"UBS's Mike Wallace thinks Microsoft and Sony will win the next-gen console and handheld wars, predicts 3 percent spike in 2006 software sales.

Citing the start of the next-generation console transition and the lack of a Halo 2 or San Andreas-level blockbuster, many analysts predicted game sales would shrink in 2005. And while US retailers sold $10.5 billion of combined gaming hardware and software--6 percent higher than in 2004--taken alone, software revenue did slide 3 percent, from $6.25 billion to $6.06 billion.

Now, more and more analysts are beginning to predict what 2006 has in store for the game market. The latest expert to join the chorus is Mike Wallace, the lead game analyst at the Wall Street investment firm UBS. "We expect US software sales to grow 3 percent in 2006 (up from a 3 percent sales decline in 2005)," he said in his most recent report. "This is up from our prior view of flat sales in 2006, with the year-over-year increase mainly due to 2005 being weaker than expected."

Wallace believes the increase will be fueled by the debut of the second and third next-generation consoles. "The launch of Sony's PlayStation 3 console later this year, along with the launch of Nintendo's Revolution console, should represent the official start of the new cycle," he said. He also agreed that the PS3 will miss its previously announced spring launch window and will go on sale across the Pacific first. "We think a summer launch [in Japan] is more likely, with the US and Europe launches still expected in Q4," he said." [more]