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NPD: Behind the Numbers, March 2011


April 18, 2011 Article Start Previous Page 4 of 4
 

Sony's Future

We've had many recent discussions about Nintendo's platforms, both new and old, and Microsoft's success with Kinect, but we haven't had a proper discussion about Sony's situation. According to a recent press release, the company states that the PlayStation 3 platform has passed 50 million units sold worldwide to retailers. Approximately one third of those units have been sold in the United States.

To some extent, Sony appears to have put its head down, focused on its stated public goals, and limited any possible negative exposure as much as possible. In particular, Sony's regular comments to the press regarding each month's NPD Group data releases have focused on its 3D gaming initiative (games enhanced to use the new generation of 3D television sets), the Move controller, and its slate of first-party titles like LittleBigPlanet, Uncharted, Ratchet & Clank, Killzone, and Resistance.

This has left many to speculate about its hardware and software sales, and a possible price cut for the PlayStation 3. Moreover, the company has clearly moved on from the PlayStation 2, whose hardware sales are around 1 percent of the market each month, and the PlayStation Portable. The latter system already has a successor, the NGP, slated for release sometime in 2011, although we still consider the system unlikely to launch in the U.S. in any meaningful way this year.

For the remainder of 2011, we believe that Sony will essentially be a single-platform company, much like its key rival, Microsoft.

With that in mind, let us shed some light on Sony's fortunes. Sony appears to be sitting on details of a rather strong first quarter for the PlayStation 3. While we cannot provide specifics, it appears that the PlayStation 3 saw its sales increase by roughly 5-10 percent in the first quarter of 2011 compared to the same period in 2010.

Remember that during the first quarter of 2010 the PlayStation 3 was selling well as it came off a strong holiday and the August 2009 introduction of the $300 PlayStation 3 Slim model. While bundles have changed and new software titles have been released, any sustained increase in sales 18 months after the last price cut is an important development.

One might speculate that recent retailer discounting has helped promote the PlayStation 3, but according to NPD Group data provided to us, the average price for the system remains well above $300, at $318. (For the sake of comparison, the average price of the Xbox 360 has fallen to $287.)

Moreover, we know that software sales for the platform have been accelerating, and by our estimates the system should break 130 million units of software in April 2011. This has no doubt been helped by Sony's own LittleBigPlanet 2, which we know has sold better than the original, and Killzone 3.

According to exclusive data provided to Gamasutra, lifetime sales of Killzone 3 have now reached 500,000 units. During approximately the same length of release Killzone 2 sold around 620,000 units, but we should note that the Killzone 3 figure provided by the NPD Group does not include copies of the game sold bundled with PlayStation 3 hardware. Regardless, it does appear that Killzone 3 is tracking just behind its predecessor.

One additional point about Sony is that its $20 PlayStation Network card was the top-selling accessory for the month, according to the NPD Group's Anita Frazier. Since the launch of the PS3 in late 2006, Sony has been playing catch-up to Microsoft's Xbox Live service. While we hesitate to read too much into a single month's data, it is certainly a mark of Sony's progress that its cards are selling well enough to take the #1 spot in a segment in which Microsoft's 1600 Point Xbox Live card has been leading several times over the past year.

Given that software sales are increasing, hardware sales are up year-over-year, and it is making progress with its online services, it appears to us that Sony may be pleased with a longer, shallower sales curve for the PlayStation 3 and will therefore hold off on a price cut until at least the second half of 2011.

Remember that the previous times Sony had made changes to its pricing and hardware line were in November 2007 (introduction of $400 40GB model) and August 2009 (introduction of the $300 PS3 Slim). It's perfectly in character for the company to continue to accrue the benefits of its increasing margin on the system hardware and set its pricing by internal goals rather than what analysts, retailers, or third-party publishers might ask.

[As always, many thanks to the NPD Group for its monthly release of the video game industry data, with a special thanks to David Riley and Liam Callahan for their assistance. Thank you in particular to NPD Group analyst Anita Frazier for her monthly analysis notes. Additional credit is due to Michael Pachter, analyst for Wedbush Securities, for his perspective, instrucive conversations, and entertaining anecdotes.

We also wish to thank Doug Creutz of Cowen and Company for his insights. Finally, many thanks to colleagues at Gamasutra and particularly regular commenters on NeoGAF for many helpful discussions.]



Article Start Previous Page 4 of 4

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