Thursday, February 04, 2010

Console Post Of The Week: My Head Hurts

I have something called a "fever" today, so I hope I've kept these numbers straight (with thanks to Julian D.--for ideas with the numbers, not the fever).

With Nintendo/Microsoft/Sony all announcing earnings in the last week, it's a good time to review 2009 and see where we're headed in 2010.

First off, here's an anecdotal bit of information. Based on what Nintendo announced last week, when they talk about Japanese sales figures, they're taking about actual sales to consumers. That does not appear to be the case in the U.S., though, because they mentioned 32 million as a lifetime figure, but the NPDs only record 27.115 million. So I'm guessing that in the U.S. (and probably in Europe as well), Nintendo is counting sales to retailers, and the difference in the numbers represents inventory.

[NOTE: Matt Matthews e-mailed and correctly pointed out that Nintendo was talking about "the Americas", not just "America." That accounts for the discrepancy.]

Moving on.

Based on earnings reports, here are what each manufacturer claims to have sold in the nine month period from April 1, 2009-December 31, 209. I'd use the full calendar year, but Nintendo released information for the last nine months, so let's go with that:
Nintendo (Wii): 17.05 million
Sony (PS3): 10.8 million
Microsoft (360): 8.5 million

Ah, but it's not quite that easy, because Microsoft talks about "shipped" units, Sony talks about "unit sales", and Nintendo is probably talking about different things in different territories. In spite of that, I think these numbers are useful for ongoing discussion.

First off, let's look at US + Japan sales for the last nine months (these are actuals from NPD and Media Create):
Wii: 9,281,759 (7.56M U.S. + 1.72M Japan)
PS3: 5,147,728 (3.63M U.S. + 1.51M Japan)
360: 3,968,594 (3.74M U.S. + 228k Japan)

Again, given how each company classifies their console sales, this may not be exact, but if we added to the U.S. + Japan numbers to equal the manufacturer's earnings statements, what would they look like?
Wii: 17.8M (7.56M U.S. + 1.72M Japan + 7.77M Rest Of World)
PS3: 10.8M (3.63M U.S. + 1.51M Japan + 5.65M ROW)
360: 8.5M (3.74M U.S. + 228k Japan + 4.53M ROW)

I think what's most revealing in that set of figures is how strong Sony appears to be in "rest of world" (in particular, Europe) compared to the U.S. It's not a new observation, but seeing that Sony sells as many units in ROW as Japan and the U.S. combined is surprising.

It's easy to sort out what these markets will be like going forwards. The Wii will be first in all three markets (U.S., Japan, Rest Of World). The 360 will be second in the U.S. and third in the others. The PS3 will be second in Japan and ROW).

Placement is only part of the picture, though. What about momentum? Sony hasn't passed Microsoft in the U.S., although they're closing, but Sony's 2009 sales in Japan were up 80% over 2008, so the price cut has really helped in Japan. In the U.S., though, sales were up "only" 22% versus 2008, which leads me to think that the price cut is going to have a lesser effect in the U.S. than Sony expected.

If you're curious about annual sales figures, here they are for the last three years in the U.S. (in millions):
              360           PS3         Wii
2007      4.62          2.56         6.29
2008      4.73          3.54       10.15
2009      4.77          4.33         9.56

Yes, Sony has increased PS3 sales each year, but it's worth nothing that sales in 2009 still weren't at the level of 2007 sales for the 360. It's fair to expect the PS3 to outsell the 360 worldwide in 2010, though, because there will be a 1.5-2.0 million unit gap in Japan.

It's also important to remember that the player with the most recent price cut is always going to appear to have the most momentum. The Wii, in particular, seems to have huge momentum after the price cut to $199.  What it means, though, since both Sony and Nintendo had a price cut last fall, is that Microsoft is likely to be next at some point this year, and when it happens, we'll see some of the same historical patterns re-emerging (in particular, dominating Sony in the U.S. market). Even after the price cut to $299, Sony barely outsold Microsoft in the fourth quarter in the U.S. (by about 10,000 units), and without a further price cut, I expect their 2010 sales in the U.S. to strongly resemble Microsoft's.

Here's an updated 12-month rolling sales graph for the U.S.:

Sony has definitely changed their sales trend, at least temporarily, but it's worth noting that they're still over 650,000 units away from hitting 5M on a twelve-month basis. The PS2 was over that level for the first four and a half years!

Here's a look at Japan:

I mentioned a few months ago that the PS3 was trending much like the Gamecube, but the price cut ended the resemblance. Interestingly, though, do you see what's almost outselling the Gamecube at the same point in its lifespan in Japan? The 360, believe it or not.

For Microsoft, with 360 sales flat in the U.S. and rolling over in Japan, it would be an ideal time to start promoting the 720 or whatever the next system will be. In an attempt to significantly stretch out the life cycle, though, they're going to use Natal this fall in an attempt to "re-launch" the console, essentially.

Risky? Very much so, because if Natal doesn't generate significant additional sales over the next few years, Microsoft has nowhere to turn, and as I've said before, expecting Natal (or Sony's Arc) to gain significant traction is very optimistic, no matter their technical merits.

I'm completely out of gas, so I'm stopping here, but I'll continue after the NPDs next week.

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