Monday, August 27, 2007

Console Post of the Week: Meet the New Boss, Math, and Marketing

There are some interesting data points from last week.

First, the Wii has allegedly overtaken the 360 in total worldwide sales. I say "allegedly" because it's notoriously hard to compile these figures, so exact numbers are hard to come by, but if it hasn't happened yet, it's just a matter of weeks. And if you thought last November that the Wii would overtake the 360 in nine months, and would crush Sony beyond comprehension, then you are a member of the smallest and most exclusive club in the world.

It also points out how important a pack-in game can be when you're trying to sell a new console. Wii Sports turned out to be the perfect game to showcase the controller, and Nintento included it even though they were already selling the console for much less than the competition. Without the pack-in game, I think the Wii would have been much, much less successful.

In comparison to the remarkable shrewdness of Nintendo, Sony had a row of toilets at Leipzig this week. Based on the July NPD numbers, all I can say is well-played, gentlemen--this certainly IS living.

Sony dropped the price on the 60GB PS3 in the US by $100 on July 9, so for most of the four-week NPD period, the PS3 was available at the lower price. Like I said, though, even if their sales doubled, it would just make them a closer last in the U.S., and that's what happened. Sony sold 40k systems a week (July total 159,000 for a four-week period) compared to 20k systems a week in June (100,000 units, but in a five-week period). Microsoft sold 170,000 360s, though.

In a month where Microsoft was getting absolutely HAMMERED because of reliability issues and Sony had a $100 price cut, they still couldn't outsell the 360.

They're not going to any time in the next six months, either. That ship has sailed. Microsoft cut the price of the Premium unit by $50 and added an HDMI port. They have a killer line-up of games this fall, and Sony is still floundering around with their game line-up.

There was some good news for Sony, though--for only the second month since launch, the PS3 sold more than half as many units as the PS2 in the U.S.
November 2006-July 2007
PS3: 1,611,000
PS2: 3,808,000

Compare the 360 with the original Xbox as well and here's what you get:
November 2005-July 2006
Xbox 360: 2,209,000
Xbox: 980,000

Holy crap. Not only has the 360 sold 600,000 more units in the same time period from launch, but the 360 outsold the Xbox by more than 2-1 in the first nine months after launch.

Now let's focus on months seven through nine from launch, just to see if that is more revealing.
November 2006-July 2007
PS3: 340,000
PS2: 680,000

November 2005-July 2006
Xbox 360: 704,000
Xbox: 60,000

Holy crap, part two. It's entirely possible that Sony's new console won't outsell its old console in the U.S. until twelve to fifteen months after its introduction.

Oh, but wait--Sony has huge momentum in Europe, right?

Well, not so much. At least, not if you pay close attention to information Sony released in the last week. Remember, David Reeves (SCEE president) said that Sony had sold-through one million units in Europe and Australia (combined) around May 30 (the quote I linked to a few weeks ago was from Friday, June 8, but Reeves said "early last week", so it was actually a little sooner).

On August 22, Reeves announced that the PS3 had sold-through 1.3 million units in Europe.

So let's work with these numbers and see what we get. A generous estimate of Australian sales from launch to May 30 for the PS3 would be 45,000 units, so let's back that out of the initial 1 million number. That means that between May 30 and August 22 (twelve weeks), the PS3 has sold 345,000 units in Europe.

That's about 29,000 units a week.

It's possible that those twelve weeks represent uniform weekly sales, but it's unlikely, because May 29 was only just over two months after launch. In other words, even that 29,000 a week number (which is weak to start with) is probably closer to 25,000 a week now. Or lower.

In comparison, let's look at the same period in the U.S. (remember, the PS2 installed base is roughly equal), adjusting for launch dates. That would be from January 20 to April 14, and the way that NPD reporting periods fall, that would include the last two weeks in January, all of February and March, and the first week in April. I'm calculating the last two weeks of January sales at 35,000 per week because of my previous analysis here.

Total sales for that 12-week period (March was a 5-week period): 339,000. Almost identical.

In other words, interest in the PS3 in Europe looks almost exactly like interest in the PS3 in the U.S., except that in Europe it's only been four months from launch.

Zero momentum.

Hot Shots 5 has helped the PS3 sell over 20,000 units a week in Japan for three weeks in a row, which is better than the death rattle numbers they'd had for months, but Japan is still an unqualified disaster for Sony as far as the PS3 is concerned. Even with a lower price from launch date forward, their numbers are incredibly low.

So how does Sony respond? They announce that they'll be adding PVR functionality via a software download, trying to justify the price by adding a twentieth piece of functionality that almost no one will ever actually use.

Adding value doesn't work if your cost is too high. Consoles are a cost market first.

Lastly, Steven Davis has an interesting analysis of of an interview that Peter Edward (director of Sony Home) gave to this week. Here's an excerpt from that interview:

Edward was discussing supervising the Home environment, although Sony doesn't intend to become a "virtual police" force. Instead, it will be providing different areas within Home depending on the age of the user, helping to apply appropriate non-game branding for products such as cigarettes and alcohol.

...With a presentation featuring potential branding from Durex, Marlboro and Bacardi, Edward said that it's not Sony's intention to offer a sanitised experience, and that more mature gamers can expect to see the same products advertised online as in the real world.

Well, I can certainly see wanting to spend lots of time in an online world where I'm seeing condom ads on a regular basis.

Of course, if you're putting rows of toilets at gaming conventions, condom advertising may be a step up.

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