Analysis: Motion gaming could disappoint this holiday

NEW YORK Thu Sep 30, 2010 1:49pm EDT

A visitor plays a new 3D game on Sony Corp's PlayStation 3 motion-sensitive controller ''Move'' at Tokyo Game Show in Chiba, east of Tokyo September 16, 2010. REUTERS/Yuriko Nakao

A visitor plays a new 3D game on Sony Corp's PlayStation 3 motion-sensitive controller ''Move'' at Tokyo Game Show in Chiba, east of Tokyo September 16, 2010.

Credit: Reuters/Yuriko Nakao

NEW YORK (Reuters) - No amount of jumping or arm swinging will revive the $60.4 billion global video game industry this holiday season.

Motion game controllers from Microsoft Corp and Sony Corp hitting store shelves in time for the holiday rush may stir curious video game fans, but disappoint investors and retailers betting on a recovery.

US video game sales are down 8 percent this year on top of an 8 percent drop in 2009, according to retail research firm NPD.

Industry watchers had pinned hopes of a sales lift on the release of new accessories that mimic and improve upon motion-sensor functions pioneered by Nintendo's Wii game system.

"We think that (motion games are) going to bring renewed interest to the gaming platforms," Best Buy Chief Executive Brian Dunn said in an interview. "I believe they are going to be quite successful and will reignite interest in video games."

Investors had also hoped Sony's Move and the Microsoft's Kinect systems would extend the shelf life of PlayStation 3 and Xbox, respectively, both of which have each been on sale for four years or more.

But, while motion gaming sales "will be incremental this holiday," said Lazard Capital Markets analyst Colin Sebastian, "By no means will it help the console business turn the corner."

Early signs of interest have been discouraging, according to a recent survey by the research and trading firm MKM Partners.

More than half of game console owners in a U.S. survey of 1,334 people said they were undecided about buying the new hardware and only 17 percent of them said they would purchase the systems.

Microsoft expects to sell 3 million Kinect units this year. A Sony spokeswoman said sales of the Move was "performing very well at retail," but declined to give specific numbers.

The Move launched on September 19 with its camera priced at $39.99 and its motion controller wand at $49.99. The Kinect, which hits stores on November 4, will cost $150 and does not require a separate handheld controller.

WAIT AND SEE

Game publishers are gauging the demand for motion sensor technology before investing heavily to develop motion games for Sony and Microsoft, analysts say.

With only a short list of titles are available this season, "A lot of consumers are taking a wait-and-see approach," said MKM Partners analyst Eric Handler.

Moreover, the foundation of hardcore gamers unaccustomed to exercise may not warm to the idea of getting off the sofa to play motion games, some of which are focused on fitness or dancing.

"The bulk of gamers like to sit there and veg out," says Wedbush Securities analyst Michael Pachter. "Gamers don't actually appreciate what they get from the Move or Kinect."

UBISOFT BETS ON MOTION

While major game publishers like Take Two Interactive , Electronic Arts and THQ Inc have made limited announcements about their new motion games, Ubisoft, the French game maker that was one of the first companies to produce games for the Wii, is betting heavily on the technology. It is releasing several titles for both systems this holiday.

Goldman Sachs upgraded Ubisoft to a buy rating on September 21, predicting a sales recovery from the launches of the Move and Kinect. Ubisoft shares have traded about 23 percent higher than their August low on the Bourse in Paris.

Still, Adam Novickas, Ubisoft's U.S. director of marketing, is skeptical the new products will radically change the entire video game industry.

"It's hard to say, 'the fate of the industry relies on motion controllers,'- that's just not a true statement," he said.

(Additional reporting by Dhanya Skariachan; Editing by Derek Caney)

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