The biggest area of uncertainty is which video game console system will be dominant. “The video game business is changing in major ways. Sony and Nintendo are shaking up the industry with new business models. These are uncertain times where neither conventional wisdom nor historical data necessarily predict who the winners and losers will be during the next three-to-five years,” says George Chronis, author of the DFC report Video Games at the Crossroads: Sony, Microsoft, Nintendo and the Battle for the Console Market.

DFC forecasts the market using three different scenarios for each of the new video game systems, the Sony PlayStation 3, the Nintendo Wii and the Microsoft Xbox 360. Overall market growth is about the same under all scenarios. However, under each scenario individual platforms have very different results. “Uncertainty is truly the keyword going forward,” says DFC analyst David Cole. “Three solid video game systems are competing for market share and it will probably be two-to-three years before a true leader is determined.”

Cole also points out that while any of the systems could be the market leader, none of the new systems is likely to have the market dominance the PlayStation 2 saw. “At its peak PlayStation 2 software alone accounted for about 30% of worldwide interactive entertainment revenue. By 2011 we forecast that all console software combined will only account for about a third of worldwide sales,” says Cole. With multiple console platforms, a growing portable market and online game market, Cole argues that platform diversity is the key to success.