Gamasutra: The Art & Business of Making Gamesspacer
View All     RSS
October 21, 2014
arrowPress Releases
October 21, 2014
PR Newswire
View All

If you enjoy reading this site, you might also want to check out these UBM Tech sites:

U.S. video game hardware in 2012: Winners, losers and retirees
U.S. video game hardware in 2012: Winners, losers and retirees Exclusive
January 14, 2013 | By Matt Matthews

January 14, 2013 | By Matt Matthews
More: Console/PC, Business/Marketing, Exclusive

Five million. That's the number of traditional consoles and handhelds that were sold in the U.S. during December 2012, based on the latest retail estimates released by the NPD Group, a sales tracking firm. I have accumulated reports of their estimates running back through 2000, and this is the first time in those 13 years that December hardware sales were so weak.

If you accept the idea that the hardware sales of the present are a harbinger of software sales in the future, these figures are surely an ominous sign. But measurements of software sales have become a much thornier problem, and I'm devoting an entire column to them later this week. So for now, just hardware, starting with the best-selling platform of the year...

First Place: Microsoft's Xbox 360

When Microsoft introduced the Xbox 360 S Model hardware revision in the summer of 2010 and followed it up in November of that year with the Kinect peripheral, the company bought itself not only an extra two years of life on the console market, but put itself in the driver's seat through at least the end of 2013.

That's how the Xbox 360 ended up not only the best-selling platform of 2011 but also 2012. And unless something shifts dramatically, it could end up the best-selling console in 2013.

The figure below shows the platform's annual hardware sales since 2006, and it demonstrates just how the Xbox 360 was languishing under 5 million units per year prior to the S Model and Kinect. Now, a full three years later, it still managed to shift 5.3 million systems in a year.

The system's life-to-date (LTD) total in the U.S. now stands at 38 million units. For a sense of just how far Microsoft has come since its first console, the original Xbox maxed out at under 15 million units in the U.S. The Xbox 360 has at least another year before it is deprecated, and could pass 40 million units in August of this year.

In December, the average price of the Xbox 360 fell to $246, an increase from the $227 in November, but still lower than every other month in 2012. Could this be evidence that consumers are opting for Microsoft's $100 and $150 models, which require a two-year Xbox Live commitment at $15 per month?

It's certainly suggestive but we're not there yet. We really need to see a non-holiday month with an average price below $250, and maybe even closer to $240 to begin to talk seriously about what effect the hardware-service bundles might have on the market.

As of 5 January 2013, Microsoft has ended its $50-off promotion and I eagerly await their next pricing move. They've dabbled with lowering the price by bundling it with a service and, at the same time, temporarily lowing the price of unsubsidized hardware by $50. I would love to know what they learned from that experiment.

Hopefully it means they'll make some dramatic move on pricing in early 2013, but as long-time readers know I'm consistently pushing for price cuts sooner than the manufacturers are willing to make them happen.

Second Place: Nintendo's 3DS

At 3.6 million units for the year, Nintendo's 3DS was the number two hardware platform in the U.S. during 2012. Unfortunately, that figure is over 400,000 units behind the 10-month Nintendo 3DS total for 2011, the platform's launch year.

Compared to the first 22 months that the Nintendo DS was on the U.S. market, the Nintendo 3DS is still well ahead in terms of installed base. The 3DS just passed 7.7 million units LTD and in the comparable period the Nintendo DS hit 5.85 million. But that comparison is going to get more strained for the 3DS throughout the coming year.

You see, throughout 2012 but prior to the holiday season, the Nintendo 3DS was moving around 43,000 units per week at retail. After 20 months on the market, the original Nintendo DS model was replaced with the wildly popular Nintendo DS Lite and during the first 10 months (44 weeks) of 2007, that platform was averaging over 100,000 units per week.

If the Nintendo 3DS doesn't see its sales improve over the comparable figures it had in 2012, the platform will have an installed U.S. base of 8.8 million units in July after 28 months on the market.

