PS3 and Xbox 360 to perform poorly this holiday

As the busy holiday season creeps upon us, PS3 and Xbox 360 manufacturers, Sony and Microsoft are anticipating massive sales. However, according to industry experts, video game sales may suffer from the downturn in the economy. Also, software developers may be releasing fewer AAA titles in an effort to offset financial woes down the road.

According to GI.biz, Strauss Zelnick, Chairman for Take Two Interactive, indicated that the entertainment industry is not immune to recession. This is in contrast to what other industry analysts have predicted. Historically, the entertainment industry has fared quite well during periods of recession, mainly due to an increase in consumer spending on home entertainment.

Zelnick says that the current state of the industry “doesn’t look very promising.” While speaking at a conference, Zelnick indicated that the company is starting to see software sales drop at retail locations.

He said:

In the last couple of weeks specifically we’re beginning to see some softness in retail, it’s pretty broad and it’s beginning to have an impact on the industry and by that I don’t mean a good impact.

Currently, we are well on our way into the holiday season, yet software sales have started to decline compared to last year. Will we see Wii-like monthly sales figures for the Xbox 360 and PS3 that are around the 600k to 700k mark this holiday season?

Sony and Microsoft have managed to sell at least 2 million units during the holiday seasons in the past. Even though Microsoft is experiencing a sales spike due to the recent price drop, it is still difficult to say if the company can sell a couple million units during the holiday season. Also, due to Sony’s refusal to drop the price of the PS3, sales have remained relatively flat.

Zelnick also indicated that the company will reduce development of AAA titles in order to offset high overhead costs. This strategy will also help software titles break even quickly.

He said:

In that context we think our strategy, which is to release a limited number of top tier titles, somewhat cushions us in the environment because must have products should still sell … your overhead should be lower, your marketing costs should be lower…

However, it is difficult to say if this strategy is even feasible. Reducing top tier titles means that there will be fewer games on the market that might be worth buying. Such a move could impact hardcore gamers who crave AAA titles throughout the year. We will just have to wait and see if Take Two Interactive’s strategy pays off in the end.

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