Big Three Shipment Update through September 2009

Over the last week or so Nintendo, Sony, and Microsoft have updated their software and hardware shipment figures through September 2009. As is usually the case, a lot of interesting information was divulged in the three earnings releases from the companies. Before getting into the nitty-gritty though, let’s take a look at the big picture.

The Current Generation of Systems Already Have Massive Penetration, PS2 has a Big Tail

For software, the PSP, Wii, X360*, DS and PS2 are all among the biggest ten videogame software ecosystems ever.

*Note: The X360 figures used here are based on Microsoft reporting an 8.7 attach rate on its 33.5m X360s shipped worldwide. No region or source is listed for the attach rate, but it is possible the figure is from NPD or some other tracker. In other words, the figure may not be the actual amount of X360 games shipped worldwide and should be treated as an estimate.

 With less than three years on the market, Wii is already the sixth biggest software ecosystem of all time, and it will overtake both Game Boy and NES next quarter to become the fourth largest software ecosystem of all time. The new entrant on chart is in the tenth spot - the PSP - with 227m games shipped beating out the N64 which ended up at 225m. Sources claim that the original Xbox finished with a worldwide attach rate of 8.5-9.5 (on 24.8m systems) but I have not been to pinpoint an exact software figure. So the PS3 is either 12^th or 13^th all time with software shipments of 213.6m units. The PS3 software market surpassed the GC software market this quarter, as Nintendo’s purple box ended its run with software shipments at 208.48m units.

On the hardware shipments side, the six systems still selling are also well represented. Microsoft’s X360 topped N64 as the tenth biggest hardware base by shipments for the quarter, meaning five of the current six systems are now among the top ten bases. The Wii has just taken over the PSP base (56.14m vs. 55.90m) for the quarter and will overtake the NES for 6^th place next quarter. While I fully expect PS3 to break into the top ten for software very soon, its going to take at least a year for the PS3 to break into the top ten for hardware. PS3 could very well hit 33-34m by the end of December, only half a million behind where X360 was at the end of September – but X360 will be at 39m lifetime by the end of December. The DS will also become only the second system to top the original Game Boy line in the next quarter.

PS3 shipments through September are still behind the Atari 2600, Sega Genesis and Nintendo 64, putting it in 14^th place all time for hardware shipments.

Hardware Shipments

Hardware shipments for the six systems in the quarter were as follows:

DS – 5.73m (113.48m LTD)

Wii – 3.52m (56.14m LTD)

PS3 – 3.20m (27.02m LTD)

PSP – 3.00m (55.90m LTD)

X360 – 2.10m (33.50m LTD)

PS2 – 1.90m (140.70m LTD)

All current consoles – Wii, Xbox 360 and PS3 saw some sort of price cut this quarter, with the Wii cut coming very late in the period. Sony’s cut came alongside the PS3 Slim model introduction about halfway through the quarter. At $300 for about six weeks when the Wii was still $250, PS3 came within 10% of beating Wii for the quarter. PSP also did pretty well; given that sell through was 1.6m for the quarter, with Sony apparently shipping a lot of PSP Gos at the end of the period.

Over the last year the most interesting pattern in the industry has been these two trends – Wii beginning to perform like a console instead of the DS, and PS3 beginning to break away from X360.

Nintendo of course has no reason to panic. If X360 jumped from 2.2m to 6m in CY Q3 to CY Q4 in 2008 on the availability of a single sku at $200, then Wii should have no issue jumping from 3.5m to 10.5m or so on availability at $200. For at least one quarter, the Wii line will return toward the DS line. The PS3 line is doing interesting things as well; Microsoft has never shipped more than 2.2m X360s in a non-Christmas quarter. But Sony has now shipped more than 2.2m PS3s in three non-Christmas quarters. Moving forward, Wii is likely to beat PS3 by only 20-50% per quarter, now that pricing sanity has returned to the industry, and both systems will be significantly off the legendary DS pace (never under 5m in a three month period for 10 consecutive quarters now) in future quarters. The PS3 is likely to be more impacted than Wii by aggressive Microsoft price cuts, as the Wii had its best Christmas when Xbox 360 was cheaper than Wii while the cut caused PS3 shipments to drop from the Christmas 2007 quarter to the Christmas 2008 quarter.

Software Shipments

Software shipments for the September 2009 quarter were strong across the board.

Wii – 45.14m (429.23m LTD)

DS – 42.07m (638.07m LTD)

PS3 – 23.90m (213.6m LTD)

X360* – 21.45m (291.45m LTD)

PSP – 12.90m (227.9m LTD)

PS2 – 11.10m (1497m LTD)

*Note: The Microsoft figures are based on assuming the 8.7 attach rate listed in the earnings release without a region or source is worldwide for the 33.5m X360s shipped through September 2009. It also assumes that the 8.6 attach rate listed by Microsoft through June 2009 on 31.4m X360s was also for software shipments worldwide.

One other way to look at it is by manufacturer.

Nintendo System Games – 87.21m

Sony System Games – 47.90m

Microsoft System Games – 21.45m*

In the last quarter, software shipments were substantially lower across the board.

        System        Sept 2009 Quarter        June 2009 Quarter        Change

      Wii                     45.14m                         31.07m                      +45%

      DS                     42.07m                         29.09m                      +45%

      PS3                    23.90m                         14.80m                      +62%

      X360*                21.45m                         19.40m                      +11%

      PSP                    12.90m                          8.30m                       +55%

      PS2                    11.10m                          8.50m                       +31%

      Industry Total    156.56m                       111.16m                    +41%

Attach Rate Analysis

Even though Wii is now selling at a slower clip than DS, it still has a larger user base through twelve quarters. With a big Christmas quarter (10m+) the Wii pace will remain ahead of the DS pace for another half year to year. Whether or not this continues though, the Wii has a major advantage over the DS – people buy a hell of a lot more games for Wii than they do for DS.

Even if you remove the bundled Wii Sports, the average Wii owner has bought two more games than the average DS owner through twelve quarters. If the Wii can trend close to DS for a while longer, it is going to have an enormous tail for software sales. As stated above, the two are still pretty similar. So long as Wii hardware sales remain at 2/3 the rate of DS hardware sales long term Wii software will eventually overtake DS software. It is amazing to see Wii software do so well in software shipments overall given how it compares to other Nintendo systems in Japan for software.

There is a similar situation to the likelihood of Wii software overtaking DS software developing with Xbox 360 and PS3. In an aligned launch, the PS3 has been outperforming X360.

Through 12 quarters, the PS3 stands at 27.02m