During its first 28 months on the market, the Nintendo DS was at 9.9 million units. This isn't a perfect comparison (the 3DS will have had only two holiday periods, compared to three for the DS), but it is suggestive.

I've said before that the Nintendo DS was a magnificent success, and one that would be difficult to repeat, even if the market were precisely the same today as it was back in 2006, when the two-screened handheld began to take off. So even though comparing the Nintendo 3DS to the Nintendo DS is ultimately going to be unfair, it is precisely the standard Nintendo will have to address.

Nintendo will have to focus on profitability to keep investors happy. How much room does it have, then, to fiddle with pricing?

According to official NPD Group data, the average price of the Nintendo 3DS, across the base and XL models, was $169. That's nearly $10 lower than the average going into the holidays, and even lower than the MSRP for the base model.

That means Nintendo and retailers offered significant bundles and discounts during the holidays to entice consumers to pick up the latest handheld. If Nintendo's business is still profitable at those levels, then perhaps it has some wiggle room with pricing after its current fiscal year ends in March.

I would consider getting a model of the 3DS down as close to $100 as soon as possible, and mimicking Apple's annual hardware revisions to keep the system's image as up-to-date as possible. Once the anniversary of the Nintendo 3DS XL arrives around mid-year, Nintendo could launch an updated model of the system at $200 (hopefully with a fat margin) and move the two older models down by $30 each. At $130, I would expect the base model to sell exceptionally well and give software demand a boost along the way.

I have suggested this idea before, back when the Nintendo 3DS XL came out. This year we'll find out if it's something Nintendo is considering.

Third Place: Sony's PlayStation 3

Behind the Nintendo 3DS and in third place for the year, the PlayStation 3 ended 2012 at approximately 3.4 million systems, down about 25 percent from its 2011 total. Of the six full calendar years that the PlayStation 3 has been on the market in the U.S., this is its second worst showing, just behind 2008.

The figure below puts this year's sales in context.

I went on record saying that I thought Sony should cut its prices in response to the Nintendo Wii U launching at $300. I was wrong, and spectacularly so.

Sony actually increased its price by discontinuing its $250 PS3 Slim 160GB base system and replacing it with a more expensive $270 PS3 Super Slim 250GB system bundled with Uncharted 3. Then it gave retailers deep discounts during the Black Friday period sales, driving its average price down to $238 in November.

In December, however, the average price of the PS3 was back up to $274, according to official NPD Group data. That's the highest average price for any PS3 in any month during 2012. Wedbush analyst Michael Pachter told me, "Sony will probably drop this month by $50, but I’m not sure they care if they sell an additional million PS3s. They’re focused on next generation."

But even with all this discounting and bundling and revising, Sony still suffered that 25 percent drop in annual hardware sales. It isn't clear to me that it can sustain another year with declines like that, and the only lever it really has an option to pull right now is the price. It knows how well its business fared through the holiday season with those discounted bundles. We will see in the coming months whether that was enough to move the company toward a real price cut before it launches a new system in late 2013.

The New Kids: Nintendo Wii U and Sony PlayStation Vita

The Wii U had a somewhat disappointing launch, and did not reach 1 million units before the beginning of 2013. Total sales now stand at 890,000 units with 462,000 of those having been added in December.

The fact is that the Wii U is the right now the most expensive console on the market, with an average price of $340 according to official NPD Group figures. In the absence of discounts and bundles, that suggests that consumers are largely buying the $350 Deluxe model over the base model by about 4-to-1.

Until we begin to get some data outside of the holidays, I'm disinclined to begin extrapolating into 2013. We simply don't have enough information to draw strong conclusions, and the process of evangelizing to the public has just begun. Nintendo needs to get its message out, both to consumers and to developers.

