HDTV-Compatible Consoles Will Drive High Def TV Sales

by Steve Kovsky,
Digital TV Industry Senior Analyst
June 23, 2005

Makers of digital TVs are taking the electronic games market very seriously these days, as they anticipate the awesome impact that the $10 billion video game industry can have on their sales.

Last month’s Electronic Entertainment Expo (E3) event in Los Angeles drew record crowds of professional developers and marketers, all bent on identifying hot trends and products that will continue the multibillion-dollar ascent of the international games marketplace. Key to the continued rise of digital TV demand were several announcements regarding new video game consoles that will support varying display and connectivity technologies.

Let the Games Begin

• Microsoft used the E3 event to officially unveil its next-generation video game console, the Xbox 360. The hardware was demonstrated exclusively on Samsung TVs, pursuant to a wide-ranging marketing and promotions agreement announced by the two companies last month. The Xbox 360 will support native 720P HDTV output as well as Dolby 5.1 for home theater audio systems. The new Xbox system is slated to ship in late 2005.

• Sony made a much larger commitment to HDTV gaming with the announcement of its PlayStation 3 console, which is due to ship in spring 2006. The system will be capable of generating dual 1080p video outputs in addition to supporting Dolby 5.1 and Blu-ray Disc ROM media. With a maximum storage capacity of 54 GB, Blu-ray storage will propel the creation and distribution of HD-quality content for the new game device.

• Nintendo also unveiled the new design of its next-generation GameCube console at the event. While detailed features of the Nintendo Revolution have not yet been disclosed by the company, there will be pressure for the device to provide HD-quality resolution in order to keep pace with its competitors. Nintendo has acknowledged that the unit will support WiFi networking, but little else. Shipment is expected in mid-2006.
  

Video games have become serious business, and they will have an equally serious impact on the sales of HDTV-capable TV sets in North America and beyond. The distribution of home video game consoles is staggering. Consider the Sony PlayStation 2 alone: The bestselling game console currently resides in more than 87 million homes around the world.

The decision by Sony and Microsoft to embed HDTV-quality video in their next-generation game consoles is a boon to the television industry, which is actively lobbying both consumers and government officials to tear themselves away from older analog sets and embrace a digital future.

One of the major hindrances to rapid consumer adoption of HDTV continues to be the overall absence of compelling content in native high-definition formats. TV makers appear to be ignoring the popular maxim “Build it and they will come.” This cornfield wisdom (dispensed in the 1989 baseball movie, Field of Dreams) simply reinforces the concept that demand follows desire. Without first building a rich body of HDTV content, consumer demand for HDTV hardware will remain weak. The consumer electronics industry, through its fervent lobbying of lawmakers to accelerate the digital TV turnover and frantic marketing of HD capabilities, seems to be expecting the crowds to show up for HDTV before building the programming infrastructure that is required to whet consumers’ appetites.

However, the HDTV content picture is about to change. One look at the arresting visual images being produced by the new Microsoft Xbox 360–and more pointedly, by the even more highly evolved Sony PlayStation 3–leaves little doubt that serious gamers will flock to their electronics stores to buy not only these next-generation game platforms, but next-generation digital TVs that can truly do justice to the amazing video game graphics.

HD-quality video game consoles will be part of the Digital Home landscape beginning this holiday season. Samsung was the first TV manufacturer to jump onto the game-console bandwagon by tying its lot to Xbox 360. Sony, of course, can forge its own TV/console alliance, and the company clearly plans to capitalize on the video game connection to drive its TV sales next year.

Look for closer ties and additional joint promotions between TV companies and game developers as these next-generation entertainment systems come closer to commercial availability in late 2005.

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