Gloomy outlook for game console sales

In an article published earlier this week, Jay Srivatsa, a senior analyst for research firm iSuppli, said console sales have slowed significantly this year, in contrast with the steady growth that has marked the industry until now. He expects sales to be flat for the year and down as much as 10 percent in 2005, when the major console makers start laying the foundation for a new generation of consoles.

"I would say it's a reflection of the economy as well as the fact there's no big excitement in the industry now," Srivatsa said in an interview. "The only thing to speak of in the industry now is online gaming, but that doesn't do much for console sales...The whole game console market is really in the doldrums now."

Sony has said it expects to sell 20 million units of its PlayStation 2 console during its current fiscal year, down from 22.5 million in the previous fiscal year. Microsoft expects to sell between 5.5 million and 7 million units of its Xbox console during its current fiscal year.

Nintendo faces the biggest risk, Srivatsa said. The company has temporarily halted production of its GameCube console to eat up excess inventory and managed to ship a scant 80,000 units during its most recent quarter. "If they don't do anything significant, Nintendo won't sell any consoles next year," he said.

Srivatsa said he expects another round of price cuts before the end of the year, with Xbox and PS2 dropping to $150 and the GameCube somewhere below that.

Beyond that, pressure will build to get the next generation of consoles on the market more quickly. Nintendo has said it plans to have the successor to the GameCube ready before its competitors make a move, but none of the players will find it easy to speed up development cycles.

"I don't think (that), when the companies developed this generation of console, they were prepared for it to be so short," Srivatsa said.