Gaming industry moving into the wrong direction???

[Al B. Sure!]

xbox 360 controller

[Asher]

A fad that has been going strong for four straight years?

Has been, or had been? It's certainly not growing strong now. Look at this year's Nintendo financial report compared to last year, not to mention their sales.

Four straight years isn't sustained interest? Four straight years of outselling the 360 by a 2:1 margin isn't sustained?

If it's no longer true, how is it sustained?

That is just about the entire length of this generation of consoles, how long do you think till the next gen starts up?

2013 at the earliest.

Btw, sales figures for the three:

1. Wii – 75.90 million as of 30 September 2010 (2010 -09-30)[update][8]
2. Xbox 360 – 44.6 million as of 30 September 2010 (2010 -09-30)[update][30]
3. PlayStation 3 – 41.6 million as of 30 September 2010 (2010 -09-30)[update][31]

So even though 360 was out a full year longer than the Wii, it still has about half the sales. Yet, Wii is a gimmick, hahah.

Any sales drop off at this point might be due to saturation instead of declining interest.

For most of that time, the 360 was significantly more expensive than the Wii.

Yes, the Wii was VERY MUCH in demand for several years. But as everyone finally became exposed to the console, the gimmicky nature became obvious.

Look at it in a more meaningful way: How many people, after buying the Wii, play it even quasi-regularly? The number is VERY small. The Wii was acquired by many people on the nature of its gimmicky play, but it did not sustain any real interest. Even though the Wii's HW was outselling the 360 2:1, care to guess who moved FAR more games in that time?

Do you know why? Because the Wii was gimmicky. Yes, it sold a lot of HW, but it was HW that collectected dust for the vast majority of people after the gimmick got old.

The Wii did not have sustained momentum on a micro level (everyone who buys it seems to lose interest pretty quickly), and it's clear that on the macro level it does not have sustained interest either.

[DinoDoc]

With Microsoft and Sony aping the "gimmick" should it really still be derided as such?

[Asher]

What does that have to do with anything?

It's clear you can make a lot of money with motion control gimmick. The waggle-style gimmick is old, people are burned out on it...which is why the PS Move is not selling well at all.

But the "body as a controller" gimmick from Kinect is fresh. MS can make tons of money from it.

You can still profit from gimmicks. Just ask Nintendo. Or the pet rock guy.

[DinoDoc]

This discussion on gimmicks has reminded me that I can't wait for the Nintendo 3DS if the reports thus far are close to being accurate.

[Bugs ****ing Bunny]

I refuse to play any game that requires me to flail around like a spastic. And Wii games are all aimed at simpletons.

[Asher]

This discussion on gimmicks has reminded me that I can't wait for the Nintendo 3DS if the reports thus far are close to being accurate.

Yes. 3D, the latest insufferable gimmick. It figures Nintendo is on that boat, heading full steam ahead.

[Bugs ****ing Bunny]

Fantastic. So you'll get to play some piece of lurid childishness in three sparkly dimensions.

[OzzyKP]

3D is going to stick around too...

[giblets]

Look at it in a more meaningful way: How many people, after buying the Wii, play it even quasi-regularly? The number is VERY small. The Wii was acquired by many people on the nature of its gimmicky play, but it did not sustain any real interest. Even though the Wii's HW was outselling the 360 2:1, care to guess who moved FAR more games in that time?

Just out of interest, could you provide some numbers for software sales?

[Asher]

3D is going to stick around too...

Not in its current incarnations.

[Asher]

Just out of interest, could you provide some numbers for software sales?

These are only as of December 2009. As you may know, the Wii has had a terrible 2010:


This is from March, where we already saw the writing was on the wall for the Wii:
http://www.gamasutra.com/view/news/27665/Analysis_Examining_Declining_Wii_Software_Revenue_ In_2010.php

Analysis: Examining Declining Wii Software Revenue In 2010

In our NPD analysis this month, we've noted a drop in total software dollars for the current-generation systems – the Wii, Xbox 360, and PlayStation 3. However, there is more detail within those figures that is worth examining.

As Michael Pachter has noted over the past few months, software sales on the Xbox 360 have remained flat relative to the same period last year while PlayStation 3 software sales have experienced solid double-digit gains.

Simultaneously the year-to-date revenue for Wii games is down nearly 25%, from $500 million to around $380 million. At least $60 million of the difference can be accounted for by the drop in demand for Wii Fit and Wii Fit Plus.

In fact, across Nintendo's key evergreen first-party franchises, it appears that sales are beginning to weaken somewhat.

(Some analysts believe that this may actually be due to shortages of hardware-reliant Wii SKUs such as Balance Board and MotionPlus devices, but we'll know more about this as the year continues if we see a bounceback.)

