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TVG discovers that the PS3 is far from dead and the casual market may not be as big as it seems…
- PS3 to overtake 360 in Christmas 2010
- Strong 5 year market growth
Common consensus suggests the Xbox 360 is increasingly staking its claim as the dominant console for hardcore gamers this generation, the Wii is striking out into unknown territory with spectacular results, and the PlayStation3 is languishing in third place.
Determined to see whether this is the case, we scrutinized financial reports from the three hardware manufacturers to gain a better understanding on where we currently are in this generation, providing an insight into factors such as the importance of AAA first-party exclusives and price cuts, along with a glimpse into what the future may hold.
The Xbox 360 has shifted 30.2 million units since its worldwide launch in November 2005, easily surpassing the sales of its predecessor.
Microsoft appears to know how to shift units during the crucial winter/holiday period. In 2006, 2007 and 2008 Microsoft enjoyed upwards spikes in sales in the holiday run-up, suggesting a regular pattern that is beyond coincidence. Of course, it's probably no surprise that these periods saw the release of Gears of War, Halo 3, and Gears of War 2 respectively. Further analysis of the Xbox 360 sales curve indicates that Microsoft made strategic price cuts during August 2007 and September 2008 during lulls in sales.
A staggered launch saw the introduction of Sony's format delayed in Europe, but global lifetime sales of the PS3 currently stand at 24.6 million units.
The startling thing to note from this, is the fact that not only is the PlayStation3 keeping up, but also gaining pace on the Xbox 360 (see combined graph below).
The steady growth of PS3 sales appear to be far less erratic in comparison to the Xbox 360, which leads to the conclusions that a lack of price cuts is noticeable and, perhaps more significantly, that AAA exclusives just don't have as much of an impact on hardware sales as they do on the Xbox 360. This leads us to believe that game exclusives are less of a system seller to potential PS3 adopters, who perhaps see Blu-ray functionality as a key motivating factor.
The Wii was launched to strong worldwide sales in November 2006, and has shifted over 50 million to-date.
The interesting thing to note from the Wii sales graph is that the sales curve sits underneath the line of best fit for a substantial period of its current life-cycle (between the months of May 2007 and November 2008). This is likely a result of the console's well-documented supply issues, which was rectified with increased stock towards the end of 2008.
The lack of a price cut is noticeable in the absence of any spike or subsequent drop in sales, something that Satoru Iwata Nintendo President has expressed caution about in the past. Also, the success of key first-party titles (e.g. Mario Kart Wii and Wii Fit) has been dictated by consistent sales over a long period, rather than high initial sales that quickly dissipate.
Using the lines of best fit and extending them as predictions for future sales, the resulting forecast is surprising to say the least. Without wanting to wade into too much mathematical mumbo-jumbo, the R² coefficient of each line-of-best fit sit very close to 1, meaning that each offers a good fit and a reliable means to form future predictions.
Based on the assumption that previous generations have lasted between four and five years, a forward look at predicted sales for January 2011 reveals that the PlayStation3 will edge narrowly in front of the Xbox 360 with 43 million sales, compared to 42.5 million units respectively. Provided Nintendo can continue to shift Wiis, we would expect its total sales to reach close to 83 million units by that stage.
The close proximity of sales between the Xbox 360 and PlayStation3 suggests that Christmas 2010 will be a fiercely fought and critical battleground for both Microsoft and Sony. We suspect that both manufacturers will have a considerable line-up of AAA heavyweights to stake their claims to superiority, but other factors will likely come into play.
A line-of-best fit, no matter how close, will always be an imprecise science. Further factors will play a part that are hard to gauge, including any serious price cut for the PS3, the rumoured introduction of the Slim PS3, Microsoft's potential game changing Project Natal and whatever Nintendo has up its sleeves.
Given such predictions, the total size of this generation's market will surpass 200 million units once each console has been on the market for five years. This exceeds the size of the last generation's total market of 156 million units five years after the launch of the PlayStation2. If that occurs, it's fair to assume that the hardware manufacturers have succeeded in a common goal: expanding the size of the market.
Here are the projected sales for the current-generation (five years after each format's launch) compared with the five-year cycles of previous generations:
PS1 - 71.82 million
Saturn - 9 million
N64 - 32.93 million
Total size - 113.75 million units
PS2 - 100 million
Xbox - 24 million
GameCube - 21.74 million
Dreamcast - 10 million
Total size - 155.74 million units (37%)
Xbox 360 - 42.5 million
PS3 - 52.6 million
Wii - 107.14 million
Total size - 202.24 million units (30%)
This seems to suggest that growth has actually slowed down compared to the previous generation. It also appears that despite the runaway success of the Nintendo Wii and the supposedly burgeoning 'casual market', this generation is characterised by much more of a level playing field than before.
2016 And Beyond...
However, this is a generation that both Microsoft and Sony insist has the legs to last longer than any previous generation.
"We look at our products having a 10 year life cycle, which we've proven with the PlayStation. Therefore, the PlayStation 3 is going to be a console that's going to be with you again for 10 years." Kaz Hirai Chairman and Group CEO of SCEI
"We firmly believe that the Xbox 360 has a life cycle through 2015." Shane Kim Corporate Vice President, Strategy and Business Development, Interactive Entertainment Business.
In which case, we can assume from our projected lines that the Xbox 360 will stand at approximately 86.3 million units and the PlayStation3 will pass 94.74 million. Should the Wii somehow manage to find the legs to last that long, it will stand at an incredible 190.46 million units, which is highly unlikely.
We suspect that Nintendo will struggle to continue selling Wiis after the traditional five-year cycle has passed. As a result, it wouldn't be surprising to discover that each of the formats would stand close to 100 million units at the end of each respective life-cycle, resulting in a more level playing field than any other generation.
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