E3 2014 –Two horse race

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Microsoft is on the back foot going into E3 2014.

  • So far in the competition to be the leading next generation console, Sony has won every round against Microsoft and both have utterly destroyed Nintendo.
  • Consequently going into E3 which kicks off in Los Angeles on Tuesday 10th June, Microsoft has everything to prove and a lot of market share to make up.
  • Most of the big games are made available for both platforms and hence their ability to tip the scales one way or the other will be very limited.
  • Exclusive games releases, hardware revisions, pricing changes, software updates and revisions to the user experience are the things I am looking for to see a change in the balance of power.
  • Furthermore, stitching all of this together and making the console just one of the environments within which users can live their Digital Lives is going to be increasingly important.
  • Here, Microsoft has a massive advantage with its position on the PC, tablet and mobile phone.
  • Sony has the hardware assets but lacks most of the Digital Life services required for an ecosystem.
  • Furthermore, the devices are far less compatible making cross pollination more difficult.
  • If Microsoft can make more of its edge over Sony in the ecosystem and make good its shortcomings in the console then it has a chance make up for the fumbles it has made since last year’s E3.
  • Facebook’s purchase of Occulus has pushed virtual reality into the spotlight again and I am expecting an attempt to capitalise on that momentum.
  • I am also expecting developments in the independent gaming scene where Sony is once again ahead of Microsoft in terms of nurturing smaller games developers and distributing their games digitally.
  • I continue to see Nintendo in big trouble and the absence of its president Iwata-san from the show is not going to help matters.
  • Wii U badly needs killer games that bring users flocking to the platform but it remains too underpowered and too expensive when compared to PS4 and XBox One.
  • Hence, I continue to expect to see Nintendo struggling along at the back, while the main event remains the two horse race between Microsoft and Sony.
  • Microsoft has the assets to win the long game but at the moment all the momentum is with Sony.

 

RICHARD WINDSOR

Richard is founder, owner of research company, Radio Free Mobile. He has 16 years of experience working in sell side equity research. During his 11 year tenure at Nomura Securities, he focused on the equity coverage of the Global Technology sector.

Blog Comments

“ Wii U badly needs killer games that bring users flocking to the platform”: Mario Kart 8 was the best-selling single-platform game in June, with almost 500,000 units in sales. To date it has sold over 2 million copies worldwide.

“but it remains too underpowered and too expensive when compared to PS4 and XBox One.”: The average consumer would be hard-pressed to declare what is “underpowered” about the Wii U without looking at a spec sheet. Meanwhile, you can buy an Xbox One (without Kinect) with no game for $399, or a PS4 with no game for $399…or you could buy a Wii U bundle with Mario Kart 8 and an extra controller and another free game for $329. I don’t see how you can say with a straight face that the Wii U “too expensive.”

“Hence, I continue to expect to see Nintendo struggling along at the back, while the main event remains the two horse race between Microsoft and Sony.”: As of June, the PS4 install base is 8.1 million, the Wii U is at 6.4 million, and the Xbox One is at 4.6 million. Until the Xbox One outsells the Wii U, this is hardly a two-horse race. And most people declared that Nintendo won E3 this year, and Super Smash Bros. is another hit game due out this holiday season. I think the race is far from over.