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Bucking the trend of most other analysts, Merill Lynch predicts rosy future for Xbox 360

Although most analysts have said that the PlayStation 3 would maintain Sony's lead in the console market in the coming years, an analyst for Merrill Lynch is bucking the trend and is giving a nod to the Xbox 360. Sony has held the lead in the console wars with the original PlayStation and PlayStation 2, so what would prevent the PlayStation 3 from carrying the crown this go around?

There is no doubt that the PlayStation 3 will face formidable competition from its cheaper Xbox 360 and Wii rivals, but Merrill Lynch's Yoshiyuki Kinoshita says that it goes much further than a low price tag. "The winner in the next-generation console battle is likely to be the Xbox 360, which is the leader in North America, the world's biggest market," said Kinoshita.

Kinoshita points to early production problems with the PS3 and Microsoft's one-year head start as insurmountable barriers for global dominance by Sony this time around. On the other hand, production problems can be worked out and one shouldn't dismiss Sony's larger fan base. Despite this, Kinoshita predicts that Microsoft will retain a 50% share of the North American market by March of 2011 with Sony and Nintendo commanding 27% and 23% respectively.

In the overall global market, the race will be much tighter with Kinoshita still giving the edge to Microsoft overall. "We forecast respective market shares at end-FY3/11 (March 2011) of Xbox 360 [at] 39 percent, PS3 [at] 34 percent and Wii [at] 27 percent, thus overturning Sony's domination of the market with its PS2-based share of 69 percent, and doubling Microsoft and Nintendo's respective market shares."

This is a race that everyone will be watching closely. The trash talking and prodding on behalf of both Sony/Microsoft execs and respective fans have been fierce over the past year, but it will still be years before we see which console truly comes out on top.

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Go 360
By bribud on 11/16/2006 8:17:50 PM , Rating: 4
I'd pull for the XBox 360 over the PS3 any day.

RE: Go 360
By GhandiInstinct on 11/16/06, Rating: -1
RE: Go 360
By Kanti on 11/16/06, Rating: 0
RE: Go 360
By Furen on 11/16/2006 11:09:39 PM , Rating: 3
Errr, I don't own an Xbox 360 nor will I own a PS3 but if I happened to own either of course I'd "pull" for it. A greater market share means that more games will be developed for that system, which would make those who purchased that system even happier with their purchase. Just because you chose to remain "neutral" doesn't mean that everyone else has to.

RE: Go 360
By Kanti on 11/17/2006 3:08:01 PM , Rating: 3
It's simply very short-sighted, that much should be obvious. Fanboys are the bane of the consumer existence, and xbox ones are almost as bad as apple fanatics. It's just a product people, not a religion.

RE: Go 360
By aGreenAgent on 11/17/2006 1:18:22 AM , Rating: 1
Well, you're making an assumption that he is pulling for the system because he's biased against it.

Let's think of other reasons you might want the PS3 to fail.

-It's too expensive for the market, and you hope soy realizes it one way or another

-Sony has been doing all it can to slow down the tech industry recently, they need to be sent a message

-The comments from Sony's people have been condescending towards consumers, unacceptable

-Sony's products have had tons of issues: PSP had tons of dead pixels, the PS3 doesn't play all of the PS2 games, etc.

This is in addition to the fact that nobody is forced to deal with anything. Wait! That's the exact reason the PS3 *might* fail to begin with! If MS were to then go and charge $600 for a 360, nobody would buy it.

Remember, competition isn't the only driving force in the market.

RE: Go 360
By thecubanratio on 11/17/06, Rating: 0
RE: Go 360
By Kanti on 11/17/2006 3:01:11 PM , Rating: 2
I didn't think it was possible for someone to have such little understanding for the market place, or to be so blinded by fanboyism. Whatever your problem is with Sony as a company has made you way too biased to have an informed opinion.

Point for point:
-The PS3 is NOT too expensive for the market, as has already been proven by people willing to pay the price and more. Just because you can't afford it, or don't like that they made it more than just a game console is your own problem, and is unlikely to hurt their sales in the least.

-Revenge against a market leader is just stupid, you can't hurt them, but their collapse would hurt all of us. Go ahead and reward good behavior, buy from companies you think are good (BTW: if you do think any of them are good, than you really are misinformed) but punishing bad is just moronic, it would leave us with a monopoly from a company whose track record is little better than sonys.

