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Analysis: Xbox 360 Outsells PS3 At Higher Average Price In U.S.
Analysis: Xbox 360 Outsells PS3 At Higher Average Price In U.S.
October 17, 2011 | By Staff

October 17, 2011 | By Staff
More: Console/PC, Business/Marketing

[As part of his monthly NPD Group physical game sales analysis, Gamasutra analyst Matt Matthews examines how Microsoft's Xbox 360 hardware sales are "defying gravity," as the console saw sales grow during September 2011 at an average price $35 more that Sony's PS3.]

Looking at the industry as a whole, hardware sales rates have been declining since about the end of 2009. At that point, the annualized sales rate (the sum of the previous 12 months of sales) peaked briefly around 34.2 million systems per year, but were already down from their historical high of 35.4 million systems per year at the end of February 2009. As of the end of September 2011, the annualized rate fell to 28 million systems, a decline of 20 percent from the peak.

This matters most because building the installed hardware base is a prerequisite for increasing the sales of software. As users become inactive -- losing interest over time or having their systems break -- the overall software-purchasing population will decline, at least at retail.

In an environment where new physical software sales are declining, the last thing publishers and developers want is a shrinking audience.

On top of the declining unit sales, hardware prices on many systems have been cut. Except for the most expensive systems, like the PlayStation 3 and the Xbox 360, those cuts have not resuscitated flagging unit sales.

As we have discussed before in these columns, a decline in prices can compound a contemporaneous decline in unit sales, for a breathtaking cut in revenue. While the effect on hardware has been modest (hardware prices were $228 on average in 1Q 2009 and are only $215 now, a loss of 6 percent) it is still there.

Before moving onto some specific trends for the systems underlying these industry-wide totals, let us look at a visualization of that annualized hardware unit sales rate described above. Below, the rate is given for hardware sales for the U.S., measured each quarter since the last quarter of 2008. Note the peaks in the first and last quarters of 2009, with consistent declines since that time.

This decline in hardware sales is not, however, uniformly distributed across the available systems. Nintendo's systems, with the exception of the 3DS which launched a few months ago, have seen sharp declines over the past couple of years. By comparison, Microsoft's console and Sony's lead console have either held their ground or grown modestly -- enough to claim significant ground in annual sales, but not enough to shift the balance of power as measured by install base sizes.

For example, the following figure shows the January - September hardware sales figures for the big three consoles. As a caveat, we note up front that Nintendo's sales in the last quarter of the year are often very strong compared to the competition. So, while this is an interesting view, it does not tell the full story for annual sales.

While Microsoft has grown its console's sales over a matter of several years (its first full year, 2006, is not shown in this graph), Nintendo's Wii shot to 5.2 million units in 2008, its second full calendar year on the market. From that peak its 3rd quarter YTD sales figures have declined by 20-25 percent each successive year.

Sony's sales show the company plodding on from price cut to price cut, continually trying to live down the burden of its exorbitant launch price. Its sales jumped from 2007 to 2008 based on the November 2007 introduction of the 40GB PS3 system with its $400 price, but then stagnated from 2008 to 2009. From 2009 to 2010, its sales edged up again as the PS3 Slim ushered in a more streamlined system at a $300 price. We think it unlikely that the $50 price cut the system received in August of this year will have a significant effect on PS3 sales through the first three quarters of 2012.

By contrast to the fortunes of the other systems, Nintendo cut the price of the Wii from $200 to $150 in May of this year, and the system's sales dropped nearly 9 percent in the subsequent quarter. The company's focus appears to be on maintaining some semblance of life for the system while the Wii U is prepared for launch in 2012.

We find the average price of each system each month to be of particular interest. By average price, we mean the total hardware revenue sales for a month divided by the number of systems sold in that particular month. For example, if 70 systems are sold at $200 and 30 systems are sold at $300, then the average price will be $230 per system.

