Tie Ratios and Software Sales

The tie ratio for a platform is the total number of software units sold for every unit of hardware. As NPD Group analyst Anita Frazier says, “they can be an indication of the health of a system”, but can also be used in misleading ways.

She goes on to explain: “As a system gets further along in its lifecycle and perhaps hardware sales start to diminish, the tie ratio tends to go up because software sales are the bigger draw."

"If a hardware system is doing gangbuster sales, then the tie ratio can go down even if there are lots of overall sales.”

Because Xbox 360 owners enjoy buying lots of software, Microsoft often publishes its own tie ratio in its monthly press release regarding sales figures.

The NPD Group provided Gamasutra with updated tie ratios for the other two current generation platforms, allowing us to see the lifetime to date totals across the Xbox 360, the PlayStation 3 and the Wii, as follows:

We might choose to interpret these numbers as follows: each Xbox 360 owner has purchased on average 8.1 games, while Wii owners have purchased 5.5 games and PS3 owners have purchased 5.3 games. As with any average, it is a statement about the aggregate, not the individual.

For reference, the tie ratios at the end of 2007 were 6.98 for the Xbox 360, 4.64 for the Nintendo Wii, and 4.26 for the PlayStation 3. Our estimate of the tie ratio for the Nintendo Wii in June 2008 was around 5.5, and we believe that the tie ratio for Nintendo's platform may have held roughly constant since that time. By comparison, Microsoft's tie ratio has increased by about 0.1 each month since early 2008.

These figures may be used together to get an idea of how well software has sold for each platform overall and during the first nine months of 2008. The following figures show that data:

Over 91 million units of software have been sold on the Xbox 360, with 27 million units of that software being sold so far in 2008. For the Wii, around 69 million units of software have been sold with just over half of those sales from this year.

More than 29 million units of PlayStation 3 software have been sold, and well over 15 million of those were sold during 2008. (Since the Xbox 360 launched a year prior to the Wii and the PS3, we may also compare their figures to Xbox 360 software sales in September 2007; at that time 44.5 million units of Xbox 360 software had been sold.)

Microsoft's best angle on these figures is that Xbox 360 owners buy more software, per system, than for either of its competitors. Nintendo, on the other hand, can point out that it is currently moving the most software in absolute terms and monthly software unit sales are up nearly 60% this year.

The message for Sony has to be that software sales are getting much better on the PS3, with monthly averages up 73% this year. (You can see that Sony is already going this. Their press release on the September 2008 sales data pointed out that 1.7 million units of software were sold during the month, up 130% from the same period last year.)