate a product designed to last a decade or more based on the first 18 months. Sony has historically been slow out of the gates with their video game hardware systems, but their slow and steady pace has served them well in the long term.

The challenge Sony faces is that competition in the video game market is not sitting still and for this generation Microsoft and Nintendo have clearly turned up the heat. There is no winning by default in this market.

The Nintendo Wii took advantage of every opportunity to try and build a starting base for long-term success. However, the good news for Sony is that the same can not be said for the other major competitor, Microsoft and the Xbox 360.

In terms of long-term strategy it is worth comparing Microsoft and Sony. Microsoft has shown an even greater willingness to lose money to try and build long-term market share. The Xbox 360 was the system that could benefit most from the PS3's slow, late start. One of the biggest events (or non-event) over the past year is that the Xbox 360 did little to solidify its lead.

In terms of numbers, Microsoft met its goal of 10 million Xbox 360s shipped by the end of 2006. However, walking into a retail store in January 2007 and seeing piles of Xbox 360 inventory on the floor, it was immediately clear that many of those systems shipped did not end up in consumer hands.

Gears of War was a solid hit, but it was the type of title that appealed mainly to the existing Xbox base waiting for Halo 3. In the first half of 2007, Microsoft introduced the Xbox 360 Elite which essentially raised the price of the system into a range that makes the PS3 start to look like more of a value by comparison.

In reality the new generation of game systems is just getting started. If all hardware manufacturers make their stated shipment goals over the next year, no system will have more than 40% market share when we revisit this issue next summer. Furthermore, by that time we will only be about 20% into the new generation.

The one thing we do continue to argue is that no system is likely to have the market share dominance of the first two PlayStation systems. The video game market is simply becoming diversified in multiple respects. Consumers are increasingly willing to buy multiple systems for multiple purposes.

This means arguing who will be first or second is becoming increasingly irrelevant. Publishers and developers need to learn how to properly leverage content across multiple platforms. Unfortunately, this is something most video game companies have not historically excelled at.

Platform strategy comes down to both timing and individual products. For example, if you have a big first-person shooter (FPS) you definitely want to be on the Xbox 360, even if sales are currently lagging. The PS3 may not be flying off store shelves, but a major price cut and build up of the software library could change that a year from now.

On the other hand, for many big ticket franchises the Wii may not be appropriate. The Wii is a great system, but it has its limits and a fairly unique appeal. This could present a problem for all the slow moving third-party publishers that are now scrambling to up their Wii output. By the time third-party developers start flooding the Wii market with product, the excitement may have cooled.

It is these types of execution issues that are likely to keep executives in the video game market up at night. This is an industry that sometimes seems to get as much coverage as Paris Hilton. However, when push comes to shove, finding a profitable niche is more challenging than ever. Trying to jump on the hype bandwagon and make rash conclusions based on the latest sales numbers is always dangerous. There is still a lot to be unveiled.

With E3 pushed back two months new announcements have been delayed, so we enter the second half of the year armed with very little new information. We will follow price cuts, new software introductions and the buzz of the holiday season. It will be interesting to revisit this issue in summer 2008 and see what, if anything, we have learned."

* * * * *

I ripped them last year for sitting on the fence and refusing to predict much of anything. At least they're taking a position this time, if a rather obvious one. (So it only took you 18 months to realize that the Wii would be a success? Nice job...) Overall, this group has done a decent job of making projections. They really don't seem to like the 360 though.

Hmm it was a good read :);

Can someone Cliffsnotes that for me?

TOO.

MUCH.

TEXT.

"Perhaps one of the most notable signs was with the recent release of Konami's Pro Evolution Soccer 2008. This title came out with versions for seven different game systems including the Xbox 360, PlayStation 3, and Wii. The Wii version received the highest overall rating on review aggregator sites like Metacritic and Gamerankings.com. Soccer is arguably the most important game genre in Europe and now the Wii has what many consider to be the best soccer game. This alone is likely to be a driver of significant Wii sales, especially among customer looking to upgrade from their PlayStation 2."

I found this paragraph misleading as they focused on review scores as opposed to actual sales of soccer games. Seems fairly obvious which console is still favoured for such games.