-Again, pointless fanboy grudge. Every comapany spokesman is an ass.

-Sonys problems are not unique to them in the least. Or have you already forgotten ALL the problems with the Xbox and the 360?

So you hate Sony? Who cares, that's pointless. Just think, what if they were the only game in town? They're a product of their success, MS would be no different.

By GonzoDaGr8 on 11/16/2006 8:47:59 PM , Rating: 5
We forecast respective market shares at end-FY3/11 (March 2011)

Won't we have Xbox720, PS4, And Wii-Wii by then??

RE: 2011??
By xsilver on 11/16/2006 9:09:54 PM , Rating: 2
I think that timeframe will be just right before the next gen consoles are released; therefore it will provide the latest possible picture of market share of current consoles.

Personally I think it will come down to exclusive titles of who has more fans: halo or FF series + GT series etc.etc.

My 360
By kristof007 on 11/16/2006 8:23:19 PM , Rating: 5
I've had a 360 since June and no problems with it. Wireless controllers work great, I love the demos and HD videos, and I can even play Halo 2 on it. No complaints here.

Hopefully one of my friend will get the PS3 so I can take a first hand look at what it can do.

I am not fanboy of anything, I was just stating that in my humble opinion I've had a pleasant experience with the 360.

By knowom on 11/16/2006 11:04:11 PM , Rating: 3
I think Wii will be the most popular personally because of the free online play and a ton of publishers this time around plus a new innotative design with there interactive controllers that kinda thing has never really been done before at least well and combination of the 3 along with a cheaper price tag both to buy and for the games themselves is bound to be popular. The origenal playstation was so popular mostly because it had nice graphics cheaper games and a variety to choose from. The multiplayer facet of gaming is a big part of Xbox's success as well, but the priemum and monthly fees associates with there xbox live service might deturr players. People that play consoles games play them mostly for the improved controlls and easy learning curve most of the hard core gamers and multiplayer crowd tend to play on the PC. The Wii is perfect for multiplayer games that don't really exist to much for PC sports and fighting games plus it's cheap. It'll fit nicely into lan parties and such too.

RE: Wii>Xbox360>PS3
By bunnyfubbles on 11/16/2006 11:33:21 PM , Rating: 2
I agree, the Wii may also have another advantage thanks to launch titles (and follow up titles).

I haven't had any real desire to pick up a 360 until Gears of War, but the Wii has Zelda on launch day. Nintendo really seems to be aggressive in pushing the games they know people are really wanting instead of leaving them hanging for 2 years.

Wii will be KING!
By RobberBaron on 11/17/2006 11:17:09 AM , Rating: 2
The Wii will either die horribly or be the next console King. Over priced hardware by both MS and Sony will drive people right to the Wii. Best doesnt always win, cost is king.

Its all speculation, time will tell.

RE: Wii will be KING!
By Oregonian2 on 11/17/2006 2:55:37 PM , Rating: 3
Good comment. It's been my observation that the general public prefers so-so performance at a lower price than high-performance for more money so long as the lower performance level is "adequate". This also is why I think the Wii will do very well. The most important single factor is price (by my observation of the consumer market in general). The part of the market that's hard-core gamers may be different, so the question becomes "what percentage of the overall gaming market are the hard-core gamers?".

We'll see
By Flunk on 11/16/2006 8:47:44 PM , Rating: 2
I'm not sold on any of the three next-gen systems yet although I will give a nod to the 360's controller over the PS2 one. Why is Sony just selling us yet another version of the same lame old PS1 controller? I wonder if I can get a Xbox 360->PS3 controller convertor, maybe I'll just get a 360.

RE: We'll see
By Furen on 11/16/2006 11:19:01 PM , Rating: 1

Sony is selling yet another version of the same lame old PS1 controller because everyone hated the Batarang, lol.

By msva124 on 11/16/2006 11:03:20 PM , Rating: 3
Has anyone ever gone back and done statistics on all of these analysts? Like how many things they've predicted right, vs how many predicted wrong? It would be interesting to see how badly they all suck.

Can we be a bit more misleading?
By BBQmyNUTZ on 11/17/2006 9:35:04 AM , Rating: 3
ONE guy that happens to work for Merrill Lynch says something... DailyTech goes for the cheap pop by implying its a company wide sentiment.

It's like Fox News for Nerds.

