Console Post of the Week
I saw this last week:Okay, I admit it--I love Nintendo. However, I love them like I'd love an uncle who's been an inventor for the last twenty years and has a frequent-user discount card at mental institutions. There's no question that Nintendo still has moments of inspired brilliance, but for every one of those, there are now about ten "What the...?" moments as well.
Nintendo released some information on their next console, the Revolution, on their official website in the last few days. Here's a large section of their breathtaking news: "In its final form, Revolution will be about the thickness of three standard DVD cases and only slightly longer."
If Nintendo had been in the space race in the 1960's instead of the United States, the press conference would have gone something like this:
The Press: "Does Nintendo believe that they can get to the moon first? Do the power of your engines compare with the power of the Soviets? It's been speculated that the Soviets have an overwhelming technological advantage. How do you comment on that?"
Nintendo: "We are not to be overlooked. Our spaceship is much smaller."
Great. Way to zero in on the critical issues, Nintendo. Now I know this is actually a factor in Japan--consumers there absolutely hated the size of the original Xbox--but the rest of us aren't going to be staring at the size of your unit, pardon the expression.
I don't usually go out on a ledge, but I'm going to with this statement: Nintendo is done in America. Not as far as portables go, although the PSP is certainly going to significantly impact them, but when it comes to regular gaming consoles, they're done. Not only will they be third in the upcoming generation, but they'll be a weak third. There's a fine line between innovation and oddity, and at some point in the last decade they walked over the line. Now they're so far over the line they can't even see it from where they're standing.
As far as predictions go, that has to be the worst in history. I hear they made the village idiot move out of town to make room for this guy.
Oh, wait--that was me.
May 15, 2005, was the date, and thanks to Jeremy Trim for finding it in the archives. Now as soon as I had a hands-on with the Wii at E3 in 2006, I knew I was dead wrong, but Nintendo had been floundering with the Gamecube and seemed to be totally disconnected from the real world in 2005.
Or, at least, they seemed to be. What I wrote was a reasonable explanation (I thought) of how Nintendo was publicly acting at the time.
Once I had a hands-on with the Wii at E3 in 2006 (thanks to Erik Petersen, a DQ reader who works for Nintendo), though, I knew I was dead wrong about Nintendo's future in the console market. I knew the Wiimote was not a gimmick and it was going to blow people away.
What I realized from reading my own words is that people who are wrong don't have to be wrong forever, and that's true for companies as well.
Instead of Nintendo, though, or me, what this made me think about was Sony. Sony did an inconceivable number of things wrong in the first year of the PS3's life, but they did manage to come out with a $399 unit in November, and that pulled them out of the toilet, at least temporarily.
So are there any clues to what's going to happen now? What are the chances that Sony goes from being dead wrong to dead right?
In January, I wrote that I expected PS3 sales this year to average out to roughly 40,000 units a week as long as the price was $399. I based that on the PS3 sales in 2007, and the effect in November and December of the price cut (beyond the traditional holiday sales effect).
A few days ago, I realized there was something far better to use as a base to forecast PS3 sales in the U.S. in 2008: Xbox 360 sales in the U.S. in 2007.
Good grief, that should have been easy to notice.
Two consoles at the same point in their lifespan. Same price (for the primary unit, anyway). Both competing with two other next-gen consoles (although the PS2 is slipping from relevance now, which wasn't true twelve months ago).
That all seems to make for a good base for comparison, and it's going to help us understand if Blu-Ray causes a delta in demand at $399 that didn't exist for the 360 last year. So with all that in mind, let's check 360 sales for the first six months of 2007:
January--294,000
February--228,000
March--199,000
April--174,000
May--155,000
June--198,000
That looks like a straight-line dropoff in demand from January to May, but it's not, because you're dealing with both four week and five week periods because of the way NPD collects data. So "Janury," for example, might include a few days in February, or be few days short.
Plus, and this drives me crazy, NPD has to insert a "leap" week every few years. So in 2008, January was a four-week period, but last year, it was a five-week period.
In total, though, Xbox 360 sales in the U.S. for the first half of 2007 were 1,248,000 units. That will be our base to compare PS3 sales.
January was a stronger month for the PS3 in 2008 than it was for the 360 in 2007, because of the fifth week in 2007. However, January of last year was also the month that the PS3 started flooding into stores, while in January of this year, the 360 was having significant shortages. So one month is difficult to draw too many conclusions from, but going forward, that 1.248 million number will be useful.
From what I can tell, the 360 is in at least marginally better supply now, and has been for several weeks. So it will be interesting to see if Sony comes in at or above Microsoft's 228,000 February number from last year.
Microsoft also announced price cuts in the UK today, and they're large. Here's an excerpt (thanks Gamasutra):
Microsoft has confirmed that beginning March 14th, all UK Xbox 360 models will see a price drop, with the Arcade and Elite models dropping £40 ($80) to £159.99 ($322, now the least expensive next-gen console in the region) and £259.99 ($524), and the standard model down £50 ($100) to £199.99 ($403).
That's 20% for the Arcade Premium, and 13% for the Elite.
Well, that's what they needed to do. They were getting killed in Europe, and as soon as the PS3 started outselling the PS3 in the UK, it was a red alert situation. The UK is kind of a firewall for Microsoft in Europe, and when it began crumbling as well, that had to be a crisis of the highest magnitude.
Microsoft is starting to have an additional problem, but I haven't really noticed anyone talking about it yet. What is it? The value of the U.S. dollar.
[Of course, this is backwards and I'm an idot. However, I'm leaving it up because it feels like cheating to erase my stupidity. See the "Ouch" post for details.]
For those of you living outside the U.S., you might not have noticed that our currency is basically Monopoly money right now, but it's suffered a steep and costly decline. In late May of last year, the dollar was worth about 123 yen. Today, it's worth 102 yen. That's a 17% decline in less than a year.
In that same period, the dollar is down over 13% versus the Euro.
In other words, currency is killing Microsoft right now. Sure, you can hedge changes in currency valuation to some degree, but it's still a big kick in the teeth.
If this continues, it's going to seriously compromise Microsoft's agility in terms of what they do on price compared to Sony, and I think we should monitor it closely going forward.
Lastly, a few quick notes about Nintendo. Chris Meadowcraft sent me a short article that discussed Enterbrain numbers for February, and the Wii outsold the PS3 4-1 in Japan. The combination of Wii Fit and Super Smash Brothers Brawl has been unstoppable, and given that the Metacritic score after 19 reviews is 96, it's going to be huge over here as well.
I think Nintendo has done so many things right with this console. One, it had a low launch price point. Two, it had a killer app as a pack-in. Three, there's only one SKU. Four, it was unique. Five, the advertising was absolutely brilliant. It sounds so simple, but just showing people having fun was a great, great idea.
Combine all that and you get one result: dominance.
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