Just since July there have been some dramatic shifts in this picture. Consider the table below, which gives the average prices for the Xbox 360, PlayStation 3, and Wii in July 2011 and then again in September 2011.

Between these two months, the PS3 received its $50 price drop and retailers began offering some versions of the Nintendo Wii for approximately $135. As a result, each of those systems saw its average price drop, by about $40 in the former case and $8 in the latter. (Consumers are now spending more on Nintendo DSi and DSi XL systems, on average, than they are on Wii systems.)

During the same period, the Xbox 360 saw its price increase by approximately $25. While the NPD Group won't speak to the specifics of a change like this, we suspect that part of the price increase may be related to the end of the Xbox 360 and Windows PC promotion that ran throughout the summer of this year.

Last month, we hinted this role reversal could happen. At the time, we said "If consumers think that the Xbox 360 offers a better value, then the $50 PS3 price cut could bring the PS3's average price below that of the Xbox 360 without actually driving PS3 sales higher than Xbox 360 sales."

That's precisely what happened in September 2011. Compared to its closest competitor, Microsoft is selling 12,000 more systems per week and at a $35 higher price.

From our experience, this is likely the first time that the Xbox 360 has exceeded the PS3 on average price. Going forward, the dynamic between the two consoles could change if price becomes a stronger determining factor in consumer choice.

In a communication to us about September sales, Wedbush analyst Michael Pachter described Xbox 360 sales as "defying gravity", a turn of phrase we feel captures precisely the dynamics of the current market. While everyone else is treading water or eking out modest gains on hard-fought price cuts, Microsoft's sales are strong and its system prices are going up.

To get a longer view of how console prices have changed, we offer the following graph. Keep in mind that there is a lot of variation from month to month in the average price of a system, especially as that price can be tied to cross-promotions with other products, but figure below give a general feeling for how average hardware prices have changed over the past two years.

October is the first month of the video game industry's most energetic season, and each system has a chance to cap its year with very strong sales. For the Xbox 360, absent a price cut, we think it will hit just under its record sales of 2010. Pachter, who has far more information than we, believes that Microsoft has "a huge Kinect television promotion planned for holiday" and is "focused on increasing the adoption of Xbox TV." To achieve these ends, he says Microsoft may cut its price on Xbox 360 systems bundled with Kinect, especially if Sony begins to highlight its $250 system against Microsoft's more expensive Kinect systems.

Sony has made its move -- that was the August price cut -- and it's locked in for the ride into 2012. It should end the year slightly up over 2010 -- and therefore a new record calendar year -- and on track to achieve its profitability and sales goals for the fiscal year ending in March 2012.

The Wii appears to be nearly out of gas. If it can't outsell either of the other main systems, each of which costs twice as much on average, and it has only the currently announced software slate to power it through the end of the year, then we could see sales like the system saw at the end of 2007 -- a full four years ago.

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Harry Fields
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I love you X360. You have been my favorite console... *sniff*. Even supplanting the old guard SNES. Oh how I love to play beauties such as GoW3 upon you and watch some TV/Movies between matches. You've matured so much.. *sniff*.

Matt Waldron
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I would be interested to see what role replacement consoles are playing in these trends. The decision to replace a broken console or upgrade would be influenced by many factors such as price, how long the system lasted, and available alternatives; but I would think more than anything the quality and quantity of both re-playable games and upcoming major titles would be the key determining factors.

I am not sure how influential this factor would be on overall sales movement, though it does seem to be the right time in the life-cycle of these products (maybe a little early) for replacement needs to be realized. However, the trend across the three major consoles does seem to sync up properly and as I would expect were this a contributing factor.

