No Public Discourse

Back on October 1st, I predicted that sales for September 2012 would total about $850 million. It turns out that I was off by 0.02%, as NPD has released its sales data for last month and sales were $848.3 million for the period. Year over year (YOY) revenue was down by 24%, with a 39% plunge in hardware sales and a slimmer 14% less in software sales. It marked the tenth consecutive month of declines for the industry, a trend which is expected to continue for the rest of 2012 and possibly beyond.

Before breaking down the specifics of last month’s data, let me address a few things:

There are going to be arguments that hardware sales are expected to be lower, given where we are in the waning months of this console generation. I’ll cede that point to some degree, but when you see 40% declines in Xbox 360 and PS3 sales, it’s not possible to blame the industry’s malaise on the collapse of Wii. There’s generational fatigue going on here. There’s price point stagnation at play. There are high gas prices and rising food prices to contend with. There is the rise of the smartphone and tablet market. All of these factors point to an industry sector in consoles that will continue its general path of decline for the foreseeable future.

There is also going to be some griping about digital sales not being accounted for in NPD data. Again, I’ll cede this to a point. There is a number for digital sales, and it does contribute to the bottom line of the industry as a whole. It’s possible that digital sales closes the gap in software sales, but it’s also impossible to say for certain. NPD data is comprised of raw numbers, which are tangible things. Analysts can see that number and compare it to a number from a different period to make observations and predictions. Digital data is all supposition. Perhaps digital revenues are X dollars, but how do we know? Quite simply, we don’t.

Lastly, Nintendo and Sony once again refused to share their hardware sales numbers with the public. It’s each company’s right to do so, but, thanks to reliable sources within retail, approximate ranges have been shared so that the monthly hardware rankings can be compiled. Aside from the Xbox 360 hardware number, only rankings and ranges will be posted.

With those items out of the way, let’s look at hardware first:

Microsoft was the only platform to move more than 250,000 units in September. The 270,000 units that were sold was a steep drop from last year, which was 438,000 units. A 38% decline is significant, especially when you consider that the average YOY decline for 2012 for the Xbox 360 had been in 20-25% range. Sales are slowing, and with the next Xbox still likely a year or so away, there’s little to prevent the decline trend from worsening. The YOY target for October is 393,000 units, which isn’t likely to be made - and that’s the easy target. From there, targets of 1.7 million units for November and December simply aren’t realistic. Yes, even with Halo 4 hitting in November. So, yes, Microsoft is still on top, but it’s on top of a slowly sinking ship.

Nintendo pulled the biggest surprise of the month as the 3DS stole the second-place slot from the PlayStation 3. You’d think that Nintendo would be happy about this and share specifics with the public, but 3DS sales dropped YOY. September put an end to Nintendo’s short run of positive YOY months, but a decline of less than 10% isn’t terrible when compared to the other platforms out there. Having said that, unit sales aren’t really all that great, either... especially when you consider that New Super Mario Bros. 2 has been out long enough to stir up sales (but it really hasn’t). I think that September was a pretty neutral month for the 3DS. Not good, not bad. Beating out the PlayStation 3 was a nice bonus, though.

The PlayStation 3 dropping to third place should arguably be a wakeup call to Sony. It’s easy to be complacent with price and strategy for the holiday season when your hardware is a decent YOY performer compared to competition. Unfortunately, the 40% YOY nosedive for PS3 hardware in September threatens that trend. Sony, by electing to stay flat with PS3 pricing (or even increase it), puts itself in a prime position to underperform significantly for the quarter. A weak slate of exclusives, the debut of Wii U, and the brand strength for the Xbox 360 add up to an also-ran console in the PS3 for this holiday.

The PlayStation Vita wound up in dead last once again for September, remaining behind the rapidly fading Wii platform. The silver lining for Sony here is that sales improved by at least 20,000 units over the previous month and are at the highest level since June. Madden 13 helped Vita sales out, and now it will be interesting to see where things go from here. The games are coming (finally), so the question to be answered is this: Will consumers buy into the idea of spending $300+ as a point of entry to play these games? With so many of them being ports or closely-related versions of console games, is there really a draw? I’m not convinced, but perhaps I can be proven wrong. November will be the biggest test, with Assassin’s Creed and Call of Duty making their Vita debuts.

I’ll touch briefly on software, but lack of complete sales data (including digital) makes writing about this area difficult. Madden 13 topped the combined sales chart, and that’s not a surprise. More than 2,550,000 copies of Madden 13 were sold in September, an 11% jump over Madden 12. Borderlands 2 came in behind Madden 13, posting a respectable 1,480,000 units sold. FIFA 13 was third, followed by New Super Mario Bros. 2 (3DS), Guild Wars 2 (PC), NHL 13, World of Warcraft: Mists of Pandaria (PC), NCAA Football 13, LEGO Batman 2, and Battlefield 3.

The decline in software from a year ago is fueled by a few factors. First, Borderlands 2 failed to come close to the 2 million units that Gears of War 3 moved last September. We can argue about the role that digital played here, but supposition isn’t fact, as I mentioned earlier. The other factor is that there wasn’t an equivalent to Dead Island this year. Dead Island sold nearly a million copies at retail and came in third place last year, while FIFA 13 - this year’s third-place finisher - did not. There was also a disparity of units sold between last year’s fourth-place finisher (FIFA 12, over 400,000 units) and this year’s fourth-place finisher (New Super Mario Bros. 2, about 295,000 units). Madden 13’s +11% YOY was cancelled by Borderlands 2’s -25% YOY comparison versus Gears of War 3 and New Super Mario Bros. 2’s -25% YOY comparison versus FIFA 12.

October could be an interesting month, especially from a software standpoint. There is a lot of quality software being released during this period, including Resident Evil 6, Pokémon Black & White 2 (NDS), NBA 2K13, Dishonored, XCOM, Just Dance 4, Skylanders Giants, and Medal of Honor: Warfighter. Can any of these break the 2 million mark? I think there’s a chance, and software sales could be relatively close to flat for the month, which would be somewhat of a victory for the industry if this bears out.

As far as hardware goes for October, expect deep declines to continue. I can’t see a scenario where any of the hardware platforms exceed their unit sales from last October, and that’s in spite of the slate of software releases for the month. It will be interesting to observe the battle for second place, and to see if the PlayStation 3 can recover or if 3DS sales are starting to to break away from the pack a little bit. Wii sales should continue treading water below 80,000 units, and Vita should remain in the basement for at least one more month before new games attempt to pull sales up to relevant levels.

We’ll see how it all shakes out next month. Numerical gaps aside, here's our best estimates for the Top Ten Hardware and Software sales for September 2012:

NPD’s Top Hardware Sales in September

01. Microsoft Xbox 360 (270,000 units, -38% YOY)
02. Nintendo 3DS (N/A)
03. Sony PlayStation 3 (N/A -40% YOY)
05. Nintendo Wii (N/A)
06. PlayStation Vita (more than 60,000 units)

NPD’s Top Ten Combined Software Sales in September

01. Madden 13 (360, PS3)
02. Borderlands 2 (360, PS3)
03. FIFA 13 (360, PS3)
04. New Super Mario Bros. 2 (3DS)
05. Guild Wars 2 (PC)
06. NHL 13 (360, PS3)
07. World of Warcraft: Mists of Pandaria (PC, MAC)
08. NCAA Football 13 (360, PS3)
09. LEGO Batman 2 (Wii, 360, PS3)
10. Battlefield (360, PS3)