By L1NUXownz1fUR1337 on 11/17/06, Rating: 0
By L1NUXownz1fUR1337 on 11/18/2006 6:29:57 PM , Rating: 3
No one on anandtech though it was funny?

come on - lighten up.

By arisescaflowne on 11/17/2006 8:04:36 AM , Rating: 2
He doesnt take into account, the huge following that several playstation only franchises have.

Like most people in his industry, he just looks at numbers. This gives him a huge disadvantage when making "guesses" such as this. Series such as Final Fantasy, Devil May Cry , Metal Gear Solid, ect will sell units just on their own. And those are just 3 of quite a few series , that you will only see on PS3. Q

This is good for gamers
By encryptkeeper on 11/17/2006 9:19:36 AM , Rating: 2
No matter what console you choose (if you choose only one for this generation)the gamer is the winner. I really think the race between the 3 consoles will be much closer than these guys imagine, as everyone has a different strength. I hate Microsoft, but if anyone comes out on top this generation (yep, it's no longer the "Next Generation") it will probably be them. It's good for gamers as the close competition will force each of the 3 to work their asses off to innovate and create better games. I would love to see Nintendo come off on top, since their profits will be much higher they'll have better investor support and more third party software companies developing for them.

Vague & unconvincing
By crystal clear on 11/17/2006 10:00:20 AM , Rating: 2
"The winner in the next-generation console battle is likely to be the Xbox 360, which is the leader in North America, the world's biggest market," said Kinoshita.

Sorry he does not put out enough evidence to back up his claims.Its vague & unconvincing in short.
A one year period of sales figures & consumer survey will definitely give a more accurate picture or estimates or predictions.

So what if he belongs to Merrill Lynch-Nothing Great about it.

Inevitable conclusion
By borowki on 11/19/2006 12:46:47 PM , Rating: 1
Let me put some flesh on Mr. Kinoshita's argument. First, he noted the Xbox 360's one year headstart. This is indeed very important. The chief advantage to Microsoft comes not from the fact that it has managed to sell 10 million units during this time, but that the company has a huge lead in reducing the cost of making the console. Historically, the bulk of a console's sales occurred when it price had dropped below $200. Nothing suggests a big change in the consumer habits. Those who bought the PS2 at $179 are not going to spend $400+ for a PS3. Microsoft is much closer to this threshold than Sony. When the a low-end Xbox 360 sells for $199, the PS3 will likely still cost well over $300. The one year headstart, combined with the huge initial price difference, gives Microsoft an at least two year head start in the high-volume mass market.

Mr. Kinoshita also pointed to the PS3's production problem. While the Xbox 360 suffered shortage initially too, the nature of the difficulties facing Sony is very different. Microsoft had glitches in its supply-chain, which were quickly resolved by hiring a third OEM (Celestica) and shifting more transport to the air. Sony is facing a shortage of a critical component--the blue-red diode in the Blu-Ray drive. It's not a problem the company can buy its way out of. The technology is so new that there aren't too many firms making the thing (red laser diode in DVD drives, in constrast, has been around for a couple decades). Expanding capacity means bringing new equirpment online, which takes time and huge sum of money. And we should recall that the PS3 launch was delayed for 6 months. If given the extra time Sony still failed to secure an adequate supply of diodes, the problem must be very serious.

It all comes down to a single blunder: trying to force Blu-Ray onto consumers.

By cnimativ on 11/16/06, Rating: -1
RE: rofl
By Circle T on 11/16/2006 9:53:49 PM , Rating: 5
He doesn't have to know how to play. He is a business analyst. He just has to be good at reading numbers, judging markets, and predicting business forecasts. And at that task, I'm sure he is better than I am, so I'll respect his statement. Even if I, and many other people, most certainly would just destroy him at most games.

RE: rofl
By aGreenAgent on 11/16/2006 10:21:51 PM , Rating: 5
There is something to be said about people who aren't involved with an industry, though. I've made a reasonable amount of money investing in companies who released great products (Read: AMD), but wouldn't start making money on them for months down the road.

Remember when the Athlon 64 came out? Anybody who read this site knew how screwed Intel was and what a strong position AMD was in. How was their stock doing? Poorly. I think it was like $10 per share or something. I picked it up and made a decent amount of cash on it.

Anyway, my point is that analysts track numbers, they're not the target audience - they can only speculate about whether the product they're analyzing is what consumers want. WE'RE the target audience, we know whether the product is good or not.