What does alarm me right now is the rate at which new software is arriving for the platform. If GameStop is any indication, there are only two titles scheduled for retail release between now and March: Rayman Legends during February and LEGO City: Undercover on the first of March. That's just astonishing.

And even though Sony's PlayStation Vita hasn't been out for a year yet, I think it's safe to say that it's going nowhere fast. From my estimations, in the U.S. the system moved right around 250,000 units in December, putting its total sales in 11 months at 1.28 million units.

What precedent do we have for this kind of anemic launch? The Nintendo DS hit 1.4 million units in three months in the U.S. The PSP hit 1.2 million in three months. The Nintendo 3DS hit 1.4 million in seven months. Even the PS3, which had a disastrous post-launch year, still hit 1.3 million in 6 months.

Getting a system successfully launched requires priming the engine a bit, by getting lots of hardware out there and evangelizing to publishers to get software fed into the business. Sony appears to be failing at both, since its hardware results are dreadful and bundled software probably makes up a majority of the titles consumers have actually gotten from retail.

Will the system be "Dreamcasted" in 2013? That would be unfortunate, but understandable.

The Retirees: Nintendo Wii and Nintendo DS

As for the Nintendo DS and Nintendo Wii, those systems are on their way to retirement after impressive, productive careers. The Nintendo DS sales curve since 2005 looks like the figure below.

As you can see, the introduction of the Nintendo DS Lite in mid-2006 doubled annual sales and they had nearly doubled again by 2008, peaking at 11.2 million systems in 2009. In the three years since, Nintendo DS hardware sales have fallen over 82%. Once new software ceases and retailers clear their shelves later this year, its run will end quietly.

The Nintendo Wii launched later, peaked sooner, and has declined more slowly than the Nintendo DS, as the figure below shows.

I actually hope that Nintendo ends the retail presence for the Wii this year, since it really needs to focus its resources on the system's successor, the Wii U. However, Nintendo's bundles and price moves at the end of 2012 leave it an open question of whether the company is really done with this system.

The Long View: A Stable Core Market

My colleagues at Gamasutra rib me for writing articles filled with doom about the retail market. One man's realism is another man's doom, I suppose, but I do want to show an image that I think demonstrates just how robust part of the console market has been over the past decade.

If we look at U.S. console sales in any contiguous 12 month period, we can view the figure as an annualized rate. I've also used the term trailing twelve month (TTM) rate before, for the same kind of data. Looking back into the middle of the last generation, when the only sales from the previous generation that might still exist were from the PS One, and then through the current day, the annualized rate of hardware sales looks like this:

Viewed this way, I think we can characterize the current generation, the one that is widely expected to be fully superseded this year, in the following way: The Xbox 360 and PlayStation 3 alone were able to keep console hardware sales at approximately the same level that was previously achieved by three consoles.

If we pick out just one point for comparison, the PS2, Xbox, and GameCube were selling at a rate of 12.6 million systems per year in January 2004. In January 2008, just the PS2, Xbox 360, and PS3 were selling at a rate of 11.1 million systems per year. Four years later, in January 2012, the PS3 and the Xbox 360 alone were selling at a rate of 11.1 million systems per year.

At its peak, then, the Wii alone was adding over 10 million systems per year to the system. That was a true expansion of the market, adding millions of potential customers for future generations of hardware and software.

Regardless, for over a decade the U.S. has had a core market of approximately 10 million new consoles per year. In the next year the Wii U and new consoles from Microsoft and Sony will hopefully begin to replace the declines that every older platform is experiencing.

If that happens, and the publishers can continue to produce software that millions of consumers will want, then there is every reason to expect that the traditional industry will continue to exist in some form for many years to come. Gamers will get their games and someone will make money selling them those games.

The catch, of course, is that the software won't be sold through retail, and retailers like GameStop are in for a very, very hard time. But that's a story for another column.

