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NewsTotals, Statistics, and Analysis of the 2008 World Videogame MarketBy Jacob Mazel 07th Jan 2009
Jacob Mazel
Market Changes from 2006-2008
After a 2007 in which Nintendo dominated hardware sales and software sales worldwide, many questioned whether that success would be sustainable into 2008. For many industry analysts, 2007 had been a very difficult year to predict because there were three transitions taking place. Sony’s PS2 was in the process of being replaced by Nintendo’s DS as the top machine for total software sales worldwide. Nintendo determined that it could handle supporting two platforms better than three or four in 2005, and this allowed for all the top software from the firm to concentrate on only two platforms over a period of two years. Sony at the same time had the challenge of expanding its resources to support three platforms, and trying to determine which platforms to place the projects on. The major trend in Japan in 2005 of PS2 dominance waning due to the emergence of DS dominance left the 2006 videogame sales muddled. Below is a representation of platform sales out of all platforms sold in 2006:
In a year when 60 million videogame platforms were sold, Nintendo managed to juggle its four platforms just well enough to grab over 50% of all videogame hardware units sold. For 2007, many expected that a) the market would grow, and b) that with price cuts Microsoft and Sony would be able to drop Nintendo’s share by attracting more mainstream consumers. Instead, the 2007 sales distribution ended up looking like this:
The Wii began to explode in 2007, selling over 16 million units and becoming the first console more expensive than PS2 to outsell it in every world market in the same year. Videogame sales did grow tremendously in 2007 though – over 81 million units of videogame hardware sold. DS held firm at 35% of all sales, leading Nintendo’s charge to 55% hardware market share in the year. If Game Cube, Xbox, and Game Boy Advance sales are included as well, Nintendo’s market share jumps up another percent, mainly because GBA sold over 2m units in 2007. Despite Nintendo’s growth in total market share, the change did not really come at the expense of Sony or Microsoft market share, since it was mainly Game Boy Advance, PS2, GC, and Xbox users migrating to the newer machines. In 2008, the expectation was that the videogame market would be up once again, and that as Wii aged and rival machines began peaking, Nintendo’s market share would slip a bit. Instead, it was Sony’s market share which slipped to Nintendo and Microsoft, despite having the most platforms on the market. DS market share did dip from 35% to 32%, but the market grew so much in the year, that its sales were still up from 2007.
Over 101 million units of hardware were sold in 2008. As a result, despite losing more market share out of all total hardware sales for the year, Sony did actually sell more platforms than in 2007. Microsoft took a bigger piece of the pie as the pie got bigger; suggesting that the price cuts helped the company quite a bit.
The changes in hardware volumes between the big three can be summed up as:
In 2007, the videogame hardware market grew an incredible 40%* from 2006 levels before slowing down to only 20% growth over 2007 levels in 2008. The slowing world growth is mostly a function of Japan posting contracting figures, and slowing Americas growth as can be seen below.
* With GBA, GC, and Xbox included, the total for 2007 grows to ~84.25m and Nintendo grabs another ~1.3% market share.
2008 Sales by Region In 2008, the Americas and Others markets posted banner growth over 2007, with only PS2 sales shrinking from the previous year. One of the biggest reasons for Sony’s drop in market share in 2008 is that Wii and Xbox 360 sales more than doubled in the Others region, while DS sales grew there by 50%. Combined PS2+PSP sales in Others were roughly flat at about 9m while PS3 sales grew by 50%. The one region where Sony’s market share did grow was in Japan, where PSP offset declines in PS2 and PS3 sales, and where Wii and DS sales dropped off from 3.7m and 7.2m to 2.9m and 4.0m. DS still managed to outsell PSP in Japan though, despite the 40% drop in sales.
The top and bottom sellers by region are bolded in the chart above. DS was the top seller worldwide, in Japan, and in Others. Wii managed to outsell DS in the Americas. PS2 was the bottom seller worldwide, in Others, and the Americas. In Japan the Xbox 360 still sold less than the PS2 despite ongoing efforts by Microsoft to push the machine. Comparing the figures above to those from 2007 shows just how much Wii has grown relative to the other machines:
Wii accounts for over half the additional hardware sold in 2008 as can be seen by comparing the bolded figures. The red coloring of PS2 in the second graph indicates that the system has sold fewer units than last year. In a bit of a surprise it was Wii and DS which saw larger growth worldwide than Xbox 360 despite Microsoft's price cuts.
