PS3 Launch Title Exposure: Out of the stocks we cover, video game makers Electronic Arts (ERTS) and Activision (ATVI) have the most exposure to the PS3, while THQ, INC. (THQI) does not have any PS3 launch titles.
* ERTS PS3 launch titles = Madden NFL 07, Need for Speed: Carbon, Tiger Woods PGA Tour 07, and Fight Night Round 3 (in December). NBA Live 07 on PS3 was recently cancelled.
* ATVI PS3 launch titles = Tony Hawk's Project 8, Marvel: Ultimate Alliance, and Call of Duty 3.
* TTWO PS3 launch titles = NBA 2K7 and NHL 2K7.
VG Publisher's Internal Expectations for PS3 Volumes: ERTS has said it expects 500,000 to 1.0 million PS3s in calendar 2006, while ATVI is looking for 600,000 to 800,000.
Sony's Expectation for PS3 Volumes
* North America: Sony is forecasting 400,000 PS3s for its launch in North America and recently reiterated its goal of 1 million PS3s shipped in the U.S. market by the end of 2006. Sony believes it can ship about 2 million to 2.4 million PS3s worldwide by the end of 2006.
* Japan: Sony was looking for 100,000 units for PS3's launch in Japan, it appears only about 88,400 were shipped. About 62% of the PS3s units sold were the 60GB version. The two best selling games, Ridge Racer 7 and Mobile Suit Gundam: Target in Sight, sold about 30,000 units each. Nevertheless, the PS3's tie ratio thus far is 0.98.
Context for Talking About It: Tie Ratios
Tie Ratio = number of video games bought per video game console
As mentioned above, tie ratio at initial purchase in Japan is about 1.0x. North America would likely be a bit higher as we have more titles available at launch than were available in Japan. More importantly, assumed tie ratios for the PS3 within the first year are as high as 5.0x based on the Xbox 360 tie ratio. Moreover, tie ratios tend to increase as the cycle matures.
Scenario Analysis: $ Implications for VG Publishers per 100,000 PS3 Shortfall
* At launch: 100,000 x 1.0 x $59.99 (x 0.80) = $4.8 million
* In first year: 100,000 x 5.0 x $59.99 (x 0.80) = $24 million