The Wii has a lot of fun, easy games largely geared towards kids. If one's Wii breaks, I'm not sure how desperate he is to replace it to get in another match of Wii Tennis. The Playstation III carries a high price tag and has a relatively small number of exclusive signature games. Plus if your PS3 is already broken you should be none too pleased. The Xbox360, by contrast, demands replacement thanks to the excellent Xbox live environment; and the Gears of War and Halo series alone (Call of Duty isn't hurting the cause either). If my 360 broke today I would not bat an eyelash to replace it, nor would my opinion of the system or Microsoft be soured in any way given how excellent their tech support has always been. Even if we were on the eve of a new Microsoft console that would not be backwards compatible with any Xbox games, I would replace my Xbox--there are simply too many games for that system I could not do without.

Greene Simon
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Gamers have been conditioned by Microsoft into thinking that paying for Xbox Live gets them something special.

They really believe this crap.

On PSN, you get free gaming for ALL users, dedicated servers for PS3 exclusives, meaning zero lag, and if you optionally want to pay for PS+ (the same price as Xbox Live Gold), you get automatic overnight game updates downloaded and installed, cloud game saves, and $300 worth of free games every year.

The only suckers here are those paying hundreds of dollars for Xbox Live over the consoles lifespan, just for X-Game chat....

Nick Kinsman
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I've never understood the argument that PSN is better than Live because it's free. Sure, they have free online play, but any game I've played on my brother's PS3 has felt inferior to playing on Live. The 'friends' support is generally inferior to that of Live. And the "you don't get anything!" aspect isn't quite right either, although I'm fine to let you have that one because, no, MS doesn't give us much in the way of freebies when we're paying for the service (although it totally does happen).

As far as Playstation Plus: Really? Sure, you get 'free stuff'. Well, until you stop paying them ... at which point it's not yours anymore. I don't see that as any different than an over-priced rental system for games you probably don't want anyway, but I know that somehow, a market exists for it.

Wylie Garvin
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Agreed. I'm on my fourth 360 now (though two of them were red-ring refurbs from MS). If it broke tomorrow and wasn't still under warranty, I'd have a new one within a week. I have literally dozens of games for it that I want to be able to play again. For convenience, I also use it to play DVDs. My PS3 only gets used occasionally, to play exclusive games.

@Greene: Xbox Live costs the same per year as a single game. Most players who want to play multiplayer can afford this. PSN sucks compared to Xbox Live, but that's not the point -- the point is the games. The reason Xbox Live is so popular is that you can play Call of Duty or Gears of War on it, or whatever other multiplayer game is trendy. You call them "suckers" but the fact is that Gears players couldn't play that game on their PS3 over PSN. So for that particular purpose, Xbox Live meets their needs and PSN doesn't.

Dave Long
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You all realise you can play all the CoDs on PSN as well aye? The big 360 exclusives are Halo, Gears and Forza (and Fable, but clearly not for online - Alan Wake is big for me as well, but clearly not with the broader 360 audience - no accounting for taste :P). On the other hand, if you like shooters then you have MAG, SOCOM (Con and SF - both unique experiences if you play non-respawn the way SOCOM is meant to be played), Killzone 2 and 3, Warhawk and Uncharted 2 - and if you like single player games the list of quality exclusives is ridiculous. I'm not saying one library is better than the other (although I will say the 360's library is narrower than the PS3 - there's just a broader range of experiences on the PS3) but the suggestion that the PS3 has a relatively small number of exclusive games is a statement of ignorance, plain and simple.

As for XBL, while it's only the cost of the game, it's something I get for free from Steam (and would likely be on PSN if they had have had more foresight into the design, and not overloaded the OS RAM with the XMB). Both the 360 and PS3 are great consoles, but the idea that the 360 is head-and-shoulders over the PS3 in anything other than the consumer headspace is just plain delusional. It does show, however, that consumers can be easily swayed by effective marketing ;).

In the US, though, what _does_ lock people into the 360 is that "all their mates have it", and it's the console of choice for the peer-pressure heavy teen male demographic. Once you've got mindshare control in there, it can be hard to counter. But the reasons for the 360s recet success in the US are social, not technical. Note I'm not saying this is a bad thing (obviously, lemmings following each other off the cliff is bad, but people following other people's trends can also be a very positive thing as well, or we'd have been unlikely to evolve the trait ;)).

