Recap: Xbox 360 squeezed between the Wii and the PS3

Posted by Mark Raby

Opinion – It has been more than nine months since the Sony PS3 and Nintendo Wii were launched and we are seeing first trends how well the consoles are competing with Xbox 360, which has been on the market since late 2006. It's time to have a closer look at the numbers to see what you can expect for the holiday season.

No matter how you look at the current sales numbers, the fact that the Xbox 360 has been around more than twice as long as the Wii and PS3 gives the console an undeniable advantage. More people own the Xbox 360, it has a more defined online gaming platform, and its game catalog dwarfs that of its competitors.

However, US sales for the console have been rather disappointing throughout all of 2007 so far, and the Xbox 360's next-gen market share has been more than halved in the nine months since the Wii and PS3 entered the game. It is a matter of fact that competition means that Microsoft had to give up market share, but we were a bit surprised to see how quickly that happened within nine months.

In the end, the U.S. is the Xbox 360's bread and butter. If it loses here, it loses. One analyst group, VG Chartz, already puts the Xbox 360 behind the Wii in global unit sales.  And according to NPD Group's most recent US data, the 360 just finished its worst month in over a year, selling just 170,000 units in July.

Source: NPD

Microsoft recently announced moves to put more appeal behind the Xbox 360, including a price cut and those special edition 360s and there is very little doubt that a blockbuster game such as Halo will help to improve those sales numbers at least for a few months, espe3cially when we are heading into the Christmas season.

More interestingly, however, Microsoft will try to invade Nintendo's territory with more family-friendly games to bridge the gap between the traditional gaming crowd and new gamer groups that just have begun to discover video gaming. We have some doubt that the Xbox will be able to be everything to everybody, but only time will tell, if Microsoft is able to gain markets hare by packing more and more versatility into its product.

Nintendo's Wii has been a steam train from the beginning. And it still surprises us here. I personally thought the novelty would wear off within months as gamers began to demand for more epic games on the Wii, but that has certainly not been the case.

Though caught up with everyone else in the post-Christmas slump, the Wii was the first to bounce back in the second half of 2007 and it surely had the strongest performance of the three consoles. With seven months in a row as the unmatched leader in console sales, the Wii looks poised to take on the holiday season with full speed. The Wii's relatively low price most likely is a good reason for the higher sales numbers; but the continued dominance of the sales charts also indicates that the company has a good idea of where the growth opportunity is: It surely looks like that console is building a solid new customer base in a market that has been neglected (so far) by the Xbox and Playstation.

The month of December 2006 is crucial in understanding the dynamics of the holiday season last year.  It was the first time Microsoft's console sold over one million units in the U.S. in one month, compared to only around 600,000 for the Wii and 500,000 for the PS3.  

Of course, those PS3 and Wii numbers represent sell-out numbers.  There was a supply constraint there that wasn't present for the Xbox 360 – which resulted in many people who did not get a Wii or a PS3 eventually opted for the Xbox. Even today, Wii shortages continue to stunt the potential sales growth of the console.

Source: NPD

Despite that, the Wii is practically singlehandedly draining the Xbox 360 market share, with PS3 sales essentially flat all year so far and Xbox 360 sales on a continuous slump virtually every month so far in 2007.

By holiday 2007, Nintendo said it plans to have more than adequate Wii supply. The PS3 will also be well stocked and, despite its lackluster performance so far this year, could easily make it back to the top of the holiday wish lists this year. It's going to be much tougher for the Xbox 360 to stand out as the only viable game console for the average consumer, we believe.

The Xbox 360, which could be referred to as the establishment console, will still be in the limelight.  Sure, Halo 3 will reach colossal sales and will be in the running for the best-selling game of the year.  Remember, though, that Halo 3 is a big title among Halo fans and that's it. Aside from the few die-hard fans who haven't purchased their Xbox 360 yet, Halo 3 is not likely to drive console sales in a magnitude that the Wii and even PS3 may be able to accomplish with their upcoming titles.

In our opinion, Wii has more potential for console adoption because the "non-gamer" crowd is still discovering the console and that will kick up for the holidays.  Also, the average consumer still has just not been able to go to a store and buy the console.  That will change for the latter part of this year, according to claims made earlier by Nintendo.

The PS3 has stayed quiet because onlookers continue to wait for a killer app.  If Sony is able to deliver that in the next few months with Killzone 2, Ratchet & Clank Future, Warhawk, Lair, or any other upcoming title, it could open up the floodgates to all the fence-sitters. However, we also believe that Sony's game startegy is somewhat flawed as iot is well behind market development. Graphics is only one side of the game. With a big focus on first-person shooters the company is just going after a lot of gamers who already may have an Xbox, Xbox 360 or a PS2 at home – the traditional gamer crowd. It is not opening up itself to new customers.

The Xbox 360 has no such defined demographic that it's still trying to reach.  With games like Scene It and the new Viva Pinata, the Xbox 360 will push to appeal to the casual gamer, but the years-long battle to reach that audience has historically proved very difficult for Microsoft.  There are much fewer people intently watching the Xbox 360, ready to jump on it when there's a reason to.  Microsoft's game is now to reach brand new consumers, a much more strenuous task.


Source: NPD; * - The Gamecube version of Zelda: Twilight Princess was included in the top 10 games of December 2006 and January 2007

It's also interesting to look at what platforms are actually doing well in game sales.  Sony still has a success story with the Playstation 2, of the aggregate 90 games from the top 10 list over the past nine months, 25 of them have been PS2 titles.  Meanwhile, only three PS3 titles have appeared, and no PSP games have made the top 10 in the past nine months.  The Xbox 360, meanwhile, picked up 27 of those 90 spots, making it the winner.

Curiously, the Wii has not hit the charts all that much.  Its best month was in June where it accounted for four of the top 10 sellers.  Usually, though, it's just one big game that carries the Wii through, and in April even though only two Wii games were in the top 10, they were #1 and #2.

For much of the first half of 2007, the total number of Xbox 360 consoles in the US more than doubled the number of Wiis.  Even so, many big-name Wii games outsold big-name Xbox 360 titles, like in May when Mario Party 8 and Wii Play both outsold Forza 2 and Spider-Man 3 on the Xbox 360.

The Wii has an obviously strong attach rate and that factor is key in the holiday season.  While Microsoft pumps out a myriad of titles to try to cast out one big game to every genre, and Sony focuses deeply on shooter titles, Nintendo plans to release games, each of which it hopes will appeal to every single Wii gamer. That's the heart of where the Wii's strategy is and so far it has worked tremendously.