Catch Wii if you can: Do Sony and Microsoft have a chance?

August 3, 2007: 9:12 AM ET

Sony (SNE) and Microsoft's (MSFT) long international nightmare isn't coming to an end. Nintendo's Wii console continues to clobber the PlayStation 3 and the Xbox 360, with the latest numbers showing the Wii outselling number-two PS3 by a 4-1 ratio in Japan last month.

Sony can take heart, at least, in the knowledge that it's not as bad as June, when Wii outsold PS3 6-1.

The numbers come from gaming industry watcher Enterbrain, which surveys 3,200 retail stores and 31,000 other shops in Japan. And they come as analysts are increasingly wondering whether Sony and Microsoft can stage a much-needed comeback this holiday season.

Gaming analysis firm DFC Intelligence earlier this week offered a tough assessment of Sony and Microsoft's prospects. The firm said Nintendo is having its best-case-scenario year, and the others – particularly Microsoft – are in a tough position. From the report:

The pressure is on Microsoft to really drive sales of the Xbox 360 this holiday season. If Halo 3 and other products fail to drive Xbox 360 sales, the system will soon flirt with numerous unsavory scenarios, the worst of which is the danger of becoming a distant third in the video game market share battle.

There has been a great deal of focus put on Sony's PlayStation3 launch woes. However, so far in 2007, the news from the Xbox 360 front has not been encouraging. In the first six months of calendar 2007, Microsoft shipped slightly over 1 million units of the Xbox 360 compared with Nintendo shipments of over 6 million Wii systems and Sony shipments of over 4 million PS3 systems. The Xbox 360 had a one year lead, but the competition is catching up fast.

Of course, the bulk of sales for the video game industry come in the second half of the year and it can be a mistake to extrapolate performance in the first six months to the full year.  For the Xbox 360, Microsoft is putting the focus almost entirely on the second half of 2007. Microsoft has humbly called the upcoming Xbox 360 titles the "Greatest Holiday Lineup in Video Game History." Whether it is the greatest lineup in video game history is of course subjective. However, the fall 2007 Xbox 360 release schedule is clearly a strong group of products with a wide variety of games. We would say that this will probably be the last holiday season that the Xbox 360 will have such a clear software advantage over the competition. If consumers are not lining up to buy an Xbox 360 this holiday, Microsoft clearly has problems.

The competition is breathing down the neck of the Xbox 360. The Nintendo Wii has almost caught up with the Xbox 360 in sales and the PlayStation 3 is looking to have a much stronger lineup in 2008. If Sony can keep its PlayStation 2 core base happy for another year or so, they will be in a good position to migrate them to a PS3. This means for Microsoft it is imperative they get consumers into the store NOW.

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