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Thursday, 23 November, 2000, 20:52 GMT
Sony battles in games war
Sony PlayStation
Sony launches its Playstation 2 video game console in Europe on Friday, marking the latest stage in the battle for control of the world's video games markets.

Thousands of gamers have already ordered their consoles and excitement is intense.

For Sony - and its competitors Sega, Nintendo and Microsoft - the next generation of games consoles signals make or break for future profits.

They don't just want people to play games on these consoles - they see them as the home entertainment systems of the future.

Sony is the second manufacturer to launch its next generation game consoles.

Sega launched its Dreamcast system in 1999, and Nintendo and Microsoft - a new entrant - are expected to launch their versions next year.

Games mean business

The European market for games consoles is huge and, by some calculations, already bigger than those in the United States and Japan.

The European leisure software market is estimated to be worth $5.5bn, slightly larger than the $5.4bn US market, and bigger again than the $3.8bn Japanese market. Globally, the market is thought to be worth $17bn, according to research carried out by ScreenDigest and the European Leisure Software Publishers' Association (Elspa).

Putting that in an UK economic perspective, UK-developed games generated exports worth 503m in 1998, exceeding those made from either film or TV, according to the same research.

Christmas boom

So this Christmas, it is likely that traditional toys will be left sitting on shelves as both kids and adults rush to play video games.

Mike Godliman, a director at retail consultancy Verdict, said :"Electronic games and mobile telecommunications will be buoyant [this Christmas]. These are the new toys for men and women, boys and girls."

Games and console sales traditionally peak in the Christmas period, but this year has been unusual in that sales have been high, even ahead of the launch of Playstation 2.

"In previous years, whenever a new console appeared on the horizon, the market for leisure software always dropped considerably as consumer aspirations for the new console systems took hold.

"It has not happened this time because the high quality standards of systems and software achieved in the last few years have now been fully accepted by a mass market audience," Roger Bennett, director general of Elspa said.

Buy me

So it is big business for the console makers competing for British game players' custom.

Even Sony, a huge multinational, depends heavily on the Playstation for its profits.

Accepted wisdom is that there is only room for three console makers in an increasingly sophisticated market, and the winner is as likely to succeed by virtue of clever marketing as product quality.

Indeed some argue that this explains the continued high sales of Sony's Playstation, even though the technology is now old, compared with other models on the market.

So far reviews of the product have been mixed, but sales have been strong in the US and Japan, the first markets where it went on sale.

Central to criticism is that the games available for Playstation 2 are not that good.

But then, this isn't surprising, says Kristan Reed, editor of CTW, a games trade magazine.

"The software is not as it should be. Whenever you release a console, it never maxes out to the potential of the machine," he said.

Trust us

Sony's expectations remain high.

Sony expects to sell three million consoles in Europe, the Middle East and Australia by March.

More than 3.5 million consoles have already been sold in Japan, where it was launched in March.

In the US, about 500,000 copies were sold on the weekend of the launch.

In the UK, Sony began taking orders for Playstation 2 in High Street stores a long time ago, and many of the 160,000 consoles allocated to the UK have already been sold, industry sources say.

But it is still unclear if Playstation2 will be the home entertainment system its makers ultimately hope it will be.

The adoption of online gaming "will eventually change the face of the industry certainly within the next five years. Within the next 12 months, early adopters will jump on it," said CTW's Kristan Reed.

Rivals

Rival systems are expected to pose a stronger challenge this time.

Microsoft is planning to put $500m into a worldwide marketing campaign for its Xbox video game player.

The advantage of the X box is the ease in which games can be developed for it - quite unlike PlayStation2, said CTW's Kristan Reed.

And Sony's archrival, Nintendo, is due to unveil its latest console, the Gamecube, in October 2001, promising "superlative graphics and internet access".

Since its European launch in October last year, Sega has sold one million of its home entertainment consoles.

But Sony's superior marketing skills have kept it on top, at least for the time being.

Hardware losses

Fear is that inevitably demand for games will start to slow as PC, mobile phone and games console ownership start to be ubiquitous.

Typically, console makers have lost money on the sale of the hardware, but recouped it from the sale of software.

Even as hardware prices fall, industry observers remain confident that demand will continue to grow.

"I think consumers have got used to spending less money on buying their machines. [But] there are more people around willing to pay 300 for a console than there were five years ago," one said.

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See also:

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