Amir Sharar
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Greene Simon said: "The only suckers here are those paying hundreds of dollars for Xbox Live over the consoles lifespan, just for X-Game chat.... "

You sound like a person who doesn't play that much online to begin with.

I often play online with both consoles, and setting up games with friends is 100 times easier on Xbox Live. That might seem like an arbitrary number thrown out there, but let me explain, and I'll let you decide how much easier it is.

I play the NHL games online. I play a mode where 5 of my friends and I compete with another team of 6 human players. To coordinate those people on PSN I must send everyone a message through the messaging system. Compared to Live, receiving these messages are annoying and intrusive. Secondly, I usually have to send many messages over and over. Each friend might be playing their own game or movie. So in NHL I have to wait for everyone in a lobby. I routinely would have to send messages to see what is going on if people aren't messaging back, or not in the lobby. Sometimes I have to call local friends but most of my team is from all across the US and Canada. I don't want to call or text people outside my local calling area just to set up a match. Once everyone is in, we play and we can talk to each other, but when someone drops out for one reason or another the whole process begins again for that one person.

On Live, I invite them all to Party Chat, and I know exactly what everyone is up to and where they are at (maybe someone wants to beat a particular level in Castlevania before joining us). That's it. No long distance calls or texting and no sending messages back and forth (believe me I have a USB keyboard hooked up to my PS3 and even then it's a pain to plug it for this purpose of mail tag).

I would agree that Live could use more value. I previously have paid $40 for Live a year and currently am on a multi-account Family plan for $25 a person. So there's no disagreement there.

But I would definitely say that Live is a much better experience than PSN and is worth something. I am not against paying $40 for it. I do think $60 is too high, unless MS offered more value (there are many, many ways they can do that).

I'm not the only one who plays team based multiplayer games. I'd argue that most online gamers do play team-based FPS and sports games. And for those experiences Live is something special, it offers convenience that PSN will (apparently) never be able to offer.

Sylvester O'Connor
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Interesting read. Let's not be bashful as the conversation seems to be going down people's favored systems. The fact is in the original statement by Matt that PS3 has a small number of exclusives. Not true. I would say that PS3 right now has more exclusives than MS. This is not favor but truth. Consider than Infamous, Uncharted, Gran Turismo, Sly Cooper, Ratchet and Clank, and Team Ico games which is The Last Guardian and I am sure that I am missing 2 or 3 more. Now look at MS console. Halo, which is set for a reboot with the 4th game coming next year along with the HD verision of the original at the end of this year, Forza, Alan Wake (even though according to the news seems like it might not get a sequel until Xbox's new console), and the last Splinter Cell.

Moving along, let me be the first to say that when it comes to online capabilities, Live has more meat than potatoes than PSN. I won't knock PSN because it does have some good functionality and I am not trying to be middle of the line at all but Live does have better connection especially with my computer than PSN. I have noticed some slow down sometimes with media options on PSN as opposed to LIve as well. My bandwidth is actually pretty smooth so I know it is not just a mental thing either.

In regards to the Wii, I agree 100% that it is a real family friendly console. That doesn't mean that 360/PS3 don't have family oriented games, but, the games on Wii are so casual that anyone can really pick up and play and the frequency that these types of games come out on it are more than the other 2. Also, the local multiplayer makes it really good for gatherings seeing as how PS3/360 games have pretty much throw away split screen on most games. I know that they don't have control over that part as it is a time/budget thing with most devs, but still, this is a main draw of a Wii.

Again, there are numbers that we won't ever have access to such as whether or not their increase in sales is from replacement consoles, or from people wanting to have multiple consoles in their homes. But I will say that I have my own predictions of all 3.

I believe Wii is pretty much going down and it will go down hard. I think the new Zelda will sell but not like previous games in the series especially for the lifespan that is left on Wii for hardcore gamers.

