I wanted to believe that May was going to be at least a temporary reprieve from what’s been a lengthening cycle of poor sales for the console video game industry. I had faith that Max Payne 3 would outpace L.A. Noire from last year. I believed that the PlayStation Vita would gain just a bit of strength based on retailer promotions. I thought that the Xbox 360 had another month of 200,000 units ahead, as a result of the double-whammy of Max Payne 3 and Ghost Recon: Future Soldier.
I was trying to be positive. Unfortunately, that was the wrong play.
The numbers are out for May 2012 from NPD, and the slide not only continues for the console gaming sector… but it’s deepening and there’s no end in sight. It’s possible to argue that strong sales of Diablo III played some role in the poor performance of the console sector, but this is a continuation of the slump that we saw beginning in December of 2011 and it look to continue at least until Q4, if not beyond.
Console unit sales dove 39% versus a year ago. The best-selling hardware platform, which was the Xbox 360, only managed to move 160,000 units last month. The PlayStation 3 couldn’t even manage 130,000 units. Unit sales of the Wii sank by 70% YOY. The news was bleak almost everywhere, save for the 3DS, which managed a 17% jump versus a year ago.
Let’s start with Microsoft. It’s getting to the point where being #1 isn’t really as important as we move forward. Yes, the Xbox 360 is still on top, but YOY sales are down significantly and we’re still at least 12-16 months away from Microsoft’s new console. The decision to go the subsidy route instead of a more sweeping price cut could turn out badly here. It’s been years since the Xbox 360 had a significant price cut, and that was understandable throughout 2011 as sales were riding high. Something needs to happen to carry Microsoft the rest of the way here, especially if Sony blinks first and initiates a drop to $200 for the PlayStation 3. It’s obvious that the games are coming, but consumers are being more selective about which games that they buy… and the Xbox 360 is heading into the saturation zone. We’ll see how long Microsoft plays chicken with these negative sales trends.
The PlayStation 3 has been unable to cash in on the Xbox 360 slowdown. Console exclusives have not been enough to drum up interest. Starhawk was a poor sales performer in May, which doesn’t help matters. The only positive for the PlayStation 3 is that sales of this hardware are slowing at a slower rate than that of the Xbox 360, but the PlayStation 3 hasn’t set the bar very high for itself. Even though YOY comparisons aren’t as severe, the 2011 numbers that it’s being measured against simply weren’t that impressive to begin with. The rest of 2012 could be a tough go for the PlayStation 3, as well. PlayStation All-Stars Battle Royale is the major exclusive that Sony will go to for this holiday season, and I don’t think that’s enough to derail Halo 4 for the Xbox 360 or Nintendo’s Wii U lineup for November. The long year will continue, and the “Year of the PlayStation 3” continues to be elusive, if non-existent.
The 3DS may be doing well in Japan, but it’s laboring to move 30,000 units a week here in the United States. Mario Tennis Open, which sold less than 42,000 units, got a tepid reception at retail, and the next prominent new games are still weeks away. With another price drop seemingly out of the question, Nintendo is faced with a stiff challenge in the rising mobile gaming market. Don’t be fooled by the YOY growth; after the poor first few months that the 3DS posted in 2011, there’s no reason why 150,000+ isn’t a reasonable and consistent expectation for the handheld aside from mobile gaming eating into Nintendo’s formerly iron-clad grip on the portable market. The future isn’t completely dire. Once more new software starts filling retail channels, it’s possible that consumers start buying the hardware again. Right now, there simply isn’t any impetus for people to buy. Hopefully that changes.
I have to talk about the Wii because it’s still Nintendo’s only console in the channel. I’m not sure what Nintendo is waiting for in terms of getting these units out of inventory to prepare for Wii U in 5 months. Drop the price to $100 and clear them out. There’s still a fair amount of software on store shelves, much of which is discounted in some way, so it’s possible for Wii to sell at least somewhat better than 70,000 units per month. Unless Nintendo figures this out and implements some price cuts, though, the Wii U is a long way off.
Finally, we come to the Vita. That number you see there isn’t a misprint: 50,000 for the entire month. It’s an average of 13,000 units per week, which is similar to the same sales trends that we’ve been so critical of in Japan. I understand that $250 for such a device seemed like a great deal a year ago, but the market has changed since then. $250 is perceived as expensive, and then consumers have to add memory card and game costs. It’s not a solid value proposition except to the most core gaming consumer, and even then, the IPs on the Vita don’t measure up to Nintendo’s stable of franchises. Nintendo has Mario. Sony has… Uncharted? No, not really, because sales were awful. Mortal Kombat? Sales didn’t clear 50,000 units last month. Gravity Rush? Maybe.
The fact is that Vita will continue to struggle until either the price drops (which won’t happen until the holiday season at the earliest) or until more prevalent software releases hit with consistency to convince consumers that the money spent is a wise investment. That second condition is far from a certainty. Sony failed to key on Vita enough at E3 and hasn’t demonstrated a solid enough commitment to the device to convince me or any other analyst that the future is bright. I will continue to be bearish on my outlook for this platform’s sales going forward until I am convinced that it’s the wrong stance.
Console software sales were also down significantly versus a year ago, although the 32% decline was a bit less severe than on the hardware side of the sector. Part of the problem was a poor showing at retail for Max Payne 3, which was projected to move over a million units in May. Instead, the game didn’t even manage half that number, and performed far below what we saw from L.A. Noire a year ago. Tom Clancy’s Ghost Recon: Future Soldier for the Xbox 360 was actually the best-selling individual SKU of the month, outpacing Max Payne 3 for the 360 by 73,000 units. In fact, although Max Payne 3 did take the top spot for combined console software sales last month, its gap over Future Soldier was a mere 35,000 units total.
Special nods go to Sniper Elite V2 (7th) and Dragon’s Dogma (9th) for debuting on the combined Top 10 chart in May. Sniper Elite V2 for the 360 actually outsold Call of Duty: Modern Warfare 3 on the 360 in terms of individual SKUs.
Overall, there’s going to be some concern when analysts review these numbers… and there should be. It’s a trend that shows no sign of changing and, with Gen4 consoles still months or even over a year off, there isn’t any kind of quick fix to show investors that console gaming is still as viable as it once was.
It’s going to be a very long and challenging summer.
NPD’s Top Hardware Sales in May
1. Xbox 360: 160,000 units sold**, -41% YOY
2. PlayStation 3: Less than 130,000 units sold, -26% YOY
3. Nintendo 3DS: Between 110,000 – 120,000 units sold, +17% YOY
4. Nintendo Wii: Between 70,000 – 75,000 units sold, -70% YOY
5. PlayStation Vita: Between 50,000 – 55,000 units sold
** – Data supplied by Microsoft via press release
Other data courtesy of extrapolations and trusted posts from NeoGAF, which are verified per NPD Snapshot Data for May, 2012.
NPD’s Top Ten Combined Software Sales in May
01. Diablo III (PC)
02. Max Payne 3 (360, PS3, PC)
03. Tom Clancy’s Ghost Recon: Future Soldier (360, PS3)
04. Prototype 2 (360, PS3)
05. NBA 2K12 (360, PS3, Wii, PSP, PS2, PC)
06. Call of Duty: Modern Warfare 3 (360, PS3, Wii, PC)
07. Sniper Elite V2 (360, PS3)
08. Battlefield 3 (360, PS3, PC)
09. Dragon’s Dogma (360, PS3)
10. Just Dance 3 (Wii, 360, PS3)