Permanent Generational Rankings?

For precisely a year, the Nintendo Wii has had the largest installed hardware base of all the current generation systems. The Xbox 360 has been in second while the PlayStation 3 has been running at a distant third. As of May 2009, the installed bases for those systems stand at 20.2 million, 15.3 million and 7.75 million units, respectively.

If, indeed, the current systems are destined for a 10-year hardware cycle, these may very well be the rankings that will persist to the end.

Let's assume that the Xbox 360 is considered a living system through to November 2015, a decade after its launch, and the PlayStation 3 catches up with it by that time. Over that period, the PlayStation 3 will have to outsell the Xbox 360 by over 19,000 systems per week on average.

Outside of June 2008, when the Metal Gear Solid 4 launch helped the PS3 surpass the Xbox 360 by 37,000 per week for that lone month, the PS3 has only bested Microsoft's system by at most 9,800 systems per week in any given month.

Perhaps more strikingly, the PS3 has sold better than the Xbox 360 in only five of the 31 months that both systems have been on the market. And for the year so far in 2009, the Xbox 360 has outsold its HD rival by over 20,000 systems per week.

For Sony to reverse the roles entirely – behind by 20,000 per week to ahead by 19,000 systems per week – would be an extraordinary change of momentum, one that seems unlikely even with the most generous (yet realistic) price cut to the PlayStation 3 hardware.

Consumers Buying Inexpensive Software

According to data provided by Cowen and Company, console software revenue has been harder hit by the market downturn than has handheld software.

Software for consoles typically sells at a much higher average sale price (ASP) than does handheld software, and therefore any drop in console sales is felt more acutely than is a drop in handheld sales.

Ideally we would be able to compare three relevant figures for console and handheld software: unit sales, revenue, and ASP. However, we only have access to the revenue figures, and they are plenty revealing.

For convenience, we have graphed the relevant figures below.

When comparing the YTD 2008 figures with the YTD 2009 figures, the figure above shows that console software lost over $230 million. By comparison handheld software lost a more modest $33 million dollars.

In relative terms, that means that console software revenue dropped 8.5% while handheld software only lost 3.5%.

While we don't have unit sales information for each of these segments, Mr. Pachter of Wedbush Morgan Securities, did provide some insight into unit sales for software overall.

All the software purchased in the first five months of 2008 had an ASP for $39.89, while the software in the same period of 2009 had an ASP of only $38.01, a decline of $1.88 (or 4.7%). Mr. Pachter attributes this shift in part to consumers buying more catalog (older) titles and fewer new releases.

Consider also that unit sales for the year are down very little, as shown in this figure.

With a loss of only 3 million software units from 2008 to 2009, it is harder to argue that consumers are buying significantly fewer software titles overall.

In fact, a single big release on the scale of Super Smash Bros. Brawl or Grand Theft Auto IV might well have tipped the software market over from a loss to a gain for the year, at least in terms of unit sales if not revenue.

(On Friday of last week we provided an analysis of the top 20 software chart.)