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Analysis: How Xbox 360 And Kinect Nearly Toppled Wii In 2010
Analysis: How Xbox 360 And Kinect Nearly Toppled Wii In 2010
January 17, 2011 | By Matt Matthews

January 17, 2011 | By Matt Matthews
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[As part of his end of year in-depth NPD analysis, Gamasutra analyst Matt Matthews examines how a revamped Xbox 360 and the launch of the Kinect led to an almost "flawless" 2010 U.S. retail performance by Microsoft, as it chased market leader Nintendo.]

The biggest video game hardware story of the year in the U.S. is clearly Microsoft's execution of its two-stage relaunch of the Xbox 360 platform.

In June 2010, the platform saw a tremendous gain of momentum with the launch of the Xbox 360 S Model. More than just a hardware revision, the restyled console saw its sales jump 63 percent in the June-October period compared to the same period in 2009.

Amidst the resurgence in hardware sales, Microsoft also launched Halo: Reach, the latest entry in its flagship shooter series. Hardware surged to over 480,000 units for the month while 3.3 million copies of Reach were sold to consumers.

Then Kinect – a camera and software combination that permits users to control software with body motions – launched in November 2010 and hardware sales accelerated further.

While December sales were up a less spectacular 42 percent, Larry “Major Nelson” Hryb of Microsoft claimed that the company had run out of consoles by the end of the month, suggesting that supply was at least somewhat constrained.

Absent those shortages, we would have called Microsoft's 2010 performance flawless. As it stands, they still pushed their console to a very strong finish, with annual hardware sales of 6.8 million systems, up 42 percent from 2009.

(We will discuss software sales in more detail later, but for the moment let us note that Xbox 360 software was up 17 percent in units and 14 percent in dollars over its 2009 levels.)

Microsoft's Xbox 360 nearly outsold the Wii in 2010, falling short by only 305,000 units. That the two consoles ended the year so close has as much to do with the 2.5 million system (or 26 percent) decline in Wii sales as it has to do with the 2.0 million increase in Xbox 360 sales.



All signs point to continued momentum for Microsoft's console business in 2011, which suggests that it will increase its hardware sales in 2011. This is particularly likely if it finally gives its consoles a proper price cut, something that hasn't happened since September 2008. Should the entry-level Xbox 360 have an MSRP of $150 before Christmas, we would expect it to see hardware sales levels similar to 2010.

To put the Xbox 360 sales into context, let us consider the following figure which shows annual hardware sales from 2009 (i.e. not the year that just completed).



Now we present the same figure, but for 2010.



In subsequent analyses, we will consider how the Nintendo Wii and PlayStation 3 each fit into the hardware picture from 2010, and where they might be headed in 2011.

For the rest of Matthews' monthly NPD analysis, read the full Gamasutra feature, available now.


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Comments


met deloi
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I have to disagree Andre. I don't think Microsoft will suffer. But, that's just my opinion.

Cheers,

Interior Designer Detroit

Douglas Baker
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I've held off on the Kinect for the same reason that I initially held off on getting a Wii. I'm always a little dubious about the first generation of games for a new game accessory. But I expect that Kinect will actually pick up steam and come out with some games that aren't quite so gimmicky. And when that happens, I'll be happy to plunk down my $150. (And many others who are waiting on the fence will follow suit.)



In addition, I expect Microsoft will continue to tweak the technology with firmware and software updates, perhaps eliminating the lag that presently exists. Overall, I think that there is a good chance that more Kinect units will be sold over the 2011 holiday period than 2010.



There is also the possibility that the Nintendo 3DS launch is going be a sales giant and be priced high enough that it might suck a lot of oxygen out of the room and effect sales of other consoles and accessories.



Come this summer, there might be quite a few customers standing at the store pondering buying a Kinect for their 360 or a Nintendo 3DS. But that's a good problem to have and I'm ever grateful that these companies keep pushing the R&D in pursuit of my hard-earned scratch.

