By the end of 2007, total lifetime unit sell-through of home consoles will be led by the Xbox 360, followed by NintendoÂ’s Wii, with the Playstation 3 third. This order will also be true of units sold-through solely in 2007 (ie, not lifetime sales).

• The original PSP (with memory stick) will be discontinued, and replaced by a new model with an integrated hard drive. The new model will enable connectivity to the Playstation store via internet connection, and allow you to purchase and download both emulated PS1 and native PSP games directly. Over time (meaning not in 2007), it will also allow you to purchase music and movies from the Sony store.
• The Playstation 3 will have an effective price drop of at least $100 by Thanksgiving 2007. By effective, I mean that itÂ’s also possible that the price will remain the same, but at least $100 of value will be added to the bundle.
• Nintendo will release their own Live Arcade service for the Wii. Specifically, this means Nintendo will enable third-party developers to create, distribute, and sell casual games for the Wii and DS through a new Wii channel.
• The Nintendo DS will continue to outsell the PSP in 2007. It will also enable DS <-> Wii wireless connectivity, enabling cross-platform gaming scenarios and the purchase of Nintendo DS casual games. It will not enable the download and purchase of full retail games for the DS, however.
• Apple will expand their gaming efforts significantly. The most likely scenario is investment in iPod and the (soon to be announced) iPhone devices to enable a common game development platform for developers to target. This platform will include WiFi wireless connectivity, user accounts and presence, and the ability to trial and buy content from a games channel in the iTunes store. Apple will not enter the gaming market with a home console of their own.
• HD-DVD will begin to pull ahead of Blu-Ray in the high-definition DVD format war. This will be measurable by number of DVDs available for either format on Amazon, and total player sales (including the Xbox 360Â’s HD-DVD add-on and the Playstation 3Â’s internal Blu-Ray drive).
• Google will show significant public interest in the gaming sector for the first time, including interest in acquisitions to bolster their Ad-sense business. The most likely target will be IGA Worldwide (to combat MicrosoftÂ’s acquisition of Massive). If unsuccessful, Google will seek to acquire one of the larger game publishers on the market to gain a foothold in the in-game advertising market. Likely targets include Electronic Arts (though it would be extremely expensive), Activision, or THQ.