Friday, April 20, 2007

Follow-Up (Console Post of the Week)

I would normally not follow up yesterday's long post with another, but I realized something today that I don't see being discussed elsewhere.

This week's PS3 sales in Japan: 11,948. Wii sales: 75,759.

That's the worst week for PS3 in Japan. The four worst weeks for the PS3 since launch have been the past four weeks.

Here was Sony's response to the March NPD numbers, which were horrific for PS3 sales:
“PS3 saw a month-over-month increase of 2 percent with sales of 129,638 units, we continued to find ourselves supply constrained in March due primarily to the shift in manufacturing focus to the PS3 PAL version to support the launch of the system in Europe.”


Really, this has gotten to the level of high comedy. That "month-over-month" increase was entirely due to March being a five-week tracking period, while February was four. That's not an out-and-out lie, though. This is:
"...we continued to find ourselves supply constrained in March."

Does Mr. Bean write these press releases?

Let's do a little digging.

Sony claimed, as recently as March 15th, that they were going to ship six million PS3's worldwide by the March 31 end of their fiscal year. If they're claiming it two weeks before the deadline, I assume they hit the target.

So they've shipped six million units. And they've sold (best estimates) about 3.15 million, and that might be high.

So they have almost three million units worldwide in inventory right now. And it's easy to guess that the U.S., based on units sold, has at least 40% of that inventory. That would be 1.2 million units in inventory.

Sony, based on its weekly sales rate the last two months, is averaging between 25k-30k sales a week.

They have at least FORTY WEEKS of inventory in the U.S. channel right now at current run rates. Nine months.

That's not the interesting part, though. Here's the good stuff.

Sony claimed they had shipped 2 million PS3's by around January 15th. That might be high, but let's assume it's true. That means they shipped another four million units in the following eleven weeks to the end of March, or about 360,000 units a week. That's a little more than 1.5 million units a month.

In the U.S. and Japan, combined, they're now selling about 200,000 units a month.

Based on the PS2 installed base, the ratio for sales in the different territories was roughly:

In other words, we are being really charitable if we assume that Europe's PS3 sales going forward will equal the combined sales in the U.S. and Japan. And if we do that, do you know many units a month Sony can expect to sell worldwide?


So right now, in the best-case scenario for Sony they're shipping almost 4X the number of consoles that are actually selling.

Every inventory channel in the world is stuffed, and their manufacturing capacity is, at a minimum, 4X demand.

I'm going out on a limb here, but these numbers point to only one of three possibilities, and one of them has to happen very soon:
1) Sony announces a significant price cut,
2) Sony mothballs a significant amount of their PS3 manufacturing capacity, or
3) Sony rents enormous amounts of storage space to house the excess 1.1 million PS3's they're building each month.

What do I mean by very soon? Two months, at the absolute maximum. These numbers are totally unsustainable.

I also doubt that only one of three will be enough. PS3 sales aren't going to quadruple overnight, even if they cut the price to $499. So the most likely scenario is some combination of all three: price cuts, reducing manufacturing capacity, and warehousing excess units.

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