Analysts: New Game-Console Shortages May Spur Sales of Old Ones

Two new video game consoles, Sony Corp.'s (SNE) PlayStation 3 and Nintendo Co. Ltd.'s Wii, are expected to top holiday wish lists as they debut in mid-November, but fans may have trouble buying them.

Shortages tend to plague hot new gadgets as manufacturing and distribution challenges make it hard to immediately satisfy demand, and this year is shaping up to be no different.

So even though gamers are a-flutter over the brand new consoles, machines already in the market could be the season's best sellers if consumers decide something is better than nothing.

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Sony plans to ship 2 million PS3 units for the holidays, half the number Nintendo has planned for the Wii. Debut supplies of each are expected by analysts to fall far short of demand and quickly sell out.

"This is going to be the mother of all shortages," Larry Haverty, associate portfolio manager of Gabelli Global Multimedia Trust, said of the PS3 launch.

The fund owns shares in Electronic Arts Inc. (ERTS) and Activision Inc. (ATVI), the two largest U.S. video game publishers.

Analysts expect just as severe a shortage for Nintendo's Wii which, at $250, is about half the price of the PS3.

"Unless you're willing to stand in line or pay ridiculous amounts of money on eBay, don't even try. Don't get your hopes up," Sam Kennedy, editor-in-chief of video game information site, told Reuters.


Microsoft's competing Xbox 360 console, however, should be readily available for its second holiday season, after overcoming shortages during its November 2005 debut.

"I think we're set up to have a good holiday," Robbie Bach, president of Microsoft Corp.'s (MSFT) Entertainment and Devices division, told Reuters.

Wedbush Morgan analyst Michael Pachter expects Microsoft to sell as many as 3 million Xbox 360s in November and December, but said the number could be higher if consumers who can't find a Sony PS3 buy a 360 instead.

Microsoft, which sells two versions of the Xbox 360, for $300 and $400 each, said in July it had 5 million of them in the hands of gamers. It expects to double that number by year end.

Analysts caution against calling a winner in the three-way console war between Sony, Microsoft and Nintendo based on holiday sales, since a clear winner may not emerge for another two years as manufacturers need that much time to get ample supply to market.

It also takes game makers about two years to design titles that take advantage of a console's new features.


Sony stole the game console market from Nintendo in the mid-1990s with its original PlayStation, which leapfrogged rivals with improved graphics and other features that spawned a vast library of games.

The company continues to dominate the market with its PlayStation 2, which also won the last console battle that began in 1999. The PS2 commands more than 60 percent of the market with sales of more than 106 million units.

Most analysts believe that Sony will lose some of its grip over the market in the new console cycle as competitors get more aggressive and as independent game makers move away from striking exclusive game deals with Sony.

However, they expect the $30 billion video game market to keep growing overall.

Current generation game and console sales historically fall during transitions to new console technology, but data from recent months show that U.S. consumers are continuing to buy both PS2 consoles and games.

For example, in September PS2 sales hit 307,000, while Microsoft racked up 260,000 Xbox 360 sales, according to market research firm NPD.

Analysts said video game enthusiasts, who weathered shortages of the Xbox 360 last year, are more realistic about their chances of being the first on the block to own the latest machine.

A willingness to consider more easily available options could help explain better-than-expected PS2-related sales in recent months, some analysts said.

Sony spokesman Dave Karraker said trend-bucking PS2 sales should continue through to the new year.

"It will be one of the top-selling consoles for the holiday season," Karraker said. is owned and operated by News Corporation, which also owns and operates