I think 360/PS3 still have loads of life left in it. PS3 still has potential because no one has really cracked into the true graphical prowess of the system. And if MS can secure their internet TV deal, it will just be another example of how they are trying to make their console relevant while keeping thier current HD format. With the new HD disc with increased space on it that MS is pushing, I think they still have a good 3 or even 4 years left if they choose.

Matt Waldron
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According to the following (admittedly incomplete) Wikipedia page on exclusive games, the Xbox360 has nearly double the number of PS3 exclusive games (195 to 101):

Of course, that's a fairly misleading stat, since Xbox360 has had more time to crank out filler. My original point was about exclusive signature games, which admittedly begins treading into the territory of taste. I personally am a very selective gamer and only really devote my time to those games which I consider to be in an elite class. None of the 'signature exclusive games' people have mentioned here for PS3 have intrigued me enough to graduate from playing on my brother's PS3 to buying my own. The Halo series and the Gears series are the only exclusive games I consider to have the prowess to obligate one to buy the console.

I do not know enough of the PSN to speak with any authority in comparing it with Live; I simply think Live functions very well and is set up in a way that makes it feel worth the price tag.

I think Sylvester makes an excellent point that the true graphical power of the PS3 has really yet to be realized in a defining and indispensable game. I tend to think that will happen eventually; I just do not believe it has happened yet. I would not be surprised if The Last Guardian accomplishes that feat--what Team Ico was able to accomplish with Shadow on the PS2 platform was nothing short of remarkable.

My goal was not to rip on PS3; it was to theorize about current sales figures. Right now I do not think there is enough of a catalog for the PS3 to inspire a purchase from gamers like me who don't mind waiting until there is a game that screams "you NEED this system because you NEED this game". In that sense, PS3 is actually well positioned for a major surge if they get a game or two that become must-haves, because I do not think their market saturation/penetration is as deep as Xbox360's yet. That said, I think most Xbox360 players would agree that if their console broke they would replace it (thanks largely to a couple signature series and a back-catalog of several other solid games which would become useless-- perhaps built up during the time between the release of the systems). If your PS3 broke today I tend to think you would be furious, and not be as prompt in replacing it. That would be a product of the year-lag between the Consoles and you would expect a console released at a later date to be manufactured to last longer in general.

Christopher Greenhill
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The way the annual rate of hardware sales continues to decline it makes me wonder if this evidently extended console generation (going on 5 and 6 years) has been the best move for all parties involved. I don't think one can dismiss this as simply a result of a poor economy since entertainment products like video games often do quite well despite (or perhaps even because of) recessions. Are video gamers starting to get bored of this generation?

Dave Long
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The issue here is that the _average_ selling price of the 360 at the moment is more than the launch price of the PS2 in the US, and the average PS3 price not much below. To produce a machine that's a clear step above the current crop would bring an initial price point, even for the cheapest model, at PS3 launch or worse levels (particularly given the diminishing marginal returns to performance, as evidenced by the _much_ smaller gap between consoles and high end PCs at this stage of this gen, relative to the last).

That said, I think we will see new announcements next year from either MS, Sony or both, and then new consoles in 2013. That'd be 8 years for the 360 and 7 for the PS3. However, Sony always said that the ten-year lifecycle for the PS3 never meant "no new consoles for 10 years" but that the PS3 would continue to be supported for a decade (the PS2 still gets the odd release of key sports/casual titles even now, albeit rarely, over ten years from launch, and I suspect that Sony had the same thing in mind for PS3).

fred tam
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You aren't taking into account inflation, the 360 is not anything close to the launch price of the ps2. What cost $299 in 2000 would cost $374.74 in 2010.

Bob Johnson
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Shrinking hardware sales doesn't mean shrinking audience.

