The Farmer Report: May 2008 NPD Analysis

June 13, 2008

After taking last month off due to a family emergency, I’m back and ready to dissect the latest round of NPD numbers. First, I’d like to take a moment to again try and explain the purpose of these articles, since there was still some debate about them last time. These are not meant to be buyer’s guides. They are not meant to tell people to buy or avoid any game or system because it does or does not sell well. In fact they aren’t meant to sway people at all. Their purpose is to illuminate some of the larger trends that influence the industry and the decisions that are made relating to it. It’s a lot easier to understand why it’s taken so long to see a sequel to Beyond Good and Evil when you know the the first one didn’t sell well at all. Also Activsion’s attempt to churn out a new Guitar Hero game every other day makes perfect sense when you realize that Guitar Hero 3 has sold over 8 million units (and counting) across the four platforms it appeared on. If all you want to do is play games then these numbers mean nothing to you. But if you want to know the likelihood of a platform getting better software support, or if a game is more likely to get a sequel, then looking above your own enjoyment of a system or game to its impact on the industry as a whole makes perfect sense.

So with that matter hopefully resolved, let’s take a look at said numbers and see what they can tell us. The NPD calendar tracks May as the 4-week period starting on Sunday, May 4th and ending on Saturday, May 31st. The first number, as always, will be the month’s sales, followed by the weekly average in parenthesis, then April 2008’s sales with the weekly average, and finally May 2007’s sales and weekly average. We’ll start at the top of the list and work our way down.

Wii 675,100 (168,775)/714,200 (178,550)/338,000 (84,500)

This is actually a rather surprising number. After the Wii set the non-holiday, non-launch record in March and nearly matched that number in April, it slipped nearly 40,000 units from last month. Of course, such a slip is relative. The Wii still cleared 675,000 in a non-holiday, non-launch month, this is still the biggest May ever, and it was just barely shy of double last year’s number and – oh yeah – it nearly sold as much everything not made by Nintendo combined. But after reports that Nintendo attempted to maximize supply for the launch of Wii Fit, seeing any drop, even a slight one, is rather puzzling. The Wii has also narrowed the 360’s installed base lead to less than 100,000. It will almost certainly pass it after next month’s numbers come in, verifying Reggie’s claim that the Wii would take the lead in the US by July.

DS 452,600 (113,150)/414,800 (103,700)/423,000 (105,750)

The DS also had a terrific month. It showed a monthly increase of just under 10% and a year-over-year increase of a little over 5%, and those are both improvements over very good numbers in their own right. Clearing 400,000 routinely was abnormal even for the PS2 and only happened consistently in 2002, but the DS has made a habit of this number or higher. Unless Nintendo kills the system early (and with sales like this why would they) I believe that the DS will become the most popular console in gaming history, eclipsing even the PS2 in every territory.

PS3 208,700 (52,175)/187,100 (46,775)/82,000 (20,500)

First is the good news: the PS3 is selling around 250% what it did last year and showed a decent bump over last month. The bad news (and this applies to the 360 as well) is that any chance of a sales bump from the release of Grand Theft Auto IV has been negated (unless one accepts that sales would be even lower without GTA IV keeping the systems afloat). Otherwise this is a pretty good month and it shows what a massive turnaround the PS3 has made from last year. It can’t touch the Wii (but then again no system in history can) and a 20,000 unit lead won’t close the installed base gap with the 360 very quickly, but compared to what might have been (and a year ago likely would be) Sony is probably quite happy.

360 186,600 (46,650)/188,000 (47,000)/155,000 (38,750)

For Microsoft, however, there are more questions to be asked. The PS3 has now led the 360 in sales for three out of the first five months of 2008, sales are essentially flat month-to-month, and up only around 25% over last year despite the launch of GTA IV just five days before this retail month started (remember, last month didn’t show any huge sales bump either). The actual gains that the PS3 have made on the 360’s installed base lead are relatively negligible, but the PR perception that the PS3 is “winning” 2008 is becoming quite real; as is the perception of a far better defined games lineup going forward. As long as sales remain neck-and-neck the 360’s huge lead in installed base and their ravenous software-buying habits will sustain the console just fine, but unless MS makes a counter-move Sony has a very real chance to tilt the momentum strongly in their favor. MS already lost two great chances to cut the price and build momentum (first, right before GTA IV so as to make the 360 THE platform of choice for the game, and again right before the launch of Metal Gear Solid 4 on the PS3 to steal the game’s thunder), but such a move seems unavoidable if they truly want to gain marketshare. Their desire to maintain profitability puts them in a very precarious position, but they also need to move consoles and keep up their visibility, and right now they’re struggling to do that.

