The Farmer Report: November 2008 NPD analysis

December 15, 2008

NPD has released its November numbers and, for the first time in quite some time, they’re actually surprising and interesting. Historically, October is when the holiday shopping season begins to pick up steam, but the sales numbers traditionally skyrocket in November; a great November is crucial for a strong finish for the year. This year’s had definite winners, losers, and systems that simply held their ground, so let’s take a look and see what we can turn up.

The NPD retail month of November was a 4 week month that started on Sunday, November 2nd and ended on Saturday, November 29th. Since November was a 4 week month but some are 5 (including the next month, December), most of the comparisons and trends will be drawn using weekly averages instead of the monthly totals. This allows for a more accurate understanding of what’s happening that isn’t broken by different months covering different time spans. We’ll start at the top of the list and work our way down. The first number will be this month’s sales, followed by the weekly average in parenthesis, then last month’s sales with the weekly average, and finally November 2007’s sales and weekly average.

Wii: 2,040,000 (510,000)/803,000 (200,750)/981,000 (245,250)
Only two consoles have ever broken two million systems sold in a single month: the PS2 in 2002 and the DS in 2007, and they both did it in December. That’s notable for two reasons. First, December traditionally roughly doubles November’s sales, meaning that as high as November is, sales get another huge boost in December. Second, December is 5 weeks compared to November’s 4, giving the systems 20% more time to sell. If the Wii maintained this weekly average in December, it would have cleared 2.5 million systems, giving it the second best month of all time behind only the PS2’s December 2002 when it moved 2.7 million. And the Wii did those numbers in November. For further comparison, the previous non-December record for any console was the DS in 2007 at 1.53 million and for a home consoles was the PS2 in 2002 when it sold 1.3 million. The Wii completely shattered these records by nearly 33%. Nintendo seriously increased production and shipments, and it shows. No system in history has ever moved in these kinds of numbers, and the Wii is STILL supply-constrained. Not as much as it used to be, true, but they’re still hard to find on store shelves.

DS: 1,570,000 (392,500)/491,000 (122,750)/1,530,000 (382,500)
The DS edged out its own non-December record to take the second highest non-December month ever behind only Wii. The 1-2 combo of the Wii and the DS now hold the three highest non-December months in NPD history. Combined Nintendo moved just over 3.6 million consoles last month. Unprecedented, astonishing, take your pick. Such hyperbole doesn’t some nearly so over-the-top in these cases. The gaming industry has never seen anything like these two systems before.

360: 836,000 (209,000)/371,000 (92,750)/770,000 (192,500)
Microsoft has every reason to be pleased here. They more than doubled October’s sales and even made a slight bump over November 2007. Historically a console’s third holiday season (at the end of its second full year on the market) has been its biggest, but the 360 managed to edge out its 2007 numbers here. It’s not a huge increase, and obviously the Wii is in another league entirely, but given the current economic conditions, merely holding steady is a victory all its own.

PSP: 421,000 (105,250)/193,000 (48,250)/567,000 (141,650)
Here we begin to enter the realm of the have-nots. After a strong year of hardware sales, the PSP has now had sales decline year-over-year for 3 straight months. They did more than double from October, in keeping with traditional holiday sales boosts, but these are not spectacular numbers. They’re even more concerning in light of the sales decrease for the PlayStation brand as a whole.

PS3: 378,000 (94,500)/190,000 (47,500)/466,000 (116,500)
There’s pretty much no positive way to spin the PS3’s November sales. After 10 months of impressive year-over-year gains for the PS3 (although given how disastrous 2007 was, such gains were necessary simply to remain relevant) the PS3 actually had a roughly 20% DROP over last year. Granted, November 2007 sales were fueled not only by the holidays but by the price drop to $399 as well, but this is still a very poor prognostic indicator for the PS3 going forward. 200 year-to-date sales still top 2007 over a comparable time frame, but otherwise Sony has to be very concerned, even as they remain financially unable to give the PS3 the price drop it so desperately needs.

PS2: 206,000 (51,500)/136,000 (34,000)/496,000 (124,000)
The PS2 is continuing its pattern of showing a substantial year-over-year drop, but that shouldn’t surprise anyone. The new systems in general are now the clear leaders in the market, and the 360 and Wii in particular are selling extremely well and are now bearing the brunt of the home console business. Nothing lasts forever, and even the legendary PS2 is no exception.

