Jun 2010 NPD wrap up

Only two weeks after the delayed May data released the June data came outmaking my already extra busy July extra-er busy. Here is the data NPD publicly released:

Other data for Jun they revealed below with comps from Jun 2009:

• Total industry sales fell 6% $1.1 billion
• Software fell 15% to $531.3 million
• Hardware sales grew 5% to $401.7 million
  
• Accessories rose 6% to $169.6 million
• June 2010 YTD sales were down 9% compared to 2009, whereas May 2010 YTD was down 9% (so a slight improvement over last month)
  

Hardware sales compared to May 2010:

• DS sold 510.7k units vs. 440.8k units in May
• Wii sold 422.5k units vs. 334.8 units in May
• PS3 sold 304.8k units vs. 154.5k units in May
• 360 sold 451.7k units vs. 194.6k units in May
• PSP sold 121.0k units vs. 59.4k units in May

Since we are halfway through 2010 reported sales let's take a look at the console hardware numbers NPD has freely released since the beginning of last year. The picture below is a bit blurry but it gets the point across. It shows monthly NPD unit sales from Jan 2009 through June 2010 with the years side by side by each console. This is a fairly common way of looking at year-over-year hardware sales.

In 2009 the 360 was growing its lead on the PS3 until Sony dropped its main SKU's price to $299 in October. While it still finished the year behind, the PS3 did start catching up month-over-month and even outsold the 360 in Dec'09. In 2010 the 360 continued to beat out the PS3 each month but the gap compared to 2009 wasn't as nearly as large. The positive story for both consoles is that through Jun 2010, YTD sales are ahead of the same period in 2009. The 360 is 19% ahead and the PS3 is a very robust 42% ahead. A big part of the PS3's growth is not so much because of Kevin Butler and big 1st party releases like Uncharted 2 and God of War III, but because of the Oct 2009 price cut. This brought many core consumers on board that had been waiting, while the core SKU of the 360 has been essentially $299 for two years now. Thankfully that old 360 core console is rapidly fading away at a discount, but it is because the new 360 slim debuted at E3 in June...but at $299. So effectively, despite having a great new SKU, the primary 360 console appealing to core consumers is still $299. The big caveat is that in addition to getting a 250g HD (compared a tiny 20g HD in the original 360), the slim has built in Wi-Fi. So you don't have to pay an additional $100 for the Wi-Fi adapter.

Below is another (slightly less blurry) chart showing 2010 YTD sales growth over 2009 YTD. No, that is no optical illusion; the horizontal axis is not downward sloping. Wii sales growth has been negative all year while the other two have been positive, making the axis appear slanted. The chart tells you that the PS3 is still benefiting greatly over 2009 thanks to the price cut. Come October, though, it may struggle to maintain such high comparative growth numbers. The 360, without a price cut last year, has had much lower growth until June with the uptick coming from the slim as mentioned above. But many of the 360 hardware units sold in June were replacement units or of the old model's inventory being sold at a discount, i.e. the old 20gb model that was so prone to the RROD. (My first 360 was repaired twice, then it was simply replaced. Thanks Microsoft! At least the customer support people in India were actually very helpful and nice on the phone about it.) Michael Pachter of Wedbush had a pretty good summary of the situation at IndustryGamers but that article didn't have a chart to explain it so I thought I'd add my two cents to it.

Pachter believes that the 360 hardware sales will start "plummeting" without a price cut, but that is generally the norm for consoles when they stay at one price level for too long. Thinking back to the prior generation, the PS2 and Xbox each debuted at $299, though the PS2 in late 2000 and the Xbox (and some other console called the "GameCube" from a company called "Nintendo" but I have never heard of either) in late 2001. Continuing our theme of blurry charts, below we see the last generation's monthly average hardware sales price (ASP).

Last generation, without a proliferation of different SKUs of each console, when either Microsoft or Sony cut the price the other had to follow soon after. Essentially the consumer had only one model of each platform and if one dropped its price it would have a clear sticker shock advantage over the other forcing a response.

But this generation both the 360 and PS3 had multiple different models making it easier to have a range of pricing options to communicate to the consumer. In other words, even if the core SKU of the 360 was priced at $299, having a barebones "arcade" SKU at $199 enabled Microsoft to say "you can get a 360 for under $200." Sony couldn't say this. What became apparent this generation, as evidenced by the many versions of the DS, was that game consoles (for home or portable) were no longer a one model affair. Back in the day there was a GBA and then a GBA-SP. That was it. Today there are 10-to-the-google models of the DS with about seven dozen 360 models and pi-squared number of PS3 models. All that confusion made for some oddball average sales price compared to last generations. Ironically, the Wii is the only console this generation to have a simple SKU plan with clear pricing.

Somehow in all this SKU confusion Sony, for better or worse to their hardware unit sales, managed to keep the the PS3 price at $399 and up until Oct'09, setting a record for the longest delayed price drop after a primary competitor dropped its price. Given how many, including industry analyst Michael Pachter and even myself, believe that Microsoft is going to have to drop the 360's price by this time next year to regain its sales momentum, an interesting question is what will Sony's response be? Then factor in the forthcoming Kinect and Move addons. Those aren't exactly cheap (generally $150 or $100 to existing platform owners...and more than $100 for some Move applications on PS3) and the price of entry for new consumers for the platform plus these accessories may be a deterrent (did anyone mention the economy, stupid?).

Where does this leave us? It leaves us expecting price cuts by mid 2011 or else things are going to get funky in Microsoft-town...and Sony-town.