Yeah don't know what to think about the good 360 hardware numbers. I will toss in a new theory. Old 360 hardware is so bad that the used 360 hardware market is not very appealing thus turning folks to the new hardware. :)

Even those suckers I mean consumers that buy used are quickly forced to new hardware.

Combine this with kids that were 7 in 2005 are now teenagers.

I'm sure KInect nabbed a few suckers I mean consumers as well.

Greene Simon
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That is the key to it.

PS3 userbase is actually quite alot bigger than Xbox Live, especially online for several reasons.

PS3 failure rate is really low (<1%) ,my 60GB launch console is still working great, and I don't know a single person that's had a PS3 failure (despite the Microsoft shills trying to pretend YLOD is the same as RLOD by giving it a similar name to fool idiots), opposed to virtually every Xbox owner having either a RROD or a unit that destroys discs. This means Sony "only" sold 1 console per gamer, which means 54m PS3's == 50m gamers all online. With Microsoft many users traded in their unreliable and noisy launch consoles (that had likely been already replaced numerous times) for slims. 55m Xboxes = 30m gamers, of that only 56% pay for Live Gold = 16m online gamers...

Also the fact that PS3 is winning the sales on a global basis (really, NPD numbers are the ones Microsoft love to cherry-pick, as it's home turf), and has the lions share of the best console exclusives. Almost all the good Xbox exclusives (or which there aren't that many) I can get on PC.

Graham Kavanagh
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Its very simple, people buy 360 because the games entice them... not about better this... better that. Original xbox was a powerful beast, but ps2 enticed people with games... simple. I have all 3, but 360 probably gets 95% of use.

Greene Simon
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@Amir Sharar

You start a PSN Party Chat idiot. It's simple.. Do it from the XMB, and it stays open and works in all games regardless of what your friends are playing.

People that claim PSN does not have X-Game chat do not know what they are talking about, and are basically just believing the Microsoft shills that continue to post misinformation on forums like this...

Fiore Iantosca
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"The only suckers here are those paying hundreds of dollars for Xbox Live over the consoles lifespan, just for X-Game chat.... "

Ignorance at its finest LOL

Squeeky Clean
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Does the author mention the fact that Microsoft has been aggressive with its promotions lately? How about the FREE 360 with the purchase of an HP computer? That deal was active during August & September. I also notice that MS hides its discounts with gift cards and bonus items at the retailer. For example, purchase a 360 console and get a $50 Walmart giftcard. MS is providing the discount and it is not taken into account by the "average retail price" i.e the customer paid full retail for the unit at the till (tricky huh?). Once again you can't take articles like this at face value.

Matt Matthews
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From the article you're commenting on:

"During the same period, the Xbox 360 saw its price increase by approximately $25. While the NPD Group won't speak to the specifics of a change like this, we suspect that part of the price increase may be related to the end of the Xbox 360 and Windows PC promotion that ran throughout the summer of this year."

Discount promotions like that, and gift cards and others, are accounted for in NPD's revenue figures. Tricky yes, but still included in this data and in the article.

Joseph Caddell
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Anthony Taylor Said: " each his own."

...Nuff said...

BUT!... I would have to go too Xbox Live for online, sure there is a service fee but its only once a year so its not that bad. I don't own a PS3 not that I'm a hater, just I never had cash for one when I USED to own a Xbox 360, but I will say I love the PS3 for single player experience. Not that it's not good on Xbox 360, I think it might just be because of the exclusive titles. I mean look at the original Xbox and PS2... no comparison in terms of online experience.

But that doesn't matter anyway because I'm a pc gamer and I just dumped $1,100 on a new machine that's another reason why I don't have a PS3 still. Once My Xbox 360 crashed on me a few years back I was too lazy the replace it and played on my Gaming Laptop...Decent FPS on Civilization V...until this new beast of course.

Besides a plus for me is that I can switch from using 3DS Max or Maya from modeling boxes all day(sarcasm) and importing them into UDK to my steam account and playing Mero 2033 is very convenient. :)