The fact is that while nobody can say for sure, Sony appears to be in a position to lose a lot of customers. Nintendo appears in a position to gain marketshare. I'm certain MS won't lose any.

The end result depends on us and our opinions. If I were to judge based on comments on DT, I would say Nintendo and MS are in a position to both overtake Sony, at least in this generation.

RE: rofl
By The Sword 88 on 11/17/06, Rating: 0
RE: rofl
By aGreenAgent on 11/17/06, Rating: 0
RE: rofl
By ani4ani on 11/16/2006 10:50:17 PM , Rating: 3
There is no such thing as a good analyst - those that are, do what they proclaim, make a fortune and don't need to be analysts any more.

RE: rofl
By msva124 on 11/16/2006 10:57:37 PM , Rating: 2
Very perceptive.

RE: rofl
By MonkeyPaw on 11/16/2006 11:32:56 PM , Rating: 5
Did it ever occur to you that some people actually enjoy doing their job? It's like wondering why professional athletes don't quit after making a few million bucks--there are aspects of life that are unattainable by money, and some find satisfaction from being good at their job. I'd imagine many analysts (especially good ones) enjoy helping others get rich as well, and they might like the action of picking winners. If everyone lived for only themselves, we'd all be screwed.

RE: rofl
By msva124 on 11/16/2006 11:49:00 PM , Rating: 2
LOL. If analysts actually wanted to help people get rich, they would have detailed statistics on every one of their past predictions so that you could tell whether they were any good or not.

RE: rofl
By deeznuts on 11/17/2006 2:27:48 PM , Rating: 3
Smart investors/money managers don't really look to analysts for their predictions or recommendations, but look at their research and form their own conclusions.

To follow an analyst blindly without your own management/investment style, philosophy, procedure is foolish.

RE: rofl
By raddude9 on 11/17/06, Rating: 0
RE: rofl
By clairvoyant129 on 11/16/2006 10:13:42 PM , Rating: 2
And why would he have too? He works for Merill Lynch, a company you will never work for.

God, the morons on the internet.

RE: rofl
By cnimativ on 11/16/06, Rating: -1
RE: rofl
By theprodigalrebel on 11/16/2006 10:41:48 PM , Rating: 3
Business Analyst != Product Reviewer

RE: rofl
By cnimativ on 11/17/2006 11:04:12 AM , Rating: 1
Business Analyst != Product Reviewer

you won't be able to analyze the business without understanding the product.

RE: rofl
By Oregonian2 on 11/17/2006 2:14:38 PM , Rating: 2
So if a food company came out with $9 Million dollar frozen dinners intended for the mass home market, and an analyst who NEVER had a frozen dinner and always eats in restaurants thought it was over-priced in his analysis and wouldn't sell (but knows the price of every frozen dinner because that IS his business) you'd say he hasn't a clue?

Sony's unit is much more expensive than previous units. It has few games available for it. It's a year behind major competition. It's made by a company with major PR black marks (Laptop batteries, failure in the plasma display tv market, etc). All not good signs even if a unit has never been used.

You're saying that there is NO WAY Betamax VCR's couldn't beat VHS in the market?

I agree that I don't think Sony's market position will slip that much, but I do think it'll be slipping a significant amount. But I also think the analyst has a reasonable stance even if I don't agree with it. His *could* be true.

I read a few days ago that the sales of the Xbox-360 went up (in Japan I think) six fold a week or two before PS3 release. I think it was from those who were waiting to see the PS3 and it's retail price before deciding and they finally decided (for the Xbox). Something that favors the Xbox I think.

RE: rofl
By msva124 on 11/16/2006 11:00:36 PM , Rating: 2
Probably one of my favorite putdowns on the internet comes in the form of "<act stupid> <insult others for being stupid>".

Stupid article title once again
By Kanti on 11/16/06, Rating: -1
By ViperROhb34 on 11/16/2006 11:43:06 PM , Rating: 2
Realistically analyst say things like this all the time, but in the more trusted companies like M-Lynch I feel are listened to more. And why does this matter ? Because the people who listen are other companies, like software developers who make titles and take risk on making exclusive titles.

Its not like this is the only big company recently or only developer who says they dont like the PS3 situation or have as much faith in it then their previous console PS2

By boca on 11/16/06, Rating: -1
By retrospooty on 11/16/2006 11:17:42 PM , Rating: 2
wow.. nice caps.

