WMS’ prior forecast, released in October 2005 prior to the Xbox 360 launch, predicted that the market would grow by 11 percent in 2006. The significant shift from positive to negative growth is due to weaker than expected demand in late 2005. According to WMS, much of that weakness is attributed directly to the unavailability of the Xbox 360.
Once again, WMS states that Microsoft did a “phenomenal” job of marketing the console, which backfired when the people who wanted it couldn’t get it. Microsoft created a sales vacuum, as the typical transitional decline of current generation software occurred, with no next-generation software being bought. Contrary to what Directions of Microsoft analyst Matt Rosoff stated, WMS believes that continuing Xbox 360 supply issues combined with an announced PS3 launch date will cause consumers to defer their interest and money away from Microsoft’s console.
There is light at the end of the tunnel, however. WMS predicts a turning point at the end of 2006 as next generation and handheld software sales ramp up, which will help offset current generation software declines. Also helping the dollar sales figures are increased average selling prices for software, which is being driven by higher-priced PSP and Xbox 360 titles.
WMS also expects price cuts this year for the PS2 (which costs $80 to manufacture), GBA SP (from $79 to $59), PSP and DS.