Thursday, April 19, 2007

Console Post of the Week

Here's how obvious some of the data is at this point: I'm writing this entire post before the NPD numbers come out. All I'm going to do is insert the NPD numbers when they're released and it's good to go.

On April 13, I wrote that I expected PS3 sales for March to be between 120,00-140,000. Today's NPD number? 130,000. Another absolutely horrible month for the PS3. The Wii sold 259,000 units (every one they made). Microsoft sold 199,000 units, and if I'm Microsoft, that number alarms me.

God of War II helped drive PS2 sales to an amazing 280,000 units. Is that good for Sony? Not if you wanted any of those people to buy a PS3.

I'm still trying to clarify if this was a four or five-week tracking period. If it's five, the PS3 sales were closer to catastrophic than horrible. I'll let you know when I find out. [UPDATE: Those March numbers are for a FIVE week period. I was estimating 120k-140k PS3 sales based on a FOUR week period. Selling 130k in a five-week period is unfathomably bad. It's not good for Microsoft, either, because their 199k also included the first 291k sales of Guitar Hero II.]

I'll start off with Nintendo this week, but again, there's not much to say. Insert the sound effect of money spewing out of a machine [here].

Microsoft? Roger Ehrenberg wrote an interesting piece at Yahoo Finance titled "When Will Microsoft Own Up to the Xbox 360 Bomb?" It's available here, and while I disagree with quite a bit of it, it's still a very interesting read. Here (by his own analysis) are his three main conclusions:
Gaming has been a disastrous endeavor for Microsoft, particularly from an investment perspective;

The seeds of this failure are evident from their sales performance in Japan, particularly when comparing their 18 week sales figures (which is about how long the Wii and PS3 have been out) relative to those of the most successful console releases; and

This early failure in the key Japanese market has a compounding negative effect on worldwide console sales, as game developers are less willing to invest in high-risk projects for console platforms that are shaky out-of-the-gates, which makes it less attractive for gamers to buy these consoles, and so on.

Like I said, I disagree with quite a bit of this, particularly the notion that success in Japan is the foundation of success for a console worldwide. That was true in 1997. It might even have been true in 2000.

But clearly, it's not true now.

Let's look at some Japanese population basics (taken from The World Factbook):
--total population: 127,000,000
--age structure:
0-14 years: 13.8% (male 9,024,344/female 8,553,700)
15-64 years: 65.2% (male 41,841,760/female 41,253,968)
65 years and over: 21% (male 11,312,492/female 15,447,230) (2007 est.)
birth rate: 8.1 births/1,000 population (2007 est.).
--median age:
total: 43.5 years
male: 41.7 years
female: 45.3 years (2007 est.)
--population growth rate: -0.088% (2007 est.)
--net migration rate: 0 migrant(s)/1,000 population (2007 est.)

Those numbers may look like gibberish, but let's look at the United States in comparison:
--total population: 301,139,947 (July 2007 est.)
--age structure:
0-14 years: 20.2% (male 31,152,050/female 29,777,438)
15-64 years: 67.2% (male 100,995,752/female 101,365,035)
65 years and over: 12.6% (male 15,858,477/female 21,991,195) (2007 est.)
--birth rate: 14.16 births/1,000 population (2007 est.)
--median age:
total: 36.6 years
male: 35.3 years
female: 37.9 years (2007 est.)
--population growth rate: 0.894% (2007 est.)
--net migration rate: 3.05 migrant(s)/1,000 population (2007 est.)

21% of the population in Japan is over 65 years of age, and that's increasing rapidly. Their median age is 43.5 years. Their population growth is negative. There are roughly 17.5 million people in the 0-14 category.

In other words, as a country, Japan is facing an endemic and critical demographic issue: they're running out of young people.

In the United States, 12.6% of the population is over 65 years of age, or slightly more than half the percentages in Japan. The U.S. population growth is positive, and there are roughly 60. 8 million people in the 0-14 category.

What drives gaming? Well, even though I'm 46 and don't want to admit it, it's young people. They have more free time, play more games, and spend more time gaming than older adults. So when Ehrenberg talks about Japan as the foundation for success, he's ignoring the overwhelming, current demographic evidence.

And before you fire off an e-mail: no, I'm not forgetting about Japanese developers. But they are no longer influential to the degree that their lack of support could kill a console.

But I digress.

Like I said, it's an interesting read. And I do completely agree that the Xbox and 360 have lost a ton of money.

Fortunately, they print money.

Well, it's been a busy week for Sony. Very busy. In the span of just a week, they've killed the 20GB model, claimed to have sold 800,000 units in Europe since launch, discussed "streamlining" their operations (aka laying people off), and the head of Sony Italy resigned.

Oh, and here's the most interesting bit of information, revealed in a Financial Times interview with Sony president Ryoji Chubachi:
"We are re-examining our [PS3] budgeting process in terms of pricing and volume. Sales assumptions change and the market is competitive. We are in the midst of revisiting our strategy for the PS3."

That seems like a pretty straightforward admission that what they're doing isn't working (he's right: it isn't). Sony then issued a very strongly worded non-denial (from spokeswoman Mami Imada):
“PS3 prices and shipment plans for the future should be determined by market trends and competition. Sony currently doesn't have any specific plan to cut the PlayStation 3's price."

Both of those quotes came from a Gamasutra article here.

Well, it's the billion dollar question for Sony, isn't it? They're already losing a metric shit-ton of money on each PS3 they sell, but even doing that, they're not selling enough.

When someone designs a high-end Mercedes and needs it to sell like a Camry in order to recoup their investment, and they believe it will happen, they are engaging in magical thinking.

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