Reviews mean very little. This is a financial analysis, not a hardware review. In thier opinion, PS3 will lose. It does hold alot of weight, considering all of the issues with it, and the overbloated price/blue ray debacle and compatibility issues. On top of that developers are not happy programming for it, and Xbox has a 1 year head start. There are many more issues, but you get the point.

By boca on 11/16/06, Rating: 0
By ViperROhb34 on 11/16/2006 11:38:55 PM , Rating: 2
Yes, and now reports that PS3 auctions in Japan are going down because alot of people who bought a PS3 in Japan bought it for re-saling it.. not because they actually want one is not encouraging considering mainly only 88k were sold.. it makes you wonder how many really want it.. There were never any reports the 1st week the 360 was out that its actual demand was lower then auctioners who were selling them.. and prices reflected the demand for 360 on auctions for months !

By boca on 11/16/06, Rating: 0
By Dianoda on 11/17/2006 3:58:37 AM , Rating: 3
I don't see how gouging the price of an item that effectively has no retail presence has anything to do with its future success. Those prices will drop when 20,000+ actual ps3’s hit ebay and the nutjobs who spend 3 times the retail price on an item are satisfied. There is really no compelling reason to actually own a ps3 right now (you know, and remove from the packaging...I guess maybe if you really wanted a beta-ray player); it’s an unknown quantity, with no killer app.

Not to say that it’s any different from other system launches. As a general rule, launch titles almost always pale in comparison to titles released one year or even six months in. It also takes time to work the bugs out of the hardware (ps2 and 360 launch hardware had plenty of problems), who wants to walk into something like that? Sony lowered the clock of cell, whose yields are still horrible, just so it could push ps3 out the door because if it delayed any longer people would be wondering not when but if it would be coming out.

I own all 3 members of the current generation and have been happy with them all, Okami, FF, GTA and GT3/4 on ps2, Halo/2, Forza and Ninja Gaiden on Xbox, Super Smash, Mariokart and Zelda on cube. They all have games worth owning the system to play. Not so much yet for 360 and ps3. The software is starting to show up for 360, but ps3 is just getting started and everything I’ve played for it so far has run like the poorly optimized code it is.

Things will be a lot clearer in a year, but right now, 360 has the momentum (and the software), and ps3 has a few months before you will even be able to reliably find it in retail again. Wii is good for the industry, and I’ll actually be waiting Saturday night to get my hands on it and Zelda (I’ll get 360 for Halo3 and maybe ps3 for GTHD if the price ever comes down, which it will). I can trust Nintendo to deliver on its promises, unlike sony (sorry, but if you handle absolutely everything you do that poorly, well, where there’s smoke…). Nintendo choose its own path, and the experience of Wii will be quite different from anything that sony and microsoft have, its making its own market.

Oh, and zune has no place here, and it’s in the same position as ps3, which is barely on the market yet. Really that analyst did a pretty good job, and I’m sure that they know a lot more about actual business related predictions than a bunch of fanbois who marvel at a every shiny thing they see (sustained demand my ass, wow, two days of idiots on ebay, come on, please, anyone can find better support for their argument than that). Like I said at the beginning of this, ebay demand doesn’t mean shit in the long run.

By retrospooty on 11/17/2006 9:36:36 AM , Rating: 3
Yes, there is a high demand. Alot of people are buying to resell it for a huge profit, and alot of total nerd losers cant seem to wait another few months so they are paying rediculous premiums... So, whats your point? It will come down to earth very soon, and very hard.

Sony doesn't see any of that price gouging profit anyhow. On the other hand, Sony loses $300 per unit, so in a way, I hope they sell a hundred million of them... LOL

By Steve Guilliot on 11/18/2006 12:41:55 AM , Rating: 2
You're over-estimating the importance of high $. Even if you are right about the rate of $2500+ sales, it's still a negligible % of launch units.

More important is why some PS3's sell that high. The launch supply is much lower than with the xbox360. That alone will account for more price gouging.

The Xbox360 was in incredible demand for several months after launch. We'll see if PS3's remain as popular at the 1 million mark.

By Teletran1 on 11/16/06, Rating: -1
"Well, we didn't have anyone in line that got shot waiting for our system." -- Nintendo of America Vice President Perrin Kaplan
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