Microsoft (NASDAQ:MSFT) entered the gaming console market rather late with the Xbox but has managed to gain significant market share thanks to the growing popularity of Xbox 360 console and the Kinect motion gaming add-on. Xbox has been the top-selling console for months and sold close to a million units during Black Friday in 2011. Microsoft also announced that it has sold more than 66 million Xbox units to date, and over 40 million Xbox Live memberships. Even its latest device – the Kinect motion gaming addon for the Xbox – was a huge hit, and sold over 18 million units in less than a year. Research by NPD suggests that Microsoft dominated the video game industry in 2011, capturing over 40% of all video game related spending with the Xbox, its accessories and its games. [1] The Xbox competes primarily with Sony’s (NYSE:SNE) Playstation 3 and Nintendo’s Wii in the gaming console market.
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Xbox Accounts for 40% of Total Video Game Spending
The total video game related spending in 2011 was around $17.02 billion. Microsoft’s Xbox accounted for around $2.1 billion in console and gaming hardware sales, and $4.6 billion in Xbox game sales by all publishers.
Xbox has been Microsoft’s fastest growing business in the last couple of quarters, accounting for a major portion of its revenue growth which has been dragged down by slowing Windows sales. We expect Xbox’s market share in the gaming console market to increase in the coming years.
Xbox, Kinect, Windows Phone and other devices account for nearly 8% of Microsoft’s $32 Trefis price estimate, which stands nearly 15% above its current market price.
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