Industry Executives Predict a Major Battle Among Video Game Hardware Manufacturers, Reports DFC Intelligence

According to a new report from DFC Intelligence, executives in the interactive entertainment industry are gearing up for the most competitive video game hardware battle ever. The report, Executive Interview Series: The State of the Game Market 2001, is based on interviews DFC conducted with some of the leading executives in the video game industry. Combined, the executives interviewed for the report, represented companies that accounted for nearly 75% of U.S. interactive entertainment software revenue in 2000.

    A primary topic of the interviews was the market potential for the leading new game systems, the PlayStation 2, the X-Box, the GameCube and the Game Boy Advance. Unlike what DFC has found in past industry surveys, many executives felt that the game industry could be split among 3 or more hardware systems. There was significant disagreement on how well each hardware platform will do over the next several years.

    The PlayStation 2, from Sony (NYSE:SNE), was the favorite among industry insiders to be the market share leader. This was the despite the fact that many executives are extremely disappointed with Sony's handling of the PlayStation 2. Nevertheless, the main difference seems to be between those that think the PlayStation 2 will win the hardware race by a "country mile," and the executives that think the market could be fairly evenly split among three game systems.

    The interviewees were less certain about the GameCube, from Nintendo (OTC:NTDOY). The less than unanimous consensus was that the GameCube would be the number two system behind the PlayStation 2. Most respondents felt that Nintendo would focus almost exclusively on the 6-14 year old audience and let the PlayStation 2 and X-Box fight it out for the over 14 demographic.

    The greatest area of disagreement was over the outlook for the X-Box, from Microsoft (Nasdaq:MSFT). Many respondents hope that a large new entrant like Microsoft will take the game industry to the next level. Other executives came outright and said they thought that the X-Box would be a failure. There was some significant concern about Microsoft's lack of marketing ability for this type of consumer product. Other respondents were worried about Microsoft's track record of not getting products right the first time around.

    There was also some substantial concern about whether the X-Box and GameCube would actually be released in 2001. Many respondents thought the launch date of one, or both, of these systems may slip to 2002. Even if these products ship in 2001, they may ship in very limited quantities due to manufacturing shortages.