Note: These observations are based on raw NPD data for the month of January. Due to the sensitive nature of the data, certain specifics have been omitted.
Here are the hardware rankings, based on unit sales, for January 2012:
- Xbox 360 (270,000 units sold)
- PlayStation 3
- Nintendo 3DS
- Nintendo Wii
I talked about the Xbox 360 last night in my preliminary analysis, and the unit sales number had already been made public. There's not really much to add to what I said. I expected a Year-over-year (YOY) decline, but a 29% drop was sobering to see. The "Kinect effect" seems to be waning, and the lack of new software combined with such a big year for Xbox 360 hardware sales adds up to a down month. Perhaps it's also a lesson for other analysts to dial back bullish projections for the Xbox 360 moving forward. I think that YOY numbers will continue to be on the negative side for most of 2012, although I don't think the declines will be this pronounced.
I may have underestimated sales of the PlayStation 3, but its second-place finish is a hollow victory. Sales were the worst ever for the January period, and total hardware/software sales declined over 28% from last January. It's notable that the PlayStation 3 pulled ahead of the 3DS, but I'm not convinced that the ranking change is due to strength for the PS3 as much as it is a correction for the 3DS after a highly successful Q4. We'll see if fortunes change for February—or if PlayStation 3 money goes to the Vita. I expect continued YOY declines for at least the remainder of Q1 for the PlayStation 3.
I was far too bullish with my predictions for the 3DS. I expected more units to sell, given the evergreen nature of Mario titles, but 3DS unit sales dipped nearly 90% versus the previous month. That's a hefty drop. It's tough identify any one cause for the decline, though it's likely that lack of new games in January and a slowdown in general video game-related spending are the biggest factors. I don't think that interest in the upcoming launch of the Vita played a significant role, but we may know more after we see launch numbers. There aren't any YOY numbers to consider yet for the 3DS, but some notable software releases are due in February, including 3D versions of Tekken and Metal Gear Solid 3.
I'm not sure what Nintendo does with the Wii at this point. Short of dropping the retail price to $100 and trying to make one last stand before the Wii U arrives, I don't see much to drive Wii sales. Perhaps we'll see a bump in February (which is a common trend), but beyond that, Nintendo has a decision to make. Do they focus on the 3DS and gradually sell through Wii inventory ahead of Q4, or do they act sooner with a price cut and additions to its Wii Select reduced price SKU line? I would say that a price cut should happen sooner, maybe in April or May, but it's tough to gauge what Nintendo's strategy will be. For now, keep an eye out for a price cut, but don't count on it just yet. Expect YOY declines to continue for the Wii for the foreseeable future as sales continue to wane.
Overall, while it is too soon to panic, it is prudent to start watching for sales trends. I expect that new software releases and the launch of the Vita should combine to stem declines in hardware unit sales, but nothing is certain. If YOY numbers continue to sink into double-digit negatives through the rest of Q1, we may start seeing rumblings about price cuts. I'm still not convinced that new hardware platforms are the cure-all for trends like this, but I'm also skeptical of Microsoft's insistence that we don't see any info on its next platform at all this year. I think it's obvious that something exists now, and it's a question of when Microsoft decides to make its move. Sony is a bigger question mark, but I'll tackle that in another column.