My name is Jesse Divnich, and I’m an analyst with the simExchange. I will be guest writing here on DailyGame to share some trends in the video game industry that you can discover through The simExchange prediction market. A prediction market is a sort of stock market game in which players buy and sell virtual stocks in video games to predict monthly or lifetime sales of a particular video game. It’s free to play and is somewhat like fantasy football for gamers. However, the simExchange also is a tool that enables analysts to get a better understanding of what is happening in the industry. In this first article, I will cover the effect that the Grand Theft Auto IV (GTA IV) delay has on PS3 and Xbox 360 hardware sales.
Let’s take a look at what happened on the prediction market when 
news of the delay hit the Web. GTA IV’s stock, which predicts lifetime global sales, showed little change in price for both the PS3 and the Xbox 360 before and after the announcement, and there was virtually no change in the lifetime forecast for either version. The same is true with the lifetime Xbox 360 and the PS3 hardware units. This implies that the thousands of participants on the simExchange believe that, in the long-term, GTA IV’s delay will have little to no affect on hardware sales for both the Xbox 360 and the PS3. The short-term is a different story.
It is no secret when I say that great titles drive hardware sales; Halo 3, for example, is expected to drive Xbox 360 units up 57 percent month-over-month, according to Halo 3’s September futures contract that is trading on The simExchange. GTA IV is certainly a game that would fit the category of driving hardware sales; in fact, I would credit most of the PS2’s strong success to the GTA series. Since the forecasts show that hardware lifetime sales remained unchanged in the long-term, I can only conclude that sales must be hurt in the short-term as consumers delay their hardware purchases.
It is unclear how much of the sales will be delayed, but trading on the simExchange over the last three months, including sales forecasts for the Wii in August and September, show that the Nintendo Wii is growing in unit sales every month since the announcement of GTA IV’s delay. Even the expected release of Halo 3 does not seem to be slowing down consumer demand for the Nintendo Wii.
The pain of the delay is not spread equally between the PS3 and the Xbox 360 either. Most likely, the PS3 is going to receive the brunt of the damage in terms of unit and dollar sales. The GTA IV delay gives the Xbox 360 a better edge for software selection this holiday season. After all, the Xbox 360 has Halo 3 — and in my opinion, that in itself gives Microsoft a better software selection then any first-party title Sony can offer this season (or ever). I think it would be hard for any consumer to justify spending money on the most expensive of the three hardware systems to only get an inferior software selection. Of course, Sony does have Blue-ray, but if you ask me, spending that kind of dough just to play a DVD format that is still in its own war against HD-DVD is risky. This is not just one man’s opinion, either; I would hope any rational gamer can come to the very same conclusion by looking at the trading patterns on The simExchange.
In July, the PS3 came within 11,000 units of the Xbox 360 in the North American market, according to the data provided by The NPD Group. Sony can surely thank their “phantom” price cut for that. But since then, the participants in the prediction market have been predicting a widening gap between the Xbox 360 and the PS3. They are currently predicting an 80,000-unit gap for August and a more than 200,000-unit gap in September. This gives Sony very few options to stop this gap from widening, as most strategic approaches takes months to implement and even longer to calculate the results. The only strategy that can be executed quickly enough to salvage PS3 sales this holiday season would be another price cut, which I believe is coming soon. Other options could be the bundling of more software, bundling Blu-ray movie titles, or both. Regardless of what option Sony chooses, the results will still be the same: it is going to cost Sony more this holiday season to stay competitive in this market than it will cost any other hardware producer.
I wish the best to Sony, and it would be a shame to see the Xbox 360 gain a large lead over them this season. After all, I am a firm believer in what a free and competitive market can do for any industry, and whether you are a Sony fan or not, they would be doing a disservice to all gamers by not remaining competitive this holiday season.
Jesse Divnich is an analyst with The simExchange, the one and only prediction market for the video game industry. His “Enlightenments of The simExchange” columns will appear regularly on DailyGame.net to shed light on trends in the video game industry.