Douglas Rae
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I disagree with Andre also. Sounds like you are making a little bit of a sweeping judgement that everyone is in some sort of depression and that a rising economic power will.. do what exactly?



From my experience, when the UK was in recession, we had to increase our export companies in order to help balance this as quickly as possible as well as for the long-term. A country that has good exportation over most of the consoles is surely in a good position to carry on doing so.



Its not as black and white as you seem to be picturing it.



My opinion is that the Wii is sold to consumers on the gimmick that it has some form of motion control - though I feel its a total gimmick and leads to having poor titles and replayability. Where as the 360 is adding motion controls, in a better way IMO, on to an already strong platform - giving the masses a key into the 360's world. The Wii has sold consoles to the masses and opened the door for Microsoft to sweep up people looking for a decent experience (just try and play 007 on a wii with 3 other people and their motion controls, bloody nightmare and barely responsive).



I personally sold my Wii within 6 hours of buying it, after playing it for an hour I spend 5 asking round my friends and family until my Dad bought it off me - then he actually binned it...



I've got a 360, im buying a new 360 because I like the look and want another warranty on a fantastic console.

Prash Nelson-Smythe
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To put a more sober spin on things: in 2010 the XBox 360 almost reached a stage where it could begin to close the install base gap between itself and the Wii, coinciding with the release of a new slim version which is not guaranteed to break and a new peripheral and range of games aimed a broader market than before.



Good year for it. I might even pick one up myself in the next few months...

Carl Chavez
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Thank you for that... Kevin Jones tends to spin topics into hardware wars and away from good industry analysis.

Jonathan Gilmore
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Must have been difficult to give that faint praise.

Prash Nelson-Smythe
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Must've been easy to make a snide remark to a stranger who you know you're never going to meet.



Brighten up, Gilmore!

Jonathan Gilmore
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I was putting a sober spin on things.

Michael Martin
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I have high expectations for the Kinect. If you look at some of the frankly amazing things that people are doing with the hacked drivers, I think there is a huge potential for this piece of hardware. It's also telling that other companies are trying to develop similar systems for the PC. If Microsoft releases XNA APIs for Kinect, I think we will see an explosion of uses for it.



Key though, is that Kinect shouldn't be shoe-horned into existing AAA game design patterns. I'm almost certain that these games will come out, but I hope the future of Kinect is not tied to Kinect enabled CoD or Halo games. Instead, new game patterns should be designed around the Kinect interface. Big studios and publishers tend to lack the ability to take risks in exploring these innovations, which is why I think XNA is critical to the future of the Kinect.

Jonathan Gilmore
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Hopefully MS can scoop up some indie games/developers and publish some small, innovative games on XBLA to give a better picture of what Kinect is capable of.

Douglas Baker
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Some of my favorite games from 2010 were downloads from the Live Arcade; Shadow Complex, Trials HD, Lara Croft and Limbo, to name a few. It seems to me that Arcade is where the Kinect will really shine in the year to come.



Some ideas for the Kinect aren't big enough to justify a $60 game purchase, but we might spend 400 points for a breast squeezing simulator.



The Wii download offerings are largely from their deep library of past console hits. While I'm glad to access to older Mario and Zelda games, I don't typically want to spend my time playing them.

Brad Borne
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Uh, come on, guys, we're staring down a new Nintendo hardware launch with the 3DS, directly after Kinect's pseudo new hardware holiday launch with a rediculous marketing campaign, and the outdated Wii and soon to be obsolete DS STILL outsell the 360? There's no way to twist that to look good for anyone but Nintendo.



Nintendo's putting all of their support behind the 3DS, even in a home console analysis, you can't ignore the impact that's going to have on all the other numbers...

Kevin Jones
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" and the outdated Wii and soon to be obsolete DS STILL outsell the 360?"





Umm.the DS is competing directly with the iPhone, not the 360, and the iPhone sold a massive 14 milion units in the September quarter alone. The December/holiday quarter will be even bigger. iPhone sales make DS sakes look like kindergarten.

