This week's deal shows how the software business is changing; and things are happening in hardware too. Microsoft's Xbox 360, Sony's PS3 and Nintendo's Wii are fighting for supremacy. In September the Xbox 360, which was launched in late 2005, a year ahead of its two rivals, was overtaken by the Wii as the most popular of the present generation of consoles (see chart). Mr Bach says he is unfazed. “It's not even a statistic I track all that closely,” he says. The Wii's popularity stems from its low price and its innovative motion-sensitive controller, which can be pointed and waved to control the on-screen action and encourages novices to give gaming a try. But the Wii lacks the high-definition graphics of its two rivals, so it could soon start to look dated. The real battle is between the Xbox 360 and the PS3, Mr Bach suggests.
Sales of the PS3, which have been sluggish, seem to have taken off after Sony removed some features and dropped the price. In Japan the PS3 even outsold the Wii in November, according to Enterbrain, a market-research firm. As more games become available for the PS3 next year, sales are expected to rise even further, says Mr Harding-Rolls, so that by 2011 the PS3 will have caught up with the Wii. In short, each of the consoles will be in front at various points in the “console cycle”.
In the previous cycle, dominated by Sony, programmers could address most of the market simply by writing games for the PlayStation 2. But if all the consoles matter, games companies have to produce games that run on all of them. That strengthens the case for consolidation. In other words, expect more deals.
Review
A piece of evidence on how innovation lowers the degree of substitutability of products and increases demand. The Wii, albeit having motion-sensitive controller which PS3 and Xbox 360 do not have, may only last for a few years due to its relatively poor graphics, hence the suggestion by Mr Bach that the "real battle is between the Xbox 360 and the PS3.