Related Jobs

Treyarch / Activision
Treyarch / Activision — Santa Monica, California, United States

Senior UI Artist (temporary) Treyarch
Treyarch / Activision
Treyarch / Activision — Santa Monica, California, United States

Lead UI Artist
Vicarious Visions / Activision
Vicarious Visions / Activision — Albany, New York, United States

Art Director - Vicarious Visions
Infinity Ward / Activision
Infinity Ward / Activision — Woodland Hills, California, United States

Senior AI Engineer - Infinity Ward


Bob Johnson
profile image
Funny thing is the 360 is the worst selling platform this generation worldwide. Hard to believe for us in the US.

Keith Thomson
profile image
Home field advantage. The PS3 did only just surpass the 360 worldwide in 2012 though.

Lyon Medina
profile image

Could be the worst selling platform, but it is by far the most projected to be profitable. You don't need to sell 20 million more units than your competition to make more money than them.

Not quoting exact numbers just saying in general.

Nathan Mates
profile image

I'm skeptical that the X360 is the most profitable console. The Wii was profitable from day 1. Also, Microsoft took a multi-billion writeoff due to X360 RROD (Red Ring of Death) issues that must be accounted for in terms of profit. I could see the X360 as the most profitable for third party developers, but in terms of pure HW or HW+1st party titles -- something that's hard to break down the distinction for MS, Sony & Nintendo -- Nintendo has probably done the best.

Lyon Medina
profile image

That is what I meant to be projected. Nintendo did the best of course when it comes to hardware there is no doubt about that, but when it comes to software sales there was no comparison with Nintendo and Microsoft. The RROD Fiasco for me was not as bad as people might have made it out to be. Unless I see some real hard numbers I really can’t say that was a major “multi-billion” loss.

HW+1st party is a great revenue source, but that more than anything covers the cost of development of the console (for the most part). Software, and services is where the real profit margin is the largest, also with Microsoft bringing in the ability to sell so much ad space is such a great source of additional revenue that I seriously can’t believe that they are not the front runner for most profitable. Think of all the money X-Box Live has generated, and its just unfathomable.

(Of course it could have been worse than what I read, but if I believed everything I read on the net or in articles Microsoft would be bankrupt right now, the Nintendo Wii would be a failed memory and the PS3 would be the only console on the market right now. Sorry neither here nor there.)

Nathan Mates
profile image
It's not hard to find articles in the financial press related to this, which is different from the usual fanboys. Look at the first article below, which quotes MS on the over one Billion (with a B) cost.

Read the financial press and official forms filed with the SEC for hard numbers on any US company

Bob Johnson
profile image

Pretty sure Nintendo had most profitable console. MS might not even have made a profit overall on the 360. Sony is indeed the deepest in the red from what I have read. (Roughly adding up their reported profits over this generation off the top of my head.)

The lack of money made by Sony and MS is one of the top arguments for the demise of traditional consoles.

Bob Johnson
profile image

Yep but remember PS3 launched a year later.

Nooh Ha
profile image
360 has been huge in US and UK and very disappointing elsewhere. PS3 remains very strong everywhere but USA (presumably due to 360's dominance). It will def finish ahead of 360 but will it overhaul Wii's IB? This analysis suggests PS3 has a good 6 years' life left in it (worldwide).

The challenge for MS will be to gain real traction outside of the US/UK with 720. Not sure how it can achieve this while Sony dominates these markets.

RE profitability: MS vs Nintendo is not really a competition. MS has struggled to EVER make a profit on its games division while Nintendo's profits have been consistently colossal until last year.

John Gordon
profile image

In 2009 Nintendo was rated the best company in the world by Businessweek. They weren't just profitable. They went above and beyond every company in the world.
ies-2009businessweek -business-news-stock-market-and-financial-advice

In contrast I doubt Microsoft has even turned a profit from the XBox360. They had several years where their gaming division lost billions. Microsoft does well as a company because of the PC software they make. Their gaming division though is a money loser.