Looking back to the 2007 and 2008 regional totals, there are a couple of important changes worth recognizing. In 2007, neither the Xbox 360 nor the PS3 outsold the aging PS2. Both consoles outsold the PS2 in 2008. It is debatable whether this is a bigger deal for Microsoft or for Sony. PS3 outsold PS2 by 40%, which is less than the 50% pace Xbox 360 outsold PS2 by for the year. However, PS3 has been on the market for less time than the Xbox 360. My suspicion is that Sony’s sales will hold up longer in Europe than Microsoft’s since the Xbox 360 launched almost a year and a half earlier. While neither company can be pleased that it took untill 2008 to outsell PS2, Sony can take solace in the fact that it can effectively subsidize PS3 with PS2, while Microsoft had to get price way down over a longer period to top PS2 worldwide. But the Xbox 360 did outsell the PS3 in Others in 2008, and that’s Sony’s best region. Others Year over Year Trends
With two price cuts in the Others region, the Xbox 360 went from being the least popular machine in 2007 to virtually tying PS3 at 5.5m. Sony’s 50% PS3 growth is a bit misleading in this comparison as we are comparing 12 months of sales for 2008 to 9 months of sales in 2007. The extra three months in 2008 if tacked on to the 9 months of 2007 sales, at steady weekly sales would have produced 33% growth. Nonetheless, PS3 sales were up in 2008, and given a massive increase in Wii supply, and a massive price disparity with the Xbox 360 Sony has to be – and should be pleased with the results here.
DS continues to be an absolute monster in the Others region. With 17.3m units sold YTD, the portable just missed attaining 40m units sold LTD – just in Others in 2008. For comparison, shipments of Nintendo’s entire Game Boy line – Game Boy, Game Boy Pocket, and Game Boy Color – only reached about 42 million in the region. DS can realistically reach 60 million in Others, and there is probably room beyond that if Nintendo chooses to continue supporting the device.
PSP sales, despite the growth of DS managed to improve nearly 10%, offsetting the slight decline in PS2 sales.
The big question for 2009 in Others is going to be whether Wii and DS will mimic the Americas and switch places. If you look above, DS sold 11.7m in Others in 2007, which is about what Wii sold in Others in 2008. DS just had its third full year in Others, which tends to be the peak. If DS sales dip a bit, while Wii sales rise, Wii could take over as top machine in the region for a few years. The other trend to watch will be price cuts for Xbox 360 and PS3, as Europe is probably the first region where Sony can stay profitable while cutting price. Americas Year over Year Trends
The Americas went Wii crazy in 2008. While Nintendo sold 7.4m Wiis in 2007, the company sold 12.2m Wiis in 2008. The increase in product alone – 4.8m more Wiis than in 2007 – was greater than the number of PSPs, PS3, or PS2s sold in the region. On the lift of an August price drop, Microsoft was able to sell 5.5m Xbox 360s in the Americas a 10% improvement from the previous year. Sony saw a 42% year over year growth in PS3 sales, but with the drop in PS2 sales, Sony’s influence in the Americas hardware market has dropped rather precariously. Out of 33.4m machines sold in 2007, Sony sold 11.02m machines. In 2008, the market grew to 40.6m machines, but Sony sold only 10.95m machines. As a result, despite growth in PS3 sales, Sony’s hardware share dipped to 27% from 33% in 2007.
In its fourth full year in the Americas, the DS continued to post double-digit growth. Nintendo sold more than 1.9m more portables in 2008 than in 2007. Thus despite PSP year over year growth of 5%, DS was able to continue outpacing PSP in the Americas.
In 2009, Wii and PS3 will be entering their third full years on the market in the Americas. As a result, they should see large growth over 2008 numbers. PS2 will continue to get squeezed off of shelves in 2009, so a looming question for the year is whether the PS2 market in the Americas will start to look like the PS2 market in Japan, with only low single digit percentage representation out of total hardware sales. DS, PSP, and Xbox 360 are going to be the key platforms in determining whether industry sales gain or decline. Without a price cut, Xbox 360 sales will likely be flat or down. The DSi launch will not reinvigorate DS sales in the Americas as well as in Japan. PSP is a bit of a mystery with so little top selling software to drive trends in the west.
