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Analysis: Xbox 360 Software Leads as Nintendo Falters
by Matt Matthews [PC, Console/PC]
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December 15, 2009
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[Gamasutra analyst Matt Matthews looks at the changing U.S. retail game landscape as part of our November NPD analysis, finding that Xbox 360 software is surging into the sales gap left by a declining Nintendo market.]
Amazing Wii growth drove much of the surge in software sales through the end of 2008. Some of the year-on-year decline in 2009 must be attributed to the failure of Nintendo's platform to repeat that performance.
According to Michael Pachter, an industry analyst for Wedbush Securities, Wii software revenue in November 2009 declined 18 percent from the same time in 2008. The only systems to see more dramatic decreases were Sony's PlayStation 2 and PlayStation Portable (PSP), which were down 69 percent and 21 percent, respectively.
While that certainly paints a dire picture for Sony's decade-old system and its star-crossed handheld, we find it especially troubling that the industry-leading console saw its software sales fall so far.
It is possible, although unlikely, that Wii software unit sales remained roughly the same from November 2008 to 2009. Given that software prices have, on average, declined over the past year, we suspect that there was a modest decline in Wii software unit sales, between 10-15 percent.
Unfortunately for Nintendo, software sales for its Nintendo DS also fell in November. As a result, Nintendo's total share of the software market declined significantly.
According to data released by Microsoft and comments made by analysts, the following picture of the software market in November emerges. As the figure below shows, Nintendo's two key platforms – the Wii and DS – claimed nearly 47 percent of all software dollars in November 2008.
The share we can attribute to the Xbox 360 amounts to 28%. Sony accounts for exactly one quarter of the software revenue with its three platforms: PlayStation 3, PlayStation 2, and PSP.
After 12 months, the picture has shifted dramatically. As the following figure shows, software revenue from the Wii now accounts for under 30% of the market. Combined with the share from DS software, Nintendo now holds only around 40% of the market – a drop of 7 points from the previous year.
Software performance for the PlayStation 3 has improved throughout the year, and it was one of the two platforms (along with the Xbox 360) to show year-over-year growth in November. Unfortunately for Sony, revenue from PlayStation 2 software has nearly collapsed. We now estimate that Sony's total share of the market contracted slightly to around 23% in November of 2009.
Microsoft's Xbox 360 has stepped into the gap left by its competitors and increased its share of the November software market almost 10 points, from 28% in 2008 to 37% in 2009.
In raw dollar terms, that's an increase of over $100 million. Given that the Xbox 360 version of Call of Duty: Modern Warfare 2 brought in at least $260 milllion by our estimates, all of the growth of Microsoft's software revenue can be attributed to its commitment to making the Xbox 360 the platform most associated with the best-selling game of the year.
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NPD only tracks retail sales. They currently do not have the capacity to track DD sales.
Couple things crossed my mind after reading it and the comments-
Hardware saturation (though a bit off topic), Used Sales/DLC/DDS (on topic) and true YTD sales estimates (as Ken metioned) are items that are relevant to the bigger picture of true market ownership and financials- I think without these, the picture is inconclusive & premature.
Also, "According to data released by Microsoft" does not sit well with me when the other Console groups data is not presented in kind. I think that for this to represent fair reporting, this data is necessary. Have the other Consoles reported on their estimated figures to date?
I do find it interesting reading these kind of articles however. But statistics is difficult to get right.
I suspect we will end the year with the Wii behind the Xbox 360 in terms of revenue. The situation with units, I cannot be sure, but the difference here is that the Xbox 360 has higher priced software on average.
Regardless, that's a huge reversal from last year.
I'm afraid that's all I can say.
" Considering COD:MW2 launched that month,"
Is MW2 not a legitimate 360 game?
Bottom line: 360 games outsold Wii games for November. End of story.
No excuses.
" I don't think Nintendo is really worried - it's just one month. "
Nontendo should be worried.
Their 2009 H1 profits (1st half) were down 60%.
If your profits are down by such a massive figure, and you are not worried, your shareholders are going to demand to know why not?
"What picture does YTD figures paint? "
As at September NPD, the Wii was ahead of the 360 by 3 million units.
http://www.gamasutra.com/view/feature/4172/npd_behind_the_numbers_september_.php
?page=4
However, given that the 360 handily beat the Wii in November NPD software sales, I'd say the 360 has either caught up to the Wii by now, or is ahead of Wii software sales year to date.
" This seems to me to basically be taking a small piece of data that supports your hypothesis and drawing a conclusion."
Now why don't you point out exactly where he was wrong in the article?
Did Wii software sales fall year on year? YES.
Did XBOX 360 software sales outsell Wii software sales? YES.
Did the XBOX 360 sell more software then any other platform for November? YES
Did the XBOX 360 sell more software in the top 10 than the PS3 and Wii combined? YES.
So what's your problem?
"Since the biggest title of the last few years launched in that month should be reason alone to discard this data as an outlier "
Huh?
The biggest title of the year sold gangbusters on the 360 so therefore it's not a 360 title anymore and should be discarded?
On what planet is that?
You wanna shoot the messenger because you don't like the message, and your own fanboy favorite console got beaten in software sales?