Wylie Garvin
profile image
"Funny thing is the 360 is the worst selling platform this generation worldwide. Hard to believe for us in the US."

In hardware units, perhaps. I suspect the 360's attach rate for software is better than either the PS3 or the Wii. (anybody want to check?)

Lyon Medina
profile image
So very busy so sorry for short response, would have preferred to say everything I wanted, but this will have to do.


Nathan I read all those 4 articles and they all state that they “paid” around 1.5 (b)illion in covering the warranty extension. That’s still not a loss; Microsoft invested heavily into winning the console war, and for the most part is monopolizing the U.S Market. (Were it not for Nintendo)

This is a good thing because I am not a fan of single console domination. The only reason why Microsoft Nintendo and Sony are working so hard is to keep the competition from getting to big which is why I like the idea of having a big three because it keeps things fresh and innovation at the forefront.

Also here are excerpts from “your” third link.

“Despite the $1.06 billion 360 warranty charge, the company saw a $3.04 billion net income on $13.37 billion in revenue during its fourth fiscal quarter, 11 percent higher than the same period in 2006.”

“For the full fiscal year, the company saw $14.7 billion of net income on revenues of $51.12 billion, a 15 percent increase over the prior fiscal year. “

That does not sound like a loss to me at all. Yes they could have had more but they didn’t lose anything at all. Thank you for the links though. Good articles.


“In 2009 Nintendo was rated the best company in the world by Businessweek”

That was in 2009 Josh; sorry to say that is over 3 years ago. Right now projections for the Wii-U without any specific console seller, (Wii Sports for the Wii) game to help push the sales of the hardware the console is not “projected” to do well. I personally want a Wii-U, but like many other gamers, I am not sure it is a good investment for my money to how much fun I will get in the long run from the console. I am not saying that tommorow Nintendo couldnt come out with a game that could sell 20 million consoles again, but right now there really isn't anything in my eyes that could do that.

^A Pro Nintendo Website^

“In contrast I doubt Microsoft has even turned a profit from the XBox360. They had several years where their gaming division lost billions. Microsoft does well as a company because of the PC software they make. Their gaming division though is a money loser.”

Please show me the link that proves that point. Halo Gears of War, and Forza are the only game that Microsoft game studious only puts out anymore. None of those games have “Flopped”.

So where did the losses go? Which game was that tremendous flop that cost Microsoft billions to say that it was not a success?

“Microsoft's Entertainment and Devices Division also failed to be profitable. Despite a 27% increase in revenue to $1.6 billion, the division suffered an operating loss of $172 million, 22% higher than a year ago. “Much of the operating loss was due to the discontinuation of Microsoft's Kin phones.” Poor sales forced the company to drop the devices just two months after launch.”

Related to gaming no, but it accounts for the loss in the Entertainment section which includes the Xbox 360. Not trying to be a fan boy here, but if you ask me to defend a company that is doing well, I will. Not a hard job. I rather just talk about what companies are doing right and what they are doing wrong.

@ Bob

On the “console” I am unsure,Microsoft could have made profit, they could have not, but again the console sale cover hard costs of production. If you have a huge profit margin on consoles when launching one “chances” are you’re going to not sell many consoles.

Saying "X" product takes 500$ to produce you charge 600$ to buy in. While Y product takes cost of 500$ to make and charges 700$ to buy in. Its a weird balancing act that every company has to account for.

I am unsure of what the profit margin was for the Wii but I am guessing that it was low since they were only charging $250 at launch. Unless it cost them a 100$ to produce the Wii the profit margin is not that high. Of course this is all guessing so I really can’t examine something like that.

John Gordon
profile image

"That was in 2009 Josh; sorry to say that is over 3 years ago. Right now projections for the Wii-U without any specific console seller, (Wii Sports for the Wii) game to help push the sales of the hardware the console is not “projected” to do well."

Most people consider the Wii to be part of the same generation as the XBox360. Therefore it is pretty clear that the Wii is easily the most profitable console of the 7th generation. No contest.