The situation that seems most likely to happen is another massive increase in Wii sales (up 25-50%), PS3 sales up 20-40%, DS, PSP, and Xbox 360 down 10-25%, and PS2 down 30-50% from 2008 levels.
One other possibility is that the Americas market could look like the Japan market in 2008 – down. Japan Year over Year Trends
Japan is the videogame market most in love with the DS. On the chart above, remember that red indicates shrinking sales. When sales of DS showed some signs of returning to normal (4m is usually a peak year for a console or portable in Japan) from freakish (DS sold over 7m units in both 2007 and 2006) Nintendo introduced the DSi model of DS to prevent sales from declining to a rate below 4m. With only 130 million people in Japan though, DS was bound to hit saturation in Japan first. Nonetheless, the contraction of most other machines suggests that the nature of the Japanese videogame market is changing. Sony’s PSP was the only machine to see a rise in sales in 2008 in Japan of over 100,000 units, which is somewhat alarming given that Wii, PS3, and Xbox 360 should all be entering peak sales phases. Microsoft did sell more Xbox 360s in Japan than last year, but the console continues to struggle relative to Wii and even PS3 in the region. With the fan bases of Monster Hunter, Dragon Quest, and Final Fantasy set to return to the consoles, there should be a switch in the coming years – DS and PSP will decline while PS3 and Wii rise but its up in the air as to whether that will happen in 2009 or 2010.
Japan did offer something of a bright spot for Sony in 2008. While the overall size of the market shrunk from 16.3m to 12.4m systems sold, total sales of Sony machines were flat with rising PSP sales offsetting falling PS2 and PS3 sales. Since Microsoft also gained in Japan, Nintendo actually faces a bit of pressure in Japan in 2009 since DS sales dropped by over 3m and Wii sales dropped by nearly 800k in 2008. Motion plus for Wii and the DSi could easily boost or maintain sales for the machines compared to 2008 levels, but if they don’t, Nintendo has to make sure it doesn’t over react given the ongoing explosion of DS and Wii in Others and the Americas.
Weekly Hardware Sales Distribution
As stated above, DS and Wii led hardware sales in 2008. The platforms managed average sales of over 500,000 units per week worldwide.
A more instructive way to look at weekly sales though is to look at the distribution of sales by week.
DS only managed eight weeks above the 600,000 to 700,000 range which contains its average sales. Wii had nine weeks above the 500,000 to 600,000 range which is what its averages sales were. PSP, 360 and PS3 had seven weeks above the 200,000 to 300,000 range, which is where their average weekly sales were. PS2 sold 100,000 to 200,000 units on average, but it topped that level seven times.
The point is, when looking at sales for 2009 it is best to look at median sales for 2008, and then calculate holiday sales and average sales from increases or decreases to the medians.
This is because the higher the average gets, the greater the intensity of points above the average of ‘non-holiday’ weeks. DS sold less than 500,000 units 40 weeks in 2008, but it also had six weeks where it sold more than double that amount (over 1m/week), and those extreme weeks were enough to pick up the DS weekly average in 2008 to 638,000+.
Top Software of 2008
Hardware wasn’t the only area of the industry that was healthy in 2008. There were literally dozens of million sellers in 2008 regionally and worldwide. As a change of pace, we’ve decided to assemble a) top ten sellers by region ranked by unit sales in addition to b) top third party sellers by region since games from Nintendo, Sony and Microsoft tend to reach millions worldwide.
We begin with the overall top ten sellers in the Americas.
Nintendo took five of the top ten positions, with Activision and Take Two each getting two spots. Gears of War 2 from Microsoft took the remaining spot at number eight. All ten of the top games sold over 2 million units. Three of the games in the Americas top ten list have a shot at topping $1b in revenues worldwide. Wii Fit has already done it since the game costs $90, but Grand Theft Auto IV across Xbox 360 and PS3 could easily sell 16 million units, and at $60/game sold (perhaps more depending on how the game sells in Europe long term) Take Two could eventually end up getting $1b too. Wii Play comes with a controller, but it’s still a game, and it will soon surpass 20m units worldwide at over $50/game sold insuring it too will pass $1b in revenue.
