This brief considers the impact of next-generation consoles on the online games sector, assessing whether online services will reach their mass market potential.

Key drivers are spurring the adoption of video games both online and offline. Broadband penetration is prompting the consumption of online material and the use of online social media. Demographics are also shifting with the average gamer being around 33 years old.

The PlayStation 3, Wii and Xbox 360, dubbed the next generation of consoles, each hold a unique position with regard to console offerings. While Sony and Microsoft aim towards increased functionality as a key driver for adoption, Nintendo look for innovative game play and the elusive fun factor.

The Sony PlayStation 3 is expected to win the console war in the long term with an install base of around 75 million globally by 2010. The console is not expected to dominate as much as its predecessor, the PS2, due to late launch issues in the PAL region and the early lead of Microsofts Xbox 360.