John: "In contrast I doubt Microsoft has even turned a profit from the XBox360. They had several years where their gaming division lost billions. Microsoft does well as a company because of the PC software they make. Their gaming division though is a money loser.”

Lyon: "Please show me the link that proves that point."

Here you go. This link shows the profit/loss of Microsoft's gaming from '03 to '12. If you just use '05 to '12 you will see they are at a loss. mFERGQ2TGtkdll2OVBXNGc#gid=0

Lyon Medina
profile image
The Gamecube was that popular in The U.S? Hmm, very interesting to say the least for me. I love the Gamecube, but never felt it ever got any traction here.

jay john
profile image
The article is great and very well created. The date and information are very well laid off as well. I will be following your future articles. Keep it up. Thanks!! I'm wearing my Zombies Hate Fast Food t-shirt, just saying.

Axel Cholewa
profile image
Aliens: Colonial Marines and Fist Of The North star are also set to be release in February for Wii U (accoding to Wikipedia and IGN).

In terms of the number of games the situation for the 360 wasn't better at launch than it is for the Wii U now. It was released in late 2005 (Nov. in US, Dec. for Europe & Japan). The numbers of games 360 released in North America at launch and afterwards compared to Wii U games look like this:

Month___360___Wii U
Jan______0_____1 (announced)
Feb______2_____4 (announced acc. to Wikip.; I added LEGO City to this since the article here mentions it)

After February many Wii U games are only announced for Q1 2013 or 2013, so haven't included them.

I can't shake off the feeling that the press (not only the gaming press, but in general) is painting the picture of the Wii U launch grimmer than it actually is. That's why I'm glad that Matt made no extrapolation. It would just be too soon.

PS: I didn't cross check the Wikipedia numbers, so they might be wrong or incomplete. I got the numbers from and

Russell Carroll
profile image
I think some of the negative press towards Nintendo is just b/c it is what the public wants to read. Nintendo has done so well for so long that it isn't news. However, when the Wii and DS were exploding out of the gate last time around they were still getting mostly negative press, so I guess my theory has no legs to stand on.

More interesting is the launch numbers (US numbers as reported by NPD).
Nov+Dec of launch for each:
Last Generation -
X360 - (Nov-Dec 2005) - 607,441
Wii - (Nov-Dec 2006) - 1,080,200
PS3 - (Nov-Dec 2006) - 343,850

New Generation -
WiiU - (Nov-Dec 2012) - 890,000

YES, WiiU was outsold by Wii in it's first two months.
HOWEVER, comparing WiiU to the last generation of launches, just be honest here, those numbers look fantastic.

The WiiU is off to a GREAT start compared to the PS3/X360 last time around in a marketplace that is considered to be much MUCH tougher. Why not report that? Seriously where is that story being written? Why is it constant stories about the end of home consoles and the failure of the WiiU launch when the hardware sales are actually fantastic?

...and why aren't more people talking about digital as they talk about the attach rate on the WiiU? I have 5 games, but my "attach rate" is 1! This is b/c the console came with a game, I bought one at the store and 3 digitally. Every discussion of attach rate on WiiU that doesn't have a big asterisk next to their numbers is doing some pretty shady "reporting."

Axel Cholewa
profile image
I Completely agree, thanks for the additional numbers!

I don't know where that negative press comes from. Maybe people were disappointed by the Wii because of the lack of games. I'm also annoyed by all that talk about the end of consoles, especially in the light of this year's Android console releases and Valve's move into the living room. Consoles are dead, long live the consoles.

But there is a general negative tone in the gaming industry nowadays, always pointed at the declining of retail sales for consoles and the like. Just because six or seven years old consoles don't sell that many games anymore is not a reason for apocalyptic vision. (ok, "not that many" might be understating, but still)

Yes, the times they are a changing. That quote is 49 years old, so get over it.