The graph below shows just how the January – February software revenue picture has played out in 2009 and in 2010.

(Note that the overall rankings remain the same (that is, the Wii is still leading the Xbox 360, which is itself ahead of the PlayStation 3), but the race has tightened significantly.)



Pachter raises a red flag on the Wii's software picture, saying that the problem “runs deeper” than just the recent hardware declines. He observes that Super Mario Galaxy 2 is the only major software release in the near term, and that he believes that Wii owners have become more discriminating about their software purchases (as shown in the recent weaker sales of previously robust titles like Wii Fit and Wii Play). Moreover, he notes that the Wii software tie ratio is declining over time – an indication that hardware purchases are ahead of software.

This last point – on the tie ratio – deserves a bit of explanation. For a system like the PlayStation 3 where hardware sales are rising quickly year-over-year, a declining tie ratio is to be expected. But if Pachter in fact means that the Wii tie ratio is declining through January and February of 2010 – a period when its hardware sales are down year-over-year – then that means that software sales are also falling, and perhaps quite dramatically.

This is where one could make an argument that a different mix of first- and third-party software, like what one finds on the Xbox 360 or the PlayStation 3, helps smooth out some of the software dynamics from month to month.

As an example, we know that 95% of the Xbox 360's software revenue during 2010 has come from the sale of third-party software. Contrast this with the situation the Wii, where we can estimate that at least 33% of software revenue in 2010 has come from first-party titles, based only on the titles appearing in the top 20.

It is no surprise, therefore, that Microsoft is keenly focused on making third-party publishers welcome on its platform. In a month when third parties falter, so too will Microsoft's software revenues and thus Microsoft's licensing fees. In early 2010 we are seeing that Wii software sales have dropped, probably driven by the slowdown in first-party Wii software titles.

We expect that Sony's software mix falls somewhere between these two extremes. After all, it had three first-party titles in the top 20 in February, and will no doubt add God of War III in March.

Meanwhile, as on the Xbox 360, third-party titles like Modern Warfare 2 and BioShock 2 continue to sell reasonably well on the PS3. Unfortunately for Sony, they still have the lowest software revenue overall, which is a humbling position for the company that led so decisively during the PlayStation 2 era. So as Sony and Microsoft ramp up their motion control platforms later in 2010 and the Wii consumer (presumably) becomes more discerning, there is at least some possibility for a fundamental shift in momentum.

Aggressive cuts by Sony have pushed Microsoft to shuffle the cost of its core hardware. As a result the Wii no longer enjoys the same price advantage that it once had, and soon it will also cease to be the only motion control system on the market.

Should Microsoft or Sony capture any mindshare with the casual consumers brought to the market by the Wii, games like EA Sports Active 2 and Ubisoft's Just Dance could sap some of the sheen of exclusivity previously held by the Wii.

[Asher]

In July it got worse:

http://www.gamasutra.com/view/news/29220/Analysis_Dramatic_Wii_Software_Decline_Dragged_2010s_Sales.php

Analysis: 'Dramatic' Wii Software Decline Dragged 2010's Sales

Were it not for the decline in hardware revenues, the perception that the industry is struggling might not be so intense. After all, software revenue grew year-over-year in May 2010 and is down year-to-date by only 6.7%.

However, there is still a lot of movement under the surface, and it is worth breaking the figures out in a bit more detail.

First, it does appear that software unit sales have eroded further in the first five months of 2010 than they did in the first five months of 2009, according to comments made by Wedbush's Pachter.

As the figure below shows, while average weekly software unit sales declined by only 3.2% in the January – May period of 2009 (compared to the previous year), average weekly software unit sales declined a further 9.5% for that period of 2010. (Caveat: The figure below has a vertical axis range of 1.0 to 5.0, to highlight the difference in the rates.)

How big is that differential in absolute terms? Here's one way to view it: if each game in the top 10 during May 2010 had sold three times as well, the industry in 2010 would still not have caught up to level of software unit sales it had achieved year-to-date in May 2009.

Total software revenue has declined only 6.7% this year, noticeably better than the nearly 10% fall in unit sales. The difference, of course, is that consumers are buying slightly more expensive games, leading to an increase in the average selling price (ASP) and lessening the blow that dropping unit sales has had on total revenue.

According to comments made by Wedbush's Pachter, the current situation appears to be a rather interesting reversal of fortunes for Nintendo's Wii and PlayStation 3. In all but two of the last nine months, Wii software revenue has dropped year-over-year by double-digit rates; in the other two months the Wii saw a 10% increase (December 2009) and a more modest 7% decrease (March 2010).