Taking a step back and looking at the big picture, several things immediately jump to the front. First are the incredible sales of the Wii, which continues to shatter every record in the history books. At the end of November, the Wii has sold 8.05 million units. For comparison, the PS2 sold 8.39 million in all of 2002, which is the current record for any console. The Wii is only 350,000 units behind that. Even if weekly sales DECLINE by 20%, the Wii will still be the first console to ever sell 10 million units in a single year. At the high end, if Nintendo ships this many (which I doubt they will), if December shows the usual double of November it’s possible for Nintendo to sell 4 million in December, giving them 12 million for the year and an average of over 1 million/month for the entirety of 2008. I highly doubt this will happen, but the November numbers indicate demand is high enough for this to occur if the product was on store shelves.

The other observation I find striking is that the three non-Sony consoles all increased sales over 2007 (even if only slightly for 2 out of the 3), while all three Sony consoles showed significant year-over-year declines. In addition, the three non-Sony consoles are the top sellers, while the three Sony system are all on the bottom of the list. The PS3 dropped the least, but even it saw sales drop off by over 20%. PSP sales dropped off by nearly 40% and PS2 sales dropped by more than half. Sony’s gaming division is already deep in the red both for the last quarter and this generation overall, and these current numbers won’t do much to help them out. I’m not sure how things will play out here, but right now they’re suddenly on very slippery financial ground, and there aren’t many options to get them out of it.

So with all that said, let’s turn our eyes to the software charts. First though I’ll put in my usual caveat that extrapolating the larger software market from the top 10 is impossible, and any attempts to do so will lead to wildly inaccurate perceptions of what’s going on. The top 10 list tells us quite a bit about the games that did make it and nothing about those that missed out.

1. 360 Gears of War 2 1,560,000
2. 360 Call of Duty: World at War 1,410,000
3. Wii Wii Play W/ Remote 796,000
4. Wii Wii Fit 697,000
5. Wii Mario Kart 637,000
6. PS3 Call of Duty: World at War 597,000
7. Wii Guitar Hero World Tour 475,000
8. 360 Left 4 Dead 410,000
9. PS3 Resistance 2 385,000
10. Wii Wii Music 297,000

The 360 leads things off with the top 2 titles on the charts. Gears of War
2 comes in first with a substantial lead over the original. Historically, sequels do tend to be more front-loaded than prior entires in a series, so it remains to be seen if Gears 2 will outsell the original, but it’s off to a great start here. Call of Duty also flexes its muscles with numbers only barely behind last year’s November chart topper: Call of Duty 4. It appears that switching developers to Treyarch (of Call of Duty 3) and returning the setting to World War II did little to dampen the initial enthusiasm for Activision’s mammoth franchise. Again legs will be an issue, as CoD 4 topped the charts all the way into February of this year (4 straight months), but right now it’s off to a great start.

Slots 3, 4, and 5 are taken up by the Wii’s no legendary trio of Wii Play, Wii Fit, and Mario Kart. Wii Play is by far the largest-selling single SKU that NPD has ever tracked (the previous record holder was the PS2 version of Grand Theft Auto: San Andreas). Wii Fit sold more six months after it released than in its debut month. And Mario Kart has quietly cleared 4 million in sales and is on track to be the top seller in the history of the franchise by the middle of next year.

Next comes the PS3 SKU of Call of Duty 5, selling substantially more than the PS3 SKU of Call of Duty 4 did in November 2007. Combining 360 and PS3 sales, Call of Duty 5 actually launched with more total sales than did Call of Duty 4 last year. Next up is Guitar Hero World Tour on the Wii. Mimicking last year, which saw the Wii SKU of Guitar Hero 3 debut behind the 360 version in October but sell higher in November before moving on to become by far the highest selling platform, the 360 SKU of World Tour came out slightly higher last month but this month comes in well behind the Wii’s. Left 4 Dead had a great start on the 360, especially as Valve remains primarily a PC developer and sales of this title are definitely not limited to the 360. Resistance 2 launched to Insomniac’s best first month ever, but is definitely not the heavy-hitter Sony appeared to be banking on. That goes double if rumors that Sony pushed back Killzone 2 to give Resistance room to breathe are true. Finally, rounding out the chart is Wii Music, coming in at number 10. After a soft start that saw it sell under 70,000 in its debut month, Wii Music rebounded to more than quadruple its sales in November, a feet nearly unheard of in the gaming industry.

Next month we close out the year with the biggest month of all. If November numbers historically come in at 2-3 times October’s, December historically doubles again November’s. The PS3 will almost certainly come in under 1 million given its weak November. The 360 needs to slightly top its December 2007 sales (which were 1.26 million) with 1.35 million to have 2008 come in with higher total sales than 2007. Given their slight improvement over 2007 in November I think they can pull it off, but it will be a close shave. Meanwhile we’ll find out if the Wii can top the PS2’s December 2002 all-time record of 2.7 million units in a single month. The demand is unquestionably there, but will the inventory?