With the games published by the big three removed, things look quite a bit different.
The starred games denote that some forced bundles were sold in 2008, pushing software sales for those games higher. Each game was available separately too though, so they are included. But, for those who want only a non-bundled list, I’ve listed the next highest third party sellers for 2008.
While the list only extends down to the top twelve third party titles, there are some other interesting third party notes worth sharing for the Americas. First, here is the distribution of third party hits by current generation platform in 2008:
The chart above and the ones below depict third party hits by category. Each time you move to the right, you are seeing a subdivision of the previous category to the left. So the five under ‘1000k’ and ‘Wii’ depicts the number of third party Wii games to sell over 500,000 copies which also sold over 1 million copies. In other words, only 15 Wii games sold over 500,000 copies in 2008 – not 21.
Microsoft clearly has a reason to brag about 3rd party sales in the Americas. All the same, until the middle of May 2008, the Xbox 360 did have a user base lead over Wii in the Americas. Additionally, the console has been on the market a year longer. In terms of time, that’s a 50% lead on Wii, and if you throw in the user base lead that lasted through about 1/3 of 2008, it would be reasonable to expect perhaps as many as 75% more third party hits on the Xbox 360 in total. Even with that adjustment though, Wii would still be behind, so the point still stands – Xbox 360 owners buy more games than Wii owners do in the Americas. Sony finds itself in an interesting position at the moment. A small number of people clearly love the PS3 if it can have 13 third party games sell 500,000 units in a year when Wii only had 15 third party games do that. Nintendo had a similar problem with Game Cube – what was left of Nintendo’s base loved the Game Cube. Nintendo shipped 11 games on average for the system. Sony does not want the PS3 to fall to a similar position, as even if they sell 20 games to 20 million PS3s owners in the Americas its not nearly as healthy as selling 11 games to 50 million users as they did with the PS2 owners. Microsoft seems to be stuck in between the two extremes. If Nintendo continues to chart its current course, odds are the volume of Wiis out there will be so great that more third party software on Wii will eventually be sold than third party Xbox 360 software.
It’s probably 6 to 18 months away yet though, and it’s probably already true in Others and Japan.
Next up is the Others region, composed primarily of Europe and augmented by markets in mainland Asia, Oceania and Africa. Below are the overall top sellers in Others:
Nintendo platforms took an amazing eight of the top titles in Others in 2008. The lone title on a Sony platform to debut in the top ten for the year is Grand Theft Auto IV – just as the case is in the Americas. In Others though, GTAIV is also the only title to chart in the top ten for Xbox 360.
Once we do a third party top ten though, it becomes clear which companies are doing well:
Konami, Take Two, and Sega are each well represented in the 3rd party top ten. Just as in the USA “football” is quite big in Europe – and Konami and EA benefit from this as three of the top ten are soccer games. GTA and Sonic apparently still hold sway as well, as another four of the top ten selling games for the year involved those brands. The three remaining titles are from well established franchises too – Cooking Mama, Call of Duty and Metal Gear Solid.
Working though the rest of the data to dig out the remaining 3rd party hits for 2008 reveals the following distribution:
The key difference between the Americas and Others appears to be that the Nintendo take over of software is happening faster because Microsoft has less influence in the region. In 2008, 27 third party games on Wii and DS sold over 500,000 copies in Others. For PS3, Xbox 360 and PSP combined only 25 third party games sold over 500,000 copies. The PS3 and Xbox 360 had more third party games sell over 1m copies for the year than Wii and DS did by a 2:1 margin. However, the number of titles on each machine to reach that level in Others is small enough to count on fingers and toes so it isn’t too hard to imagine a switch in favor of Wii and DS if third party companies decide that they should invest some of their big projects on Wii. Sega for one is a prime candidate given that it was the sole third party to have a game top 2m on both Wii ad DS, just as Take Two was the sole third party to have a game top 2m on both Xbox 360 and PS3 in 2008. Given the cheaper costs of developing for Wii and DS, its even possible Sega will make more money than Take Two will with its twin killing.