Gimme a break!
DS + Wii = 40% (down from 47% in 2008)
PS2 + PSP + PS3 = 23% (down from 25% in 2008)
Xbox 360 = 37% (up from 28% in 2008)
This puts Microsoft into a spitting distance of 3% of NintendoDS and Wii combined. Looking at the future game roadmaps of both, it seems that Microsoft has a much bigger amount of heavy hitters outlined for 2010 than Nintendo.
"Also, "According to data released by Microsoft" does not sit well with me when the other Console groups data is not presented in kind"
Sits ok with me.
When Nintendo outsells every other console in software, they shout loudly about it.
On the other hand, when another console outsells the Wii in software sales(like the 360 did in November), Nintendo of course is very quiet about it. Nintendo have released their own reaction to November's NPD figures. Only thing is, they never mentioned Wii software selling more than any other platform..because of course more software sold on the 360 than on any other platform.
Nothing new here.
"I suspect we will end the year with the Wii behind the Xbox 360 in terms of revenue."
MW2 is certainly a great equalizer in terms of sales for the Xbox 360, but I doubt this prediction will become true. Every year the Xbox360 has a big game that sells megamillions (Halo 3, GTA 4). Every year the Wii outsells them in aggregate for software. I suspect the full year charts will see MW2 appear twice in the top seven slots with 5 Wii titles filling out the other slots. MW2 has good sales, but it can't come close to the sales of the top 5 Wii games in aggregate. It should be clear that the Wii still has higher software sales overall. (And if you add in hardware and accessory sales, then the Wii pulls further ahead.)
"but I doubt this prediction will become true. "
Ummmm..the Wii was only ahead of the 360 by 4 million software units YTD as at the end of Sepetmber.
http://www.gamasutra.com/db_area/images/feature/4172/ytd-sw-sales-sep-09.png
Since then, 360 has oustold the Wii by a considerable amount in November software sales, the 360 has probably already caught up with the Wii, and will outsell the Wii in December software sales as well, and capture the highest selling console title for the year.
"Every year the Wii outsells them in aggregate for software"
Well, as at Septmember, the 360 is ahead of the Wii in LTD software sales, and since then, the 360 has outsold the Wii in November siftware sales, so its probably increased its LTD sales.
http://www.gamasutra.com/db_area/images/feature/4172/ltd-sw-sales-sep-09.png
Several people have pointed out that only considering the moth MW2 launched will skew the data. The point being that, while MW2 is a legitimate 360 game, it does not launch every month. It is obvious to everyone here, including you, that the same magnitude of sales will not be continued every month. No one is saying it doesn't count. It counts for this month. It will still count (but not as much) next month and the month after that. It won't count much a year from now. You can argue that there will always be a 360 game to sell as big as MW2, but you would have a hard time convincing anyone of that.
"Several people have pointed out that only considering the moth MW2 launched will skew the data. "
That's like saying the Wii only won software sales last year because of Wii Fit and Wii Play.
The fact of the matter is, Wii Fit and Wii Play are legitimate Wii games. They are part of what makes people buy the Wii, same as MW2 is part of why people buy the 360.
You just can't go about spinning the figures because you don't like the figures.
The 360 has always been a software monster. It didn't start selling huge numbers of software with MW2.
" It won't count much a year from now"
Halo Reach in September 2010 could sell even more on the 360 than MW2 did in November 2009.
From January 2010, the 360 has a massive line up of AAA titles, starting with Mass Effect 2, Bisohock 2, Bayonetta, Crackdown 2 etc.
In fact there seems to be a top AAA 360 title every month next year.
"The point being that, while MW2 is a legitimate 360 game, it does not launch every month"
MW2 is still loing to sell in huge numbers in December NPD, given that only 25% of 360 owners have bought MW2 so far, and we still have another 13 million 360 owners who still haven't bought MW2 yet.
On top of that, at 13 million 360 owners without MW2, that is more 360 owners than there were before COD4 launched in 2007( there were only approx 7 million 360's when CD4 was launched in November 2007).
"Kevin As was stated in the post above yours, there will always be a big selling AAA game on the 360 almost every year."
Nexy year will have Halo Reach, which will probably sell more in it's first month on the 360 than MW2 did on the 360, in part because it's a mainline Halo game(which always sell in vast numbers), and in part because the 360 will have a bigger install base by the time Halo Reach is launched.
"However, the lasting ability of those games month after month is very low"
Nonsense.
COD4 was # 1 in the NPD charts for 4 straight months(Nov, Dec, Jan, Feb), far outselling Mario Galaxy on the Wii which was launched in the same month as COD4(November 2007).
"Compare it to a game like Mario and Sonic at the Olympics (which stays in the top 5 to 10 month after month) "
By the end of December alone, MW2 on the 360 and PS3 combined, would have oustold Mario Kart(Wii)(7.2 million sold so far in NPD) and also outsold Wii Fit (Wii)(8.03 million sold so far).
So even if MW2 doesn't sell even one copy after December (and it will sell lots after December), it would still be one of the highest selling games ever in the history of this country, cetainly vastly outselling Mario and Sonic at the Olympics .