Half Year World Trends in Review: Part 1 Hardware
by Jacob Mazel, posted on 27 July 2009 / 1,566 Views
The first half of 2009 has seen some dramatic changes compared to previous years. In early 2008, riding huge software launches across the board, increased Wii supply, and price drop momentum from late 2007, the video game industry posted record revenue, hardware and software sales. In January to March 2009, much of that momentum was beginning to fade, but several platforms were up from levels seen in the previous January to March. During the April to June 2009 period though, most of the very early year over year gains have been wiped out in terms of sales, and except for the DS, all systems are producing less revenue than in Spring 2008.
For the second quarter of 2009, all systems performed worse worldwide than in the second quarter of 2008 except for the DS, which saw sales increase a bit on the introduction of the DSi model. Xbox 360 was down about 5% for the quarter even though it costs less than it did in the April to June 2008 quarter in the absence of content as massive as Grand Theft Auto IV. Wii is down the most – as sales have dropped from extraordinary to ‘good’ in the absence of Mario Kart, Wii Fit, and Smash Brothers within a three month period. Wii is performing nearly identically to Q2 2007 in the Americas, with sales up from 2007 in Others offsetting down sales in Japan. But PS3 is down almost 850,000, PSP is down over 1.3m, and PS2 is down over 650,000 even though the system recently received a price drop. PS3 is currently performing between 2007 and 2008 levels.
The Q1 comparison is a little less severe - slowdown hadn't really hit in Q1 2009 yet and both Wii and Xbox 360 were up significantly over Q1 2008 due to high demand after holiday sellouts (in the case of Wii) and renewed interest following price cuts (in the case of 360).
Compare the drops in hardware sales against the previous April to June quarter, and to the forecasts issued by the big three.
| Platform | Apr-Jun year on year (%) | FY 09 sales (millions) | FY 10 projection (millions) |
| Wii | -51% | 25.95 | 26.0 |
| PS3 | -38% | 10.06 | 13.0 |
| Xbox 360 | -5% | 11.20 | n/a |
| PSP | -45% | 14.11 | 15.0 |
| DS | 4% | 31.18 | 30.0 |
| PS2 | -42% | 7.91 | 5.0 |
PS3 sales are down 38% in the first quarter. If that held up the entire fiscal year, Sony would ship 7.15m PS3s or so for the year ending March 2010. Wii sales are down 51%, which would put Nintendo on pace to ship 13m Wiis or so over the same year. PSP is down 45% - a figure that would put Sony on pace to ship 8.5m PSPs for the year. DS is up 4%, and the year over year growth has continued through July at least as Dragon Quest IX sales in Japan have pushed the system to sell 300,000 units in three weeks – the equivalent sales of half a quarter usually. Nintendo will likely raise its DS hardware forecast by 5% - up to 31.5m. PS2 is down 42% so far, which puts it on pace to do 4.4m units on so, a bit less than Sony’s forecast. Microsoft is on pace to ship 10.6m Xbox 360s if the 5% drop held up.
The outlook of course is not quite that bleak. Sony would not have forecast the 30% rise in PS3 hardware sales without the likelihood of an incoming price drop. Still, that drop is not coming in July, so Sony has eight months to make up a ~4m deficit given that the system is off the FY 3/2009 pace by 1m units through four months of the new year, while the company expects a 3m rise over 12 months of the year. That is ‘only’ a 500,000/month increase over the last eight months assuming a price cut comes August 1 or so. On the other hand, PS3 routinely sells about 400,000 per month. Even a $100 price drop in August probably would not push PS3 sales to double the level seen right now over an eight month period. But such a drop makes 11.5m possible. A $50 price drop in contrast will probably only insure sales to return to the levels seen last fiscal year. PSP Go should reinvigorate PSP a bit in Japan, but the system is way down year over year and with such a high cost of entry for the new model, which launches in October it’s difficult to imagine Sony shipping more PSP systems than last year when retailers may be reluctant to stock a system where they can not make a lot of money from software sales. PSP shipments could easily be down 3m year over year from April to the end of September. So a 4m increase over 6 months – nearly 700,000 per month – will be needed to meet the PSP projection. Odds are Sony will come in at 13m or so once again for the PSP as the system along with the arriving Go-model does have a much stronger software lineup than it has had in previous holiday seasons.
Microsoft and Nintendo are not likely to let Sony drop the PS3 price to $300 without their own price drops. Nintendo has a better lineup for Christmas 2009 than Christmas 2008, and December 2009 should be the first December Wii isn’t supply constrained anywhere. So this fall is actually a fairly ideal time to drop the Wii price. A $50 price cut and big titles coming are probably enough to push Wii to at least 24m for the fiscal year, even though the system is on pace for 13m so far. Overall, it is still possible for all three companies to come within 10% of their hardware projections. It’s a coin flip as to whether the 13m PS3s or 26m Wiis is harder to do, but I’d wager Nintendo will have an easier time as they only have to match their shipments from last year and likely had no intention of cutting price initially. Sony intended to cut price all along, but probably can’t cut it as much as it wants to, and a $50 price cut just won’t get PS3 to 13m.
The following charts shows the change in average Q2 worldwide weekly sales from 2008 to 2009:
| Platform | 2008 | 2009 |
| Wii | 416,416 | 205,498 |
| PS3 | 172,572 | 107,369 |
| Xbox360 | 133,410 | 127,385 |
| PSP | 222,589 | 121,519 |
| DS | 440,657 | 460,105 |
| PS2 | 120,480 | 69,533 |
On a regional basis it’s now clearer than ever how much lift last year’s software provided in the April to June quarter. The most disturbing item from these charts is that all six systems – even the DS – saw drops in weekly sales from Q2 to Q2 in the Others region. For Wii, the biggest drop was in the Americas, where Wii now only averaged 93,000 or so per week instead of almost 200,000 per week in the absence of Wii Fit and Mario Kart. PS3 dropped 550,000 in Others putting the region only 30% better than Americas sales in Q2 09’ after performing 50% better in Others than the Americas in Q2 08’. PSP has quietly been down over half in the Americas and Japan for the second quarter, although it only dipped 35% in Others. PS2 is down everywhere for the quarter but the Americas, where the price drop helped the most. The system is ultimately down 45% worldwide. Xbox 360 saw its sales more than triple in Japan compared to last Spring, and rise half a percent or so in the Americas. But with Others down, the system performed slightly worse than last year as well, in line with Microsoft’s shipment results which were revealed on July 23.
Barring price drops by mid August, all systems should be down again for the next quarter except for DS which has a very strong line up in Japan (Dragon Quest IX, Blood of Bahamut, GTA: China Town Wars, Pokemon Heart Gold/Soul Silver) to offset any slight loss of momentum that may come in the west. Wii may have a flat to up August on Wii Sports Resort and Monster Hunter 3 but it probably still isn’t enough to beat the July to September 2008 quarter.
Part II, detailing software trends for the half year is now up.
Contact Vgchartz at jmazel@vgchartz.com