Next up is the smallest of the three world regions, Japan. With falling DS sales in 2008, Japan has undergone a transformation from DS-land to Nintendo-land. Eight of the top ten titles were published by Nintendo and nine of the top ten titles were on Nintendo platforms in Japan for 2008, but only three of those titles were on DS. In an interesting twist though, the platform that came closest to dethroning DS in Japan, the PSP, had only one title in the top ten.
**includes the cheaper re-release of the game Wii launch title Wii Sports managed to sell 820,000 additional units in Japan in 2008 outselling heavily touted exclusives such as Metal Gear Solid 4. As is the case with the other regions, Nintendo’s clamp down of the top ten makes it difficult to read the market from the top ten. Below are the top ten third party titles in Japan for 2008.
Only six third party games in Japan sold over 500,000 units in 2008, so instead of extending down to only 500,000 units, the distribution of Japanese third party hits has been drawn down to 200,000 units.
Only 28 third party games in Japan sold over 200,000 units in 2008. Compare that to Others where 52 third games sold over 500,000 units, and the Americas where 80 third party games sold over 500,000 units.
Worldwide, there were ten games to sell over 4.5m units in 2008. As is the case with the charts above, the top ten list includes games which were never ‘forced’ bundles but which may have been bundled by retailers in different regions at various times throughout the year.
The big story for the year is the success of Wii Fit. It managed to outsell GTAIV – across Xbox 360 and PS3 combined by over 1m units. Wii Fit also costs ~50% more than GTAIV and has already brought in over $1b in revenue. The top games by region, with the exception of Japan where Monster Hunter Portable 2G has sold tremendously without seeing a western release yet to give it a chance of reaching the top ten, are all depicted in bold.
Success in multiple regions is the easiest way to chart in the top ten for the year. Of the top ten Americas titles, six made it. In Others, eight of the top ten titles made the world top ten chart. Lastly, Japan saw three of its top ten titles in the world top ten chart. Each region has specific peculiarities which prevent some title from reaching the top ten. In Japan, no Xbox 360 title sold over 200,000 units in 2008. So even though Microsoft’s platform had a few shooter titles which got over 4m in the western markets, they lack that final push from Japan to crack the top ten. In the Americas, soccer games sell terribly which prevents the Konami and EA sims from topping 4m. In the Americas, music and American football games do quite well. But they tend to do poorly elsewhere due to cultural issues and language barriers. In the Others region, taste is generally similar to the Americas in a general sense, but the specifics vary. Sonic is more popular than Mario in Others. Normal football is more popular than American football. PS3 is more popular than Xbox 360 in continental Europe; Xbox 360 is more popular than PS3 in the UK and Americas. A lot of these factors tend to work against each other rather than complement each other. As a result, the games which tend to chart in the worldwide top ten tend to have content which cracks the top five in at least two regions. Games which are super successful in one region tend to fail in other regions just as often as they often as they succeed.
As a way to conclude worldwide software sales, here are all the games to sell over 3 million units in 2008, with the sales by region color coded to indicate regional contribution to total sales:
A number of notable games are absent from the list of 3 million + sellers. Little Big Planet, Wii Music, Animal Crossing: City Folk, Call of Duty: World at War (PS3/Wii), Fallout 3, Fable II, Left 4 Dead, the various Rockbands and Guitar Heros, Resistance 2 and other touted games did not sell 3 million units on a single platform. Combined across multiple platforms, Guitar Hero: World Tour, Madden 2008, PES, Rockband 2, Call of Duty 4, Tom Clancy’s Rainbow Six: Vegas 2, Guitar Hero III: Legends of Rock, Rockband, Star Wars: The Force Unleashed, Lego Indiana Jones, and others sold in excess of 3 million units.