Meanwhile the PlayStation 3 has demonstrated double-digit software revenue increases in all but one of the last nine months; in that other month (December 2009) its year-over-year increase was only 8%.

During that same period the Xbox 360 has seen some amazing months (like November 2009, with the launch of Call of Duty: Modern Warfare 2) and some dismal ones (like January 2010, when its year-over-year software revenue was down by over 60%).

A picture tells the story far more eloquently. Here is our estimated current-generation console software revenue for the first five months of 2009.





The change is striking: Sony's PlayStation 3 has taken up every bit of marketshare ceded by Nintendo's Wii. Perhaps as important is this fact: the PS3 generated as much software revenue as the Wii in the first five months of 2010, but did so with only 40% of the installed hardware base of Nintendo's console.

If Wii sales have fallen, and handheld software sales have contracted, this does much to explain the increase in the rising prices of software sold at retail. Outside of handheld software, which has been traditionally priced lower than console software, the PlayStation 2 and Wii are the two consoles with the lowest software ASPs.

With the PS2 now accounting for less than 5% of the software market (by revenue) and the aforementioned drop in Wii software sales, the Xbox 360 and PlayStation 3 contributed more to software's average selling price. According to Pachter, software reached an average price of $41.17 in May 2010, its highest value so far this year.

While the Wii may be slowing down, the platform has still moved a tremendous amount of software in its time on the market. To get a handle on just how much Wii software has been sold at retail so far in the United States, we looked at the tie ratio figures for each of the current-generation consoles, provided exclusively to Gamasutra.



As the Xbox 360 has been on the market for a year longer than the other two platforms, it makes sense to compare to its tie ratio in May 2009, which we estimate was around 8.4.

Anita Frazier, analyst for the NPD Group, cautioned that these figures “do not make an allowance for the Wii Sports pack-in with the hardware”. It also will not include the copies of Wii Sports Resort bundled with newer Wii hardware.

Utilizing these figures and the sizes of each platform's installed hardware base, we can estimate each system's total software sales. To produce the table below, we've drawn on tie ratio figures released by the NPD Group and hardware manufacturers over the past several years.



Around May 2009, about the same number of units of Wii software had been sold as Xbox 360 units, despite the latter platform having had an additional year on the market. Now in May 2010 the Wii appears to have a lead of around 17 million units. During the same period, the PlayStation 3 has fallen further behind both platforms.

Even if the PlayStation 3 software situation has changed, and the Wii has also slowed down, Sony's platform has a long way to go before it looks more comparable to its peers in the total software sold.

Finally, we examined a metric we first encountered in the posts of NeoGAF poster JoshuaJSlone: average weeks per game purchase. The basic idea is to estimate how often owners of a particular platform purchase a new game, estimated by dividing a platform's total software sales by the number of weeks of ownership for each platform (computed as the convolution of the installed base p(t) with the linear function t).

Before giving the results of these calculations, be aware that these figures will almost always increase as a system ages. So for a new system with an energized base of owners, the average time between new software purchases may be very short. Obviously, in the long run, when a system nears the end of its life, the average time between purchases will grow longer.

From our calculations, each Xbox 360 owner had been a buying a new game on average every 8.1 weeks in May 2008. By May 2010, that had increased to 12.2 weeks (for the entire population of Xbox 360 owners, measured from the time of the system's launch).

The same metric applied to the Wii showed that its base of owners had been buying a new game every 6.7 weeks on average in May 2008, but that the time between purchases had grown to 12.3 weeks as of May 2010. The same figures for the PS3 are 7.6 in May 2008 and 11.1 in May 2010.

Along with all the other metrics we've examined above, the figures above lead one to the same conclusion: Wii software sales are slowing down, and they're slowing down more quickly than they are on other platforms.

The bottom line on 2010 software: By several measures – year-over-year growth, tie ratios, and weeks per game purchase – the Wii software market appears to be slowing dramatically. This has contributed to the decline in revenue in the software segment, even as the PlayStation 3 has increased its marketshare and offset some of the losses due to the Wii. The Xbox 360 continues to reliably generate software revenue.

Note that these numbers for the Wii will look far, far worse in the next batch of analysis. The 360 has seen Halo Reach and the new Call of Duty released, and the PS3 had the new Call of Duty also. Both of those had staggering software sales numbers, while the Wii's numbers have continued to slump noticably.

[Al B. Sure!]

Asher's interest in video game sales is almost as bad as Heraclitus' interest in Ashkenazi Jews and intelligence

[Asher]

It's an interesting and dynamic market which, until very recently, had accurate, detailed and publicly available sales figures.