Wednesday, November 12, 2008

Console Post of the Week: Not Enough

Matt Matthews surpassed his already high standards in his latest analysis of videogame hardware and software sales. The article begins here, and the console analysis begins on page 3. It covers so many topics so well that I encourage you to read the full article.

The data source for Matt's article is Nintendo, and it gives us a rare look into console sales in Europe (where numbers aren't released publicly like the NPD numbers in America). Since the slides Nintendo released are in graph form and don't have exact sales numbers listed, a bit of "tape measuring" is required, but I believe these numbers are close for the January-September period this year:

Again, that's what I came up with from scrutinizing the graph--I'm not claiming those are exact. And please remember that this includes the U.K., Germany, France, and Spain only--Matt estimates that the rest of Europe represents about 20% additional sales volume.

What's striking, though, is how small those numbers are if you're Sony or Microsoft. Yes, the PS3 has strongly outsold the 360 in Europe this year, but the delta is only half a million units? Even adding 20% to that, it's only 600,000 units in total. Add another 500,000 units for the Sony advantage in Japan, and about 150,000 in the U.S., and it looks like Sony has sold approximately 1,250,000 more units than Microsoft through the end of September.

That would mean something if the relative pricing had stayed the same, but it hasn't. Microsoft's subsantial price cuts resulted in a 115,000 unit gap in September in the U.S. alone, and given Sony's adamant refusal that they're cutting prices this year, they can look forward to getting pounded over the next three months. I'm guessing the gap will between 750,000 and 1,000,000 units in the U.S. (in total) for October-December.

Another graph in the presentation showed weekly sales rates in Europe, and the 360 is now ahead there as well, although I expect that to largely be a wash. So at the end of the year, Sony will probably have sold between 500,000-1,000,000 units worldwide in 2008 than the 360. Oh, and if you add BOTH Sony's and Microsoft's sales together, worldwide, they'll be smaller than the Wii.

So much for world domination.

I believe that the dynamics of this generation are clearly established, and they look something like this:
1. The Wii has crushed all competition.
They just have, and the degree of the ass-kicking is stunning. They've done a masterful job of matching price point, innovation, and fun to what customers want right now. There's also no reason that Nintendo couldn't put out an HD-Wii whenever they want to--for $249, and still make a profit on the hardware.
2. The Sony-Microsoft pricing balance point seems to be $75, at least in the U.S.
Boy, that was a crappy description, but what I mean is this: when the price gap between the PS3 and the 360 "premium" model is only $50, Sony will lead in sales. When it's $100, though, Microsoft will lead by a substantial margin.

I don't expect this to change, and the question is, how does Sony catch up on price? I don't think they can, at least in this generation. They're always going to be chasing.

The other problem, besides catching up, is the price, period. Two years in and the PS3 is still at $399. Again, Sony can claim this is a ten-year product, but it's not. The PS2 has had a stunning run, but it just hit eight years and it's dead. Sure, new games are still coming out--developed by the "D" team. No one's showcasing their game on the PS2, and most of what is coming out is half-assed, based on the Metacritic scores.

That's eight years for a platform that's sold 140 million units worldwide. The PS3 will be very fortunate (very) to hit half that number, and developer loyalty is in almost direct proportion to how many people can buy their games on a particular platform. The PS3 just isn't going to command the long-term developer support that the PS2 did.

Microsoft isn't doing that well, either. It's hard to know what their numbers would be if their console hadn't been crushingly unreliable for the first two years of its existence, but no matter. At this point, they certainly don't have anything resembling momentum, either, although the price cuts will help.

One last note: I think these holiday sales numbers bear particularly close watching this year, because we may see a clear reflection of the economic downturn. So the usual expectations about holiday sales may not apply this year, at least not the way they have in the past.

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