PSP 182,300 (45,575)/192,700 (48,175)/221,000 (55,250)

The PSP dropped once again from April (which in turn was a drop from March), as well as year-over-year. As the sales bump from God of War and Final Fantasy fades, there haven’t been any other releases to sustain sales, and overall PSP software sales have been abysmal. Beyond that basic observation, however, attempting to understand the trends that lead to higher or lower hardware sales is an arcane science that I have not yet cracked, and this month is no exception.

PS2 132,700 (33,175)/124,400 (31,100)/188,000 (47,000)

The venerable PS2 showed a bump over last month but a significant decline year-over-year. Its sales first showed a marked decline in March, which continued even more sharply in April before rebounding very slightly this month. In March I speculated that increased supplies of the Wii were skimming off some of the broader market that the PS2 and its $130 price point were appealing to, and said that if this were the case that PS2 sales would decline even further if Wii sales remained high. Although far from definitive, these numbers would appear to validate that speculation.

Now we’ll take a look at the software charts:

360 Grand Theft Auto IV 871,300
Wii Mario Kart Wii 787,400
Wii Wii Fit 687,700
PS3 Grand Theft Auto IV 442,900
Wii Wii Play With Remote 294,600
Wii Super Smash Bros. Brawl 171,100
PS2 Iron Man 130,600
Wii Guitar Hero III 116,800
DS Pokemon Mystery Dungeon: Explorers of Darkness 107,000
DS Pokemon Mystery Dungeon: Explorers of Time 102,000

Here, things get even more interesting. The most notable element is that the top 10, which has often been dominated by the 360 ever since the console launched, here only has a single title for that system while half the titles are on the Wii and 7 out of 10 are for Nintendo systems. Nintendo also names 3 additional Wii games and states that 19 out of the top 30 titles are for the Wii and DS, which is over 60%. So at bare minimum there are 8 Wii games in the top 30 (and probably more, if any Nintendo games made the top 30 but didn’t make the top 10), while there were only 11 slots to divide amongst the 360, PS3, PS2, and PSP. Publishers who ignore Nintendo’s two systems do so at their own per
il. It’s obvious that consumers on both platforms are buying software in absolutely massive numbers.

Otherwise, let’s move through the top 10. Again, the top 10 is such a small slice of overall sales that attempting to extrapolate the bigger picture is impossible and often leads to very misleading results, but it’s still worth briefly discussing. Grand Theft Auto IV showed strong legs on both the 360 and PS3 (albeit better on the 360), but does have a slightly higher attach rate on the PS3. However, given that it’s sold over 1 million more copies on the 360 than the PS3, I don’t think MS is much concerned about attach rate. That’s one of the luxuries of such a huge advantage in installed base. Mario Kart also showed excellent legs. Given the performance of Double Dash!! on the GameCube, expect this one to be a perennial seller for the Wii. Wii Fit hit with a bang, but fell short of Reggie’s claim of 1 million. Still, selling nearly 700,000 copies of a $90 piece of software with a fairly complicated hardware peripheral is very strong, and you can again expect legs through the holidays and beyond. Wii Play continues its stand in the top 10, and will stay there until Wii sales start to fade (which could conceivably be years from now). Smash Bros. also continues to sell, and like Mario Kart will keep moving units until the end of the generation (there’s a pattern here). The budget-priced version of Iron Man on the PS2 slipped into the top 10 despite being savaged in reviews. Launching at $30 (as opposed to $50 on the Wii and $60 on the 360/PS3), selling to an installed base of over 40 million, and being tied to an enormously successful movie has its advantages. The Wii version of Guitar Hero 3 also continues to show monster legs, having appeared in the top 10 every month since its debut except December. Finally the two Pokemon Mystery Dungeon games for the DS round out the top 10.

Looking ahead to June, the big question is can Metal Gear Solid 4 do for the PS3 what the other big 4, Grand Theft Auto, failed to do for the 360/PS3 and substantially boost hardware sales? On the one hand, it’s an exclusive, meaning the full effect will be focused on the PS3 only. On the other, MGS is big, but nowhere near as big as GTA and has been called a series in decline by some. We’ll also see how many copies of Wii Fit and how many Wiis Nintendo manages to ship, since they’ll almost certainly sell all of them. See you next month.