Among the games to sell over three million on a single platform, Nintendo platforms had 13 of the 18 positions. The Xbox 360 and PS3 games which did chart reached as many as a quarter of all people who own either console. If you believe that only people who bought the Xbox 360 in 2008 bought GTAIV, then the attach rate jumps to over 50%. Wii had a similar phenomenon. If you believe only people who bought Wii in 2008 bought Mario Kart or Wii Fit, the games achieve a 50% attach rate. Of the total user base, Mario Kart Wii was bought by roughly 1 out 3 Wii owners in 2008 although if Wii Fit had released a few weeks earlier in the western markets it would have topped Mario Kart Wii. The other interesting thing about the list is that roughly half of the top sellers released before 2008. Even among the games to top 3m and release in 2008, Mario Kart Wii, GTA PS3, GTA 360, Wii Fit, Metal Gear Solid 4, Super Smash Brothers Brawl, and Pokemon Diamond/Pearl all released in the markets before the holiday software glut began in October 2008. The only two games to top 3m for the year and release after October were Call of Duty: World at War for Xbox 360 and Gears of War 2 for Xbox 360.
Hopefully the top content will be spread around more evenly from now on as a result.
Conclusions
With Wii set to reach 50% market share in every world market against the PS3-360 tandem, it is possible that the list of games to sell over 3m units in 2009 will be similarly Nintendo centric. On the other hand, DS is probably going to slow down at least a little bit in the west next year, and if Xbox 360 and PS3 can maintain their attach rates they may be able to pick up some of that slack. There are 7 games in 2009 which are likely to atually release and which likely will sell over 3m copies worldwide. These titles are:
1) Dragon Quest IX (DS/March 2009 in Japan) 2) Wii Sports Resort (Wii/ ?) 3) Gran Turismo 5 (PS3) 4) Resident Evil 5 (360) 5) Halo Wars (360) 6) Pokemon Platinum (DS) 7) Call of Duty Next (360)
Beyond these, a number of other titles will have a fair shot if they release at all or release in enough regions and come out at the right time of year.
1) Final Fantasy XIII (it will need to release in two regions at least) 2) Punch Out (originals were million sellers on NES/SNES, will need to do well in Europe) 3) Resident Evil 5 (PS3 – it could happen but this will be the first RE on a Microsoft console, and sales will be dependent on the Americas) 4) GTA: China Town (Needs a worldwide release – can’t see more than 400k in Japan, so it would have to do ~2.6m total in Americas/Others) 5) God of War III (could probably do it if it was the big holiday game worldwide complimenting Gran Turismo 5 and/or Final Fantasy XIII)
Lastly, these ten titles are long shots. They either a) don’t exist b) won’t release in 2009 or c) won’t sell 3m in 2009. Consider them 10:1 odds against:
1) Big EAD Project (Zelda Wii or Pikmin 3?) 2) Ubisoft TMNT Fighter (Wii) 3) Metal Gear Solid 4 (360) 4) Alan Wake (360) 5) Killzone 2 (PS3) 6) Monster Hunter 3 (Wii) 7) Ubisoft sequel (Red Steel 2? Assassin’s Creed 2? Rayman platformer?) 8) Duke Nukem (has to come out sometime…) 9) Dreamcast-10 year anniversary sequel from Sega (Jet Set, Shenume?) 10) Rare sequel (Perfect Dark/Battletoads/Conker?) for 360
Alongside the new titles, many of the games to sell 3m units in 2008 should do so again in 2009. A few titles which released late in 2008 may also end up selling 3m in 2009 after not selling 3m in 2008. At the end of 2009, most of these games should also be over 3m in yearly sales in addition to the new games cited above.
Wii
1) Animal Crossing 2) Mario Kart 3) Wii Fit 4) Wii Play 5) Wii Music
Xbox 360
1) Grand Theft Auto IV
PS3
1) Grand Theft Auto IV
DS 1) Nintendogs 2) Brain Training 3) Brain Training 2 4) New Super Mario Brothers 5) Mario Kart DS
As with 2008, there should be roughly 15-25 games which sell over 3m units in 2009 on the current machines.
With the software that is coming, and the likelihood of more price drops for hardware, 2009 should be an even bigger year for the videogame industry than 2008 was. Worldwide hardware sales of 28-35m Wii, 28-32m DS, 9-13m PSP, 9-13m 360, 10-14m PS3, and 5-7.5m PS2 are entirely possible. If you take the midpoint of those ranges, you get another 100m+ machines sold in 2009 which, with greater software sales from much bigger bases, could easily make it the best year for videogame sales and content ever.
Contact Vgchartz at jmazel@vgchartz.com |
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