John Gordon
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"Analysis: How Xbox 360 And Kinect Nearly Toppled Wii In 2010"



What is this horseshoes? Instead of making a headline about something that almost happened, how about a headline of something that did happen. Something like



"Wii third party has top selling SKU for December."



According to Nintendo, Just Dance 2 was the best selling game of December. That's right a Wii third party game outsold all others in the biggest month of the year. Also Epic Mickey was the #4 best selling game showing that third parties sell quite well on the Wii.

http://www.gonintendo.com/viewstory.php?id=147368



Of course all of this was hidden because NPD changed the way that it reports things.

Amir Sharar
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3rd party games outperform 1st party games quite often, I think it was wise to focus on how a console that was dwindling was able to reinvent itself.



Consider that during Christmas of 2009, the Xbox sat in a precarious position. It wasn't outselling the PS3 worldwide, the PS3 offered more value because it offered built in wifi and BluRay for only $50 or so more, the Wii was still running away with the most sales outselling the 360 2:1 (a difference of 5 million units in that year alone), and the console still had a bad rep in regards to failing hardware.



The redesign of the unit that not only made it run quieter but far more reliable, the price drops, the added value (wireless N built in), the expanded redesign of the dashboard, and the addition of the Kinect peripheral is pretty much the closest thing one can do in "re-inventing" an existing console.



The 3rd party games doing well on the Wii was fairly predictable because it was clear that Nintendo was going to focus on traditional games this Fall with Kirby and DKC, which I am grateful for, but the expanded market obviously still wanted their accessible, social games in the form of MJ and JD2.

John Gordon
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"3rd party games outperform 1st party games quite often"



I'm glad to hear you say that, but many people still think third parties do not sell well on the Wii. It's true that many third party games have done well on the Wii, and this Christmas a third party Wii game not only outsold first party games. It outsold every game on every console.

Kevin Patterson
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Kinect's performance in retail has been interesting, it's done very well for a peripheral that was not included with console at time of purchase. As a core gamer, I still don't see the must have application for it, but I have faith that MS will eventually have one. People keep dismissing MS and they keep surprising everyone. How many times have we heard that the PS3 was going to surpass the 360 and it Was PS3's year to shine, yet MS still manages to stay ahead. That's an amazing accomplishment really.

Move is doing well too, but Kinect seems to get all the press though. I'm sure Sony will have some big things for us at E3.

I know the 3DS will be big big news this year, and I would bet that MS will reduce the Kinect to $129.99 or even $99.99 come next Christmas time. If MS could give us a killer app with that price drop, MS could do very well even against the 3DS, which will probably have shortages it's first year. If the 3DS is $249 or $299, the Kinect will do even better.

Banksy One
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Matt Matthews has no part in being here talking these lies.



Who cares about sales, how about integrity? Who's audience did Nintendo ever try and steal? None, they nurtured markets where there was little or no interest in video games.

Matthew Mouras
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Agreed as far as the vision of Nintendo, but I don't think Matthews is taking any stands with this article. It's an analysis of sales data and is interesting apart from any value judgements.



It was a good year for MS. The S console was a shrewd move and I was excited to replace my aging 360 with an S console. Sure it could be argued that the product should have been sturdier from the start, but I see it as a good development in the life of the system. I enjoy the Xbox for the LIVE service, huge library of games, and the XNA framework.

Prash Nelson-Smythe
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Regarding the S, let's not forget that redesigning and launching a new peice of hardware would have a significant expenditure associated with it. i.e. if the S didn't exist and MS sold the same number of consoles, they would have made more money. Worth noting if you are considering their business performance rather than just install base.

Leon T
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You can really spin this in many ways. It could read " The 360 has its best year and still can't beat the Wii"

Really it does not matter what console comes in first in how many months or for a full year at this point. If the 360 sold more consoles than the Wii last year it would mean as much as the PSP outselling the DS in Japan for the year. The selling war is already over.



Third parties are pretty much set in what they are going to do at this point too. They began pulling back on Wii support when it was still selling 500k a month so I doubt the 360, which was always getting better support anyway, having a surge would matter much.



New consoles will likely be hitting next year or at least annouced.



Edit: I have to add that is the first year the that the 360 even sold past 5 million consoles in the US. The Wii have been selling 6 million plus since 2007 and have sold over 7 million 3 years in a row. Two of those years being in the 9 million plus numbers. People need to keep those numbers in mind in order to come to terms with the fact that one console outselling the other at this point is just noise.

Keith Moore
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My experience with the Kinect has been positive. Been playing Kinect Adventures, Dance Central and Kinectimals (fiancee X-Mas gift--I swear!) and yes, we're in the gimmick stage for these sorts of games, but didn't the Wii start the same way? Seeing how many of my friends have also bought this hardware I think there's a lot of interest, but it will depend on the quality of the games. We gotta get a quality adventure and first person shooter into the pipeline!

R G
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Rofl at everyone's comments here. Man, this is getting heated. Now for my two cents:



Kinect is going to be a fad. This much is certain. The community alone had done incredible mods (CoD4, RSV2, even Doom and Legend of Zelda) on there. These have proven that it has an incredible sensitivity, greater than the Wii's, even with motion plus. Look up on G4TV.com, they ran the vids of these last week.



Amir is right on the ball with Dance Central too.



Idk how the Wii will do. But I can tell you that as an indie dev, the PS3 is really looking good right now.

Sony has really been pushing their service lately, especially in the user-created content. Plus, the games this year are looking incredible.

ferret johnson
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Is it any surprise it sold? Regardless of whether it's good, bad, amazing, or faulty... it was backed by a $500 million dollar ad campaign which got it featured on, among other things, Oprah. Oprah can sell millions of books that people never actually read based on a mention alone. And she was just one tiny speck on the marketing juggernaut that was Kinect.



I am in no way talking up or down the tech itself, simply pointing out that if you spend $500 million on an advertising campaign, odds are you're going to move one heck of a lot of units. Is it possible to utterly fail? Sure. But it's unlikely.

R G
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Agreed. E3 had that crazy circus of elephants thing going on. And all those white plastic robes lol.

Emperador Alencio
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Fanboys in war :-)

Joe McGinn
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Kinect is irrelevant.



What really happened in the console industry in 2010 is that middle-tier console projects have almost completely ceased to exist. There are less console games being made right now than at any time in the last 20 years.



This self-cannibalistic worship of only AAA franchises will be the death of game consoles. They are getting less and less interesting to play, and customers continue to bleed off to iPhone, iPad, and even PC. Game consoles cannot survive on a sole diet of AAA console generica, and the Kinect is nothing more than a slightly better eye-toy, it's not going to bring the nirvana of a new casual audience to the 360 outside of Microsoft's wildest fantasies.

Kevin Jones
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@ Joe McGinn

"Kinect is irrelevant"





/sarc..Yeah..and the Republicans didn't annihilate the Democrats in Last November's elections either.

If Kinect is irrelevant to console gaming, nothing else is relevant.

Kinect is by far the most relevant thing that has happened to console gaming since 2006.

In addition, Kinect is the fastest selling consumer electronics product ever, far outselling the iPhone and iPad launches, as well as the Wii/Wiimote launch. The 360 itself has just had its best sales year ever..in it's 5th year no less. Nothing like that has ever happened to any console before.

Can I suggest somethi8ng?

YOU are irrelevant.





"and the Kinect is nothing more than a slightly better eye-toy, it's not going to bring the nirvana of a new casual audience to the 360 outside of Microsoft's wildest fantasies. "





/sarc..that is why Kinect is far outselling the Move, was the "must-have" toy for the Christmas, and has already sold 8 million units in just 60 days and caught on with thhe non-gaming public.



But hey, just keep living in Sony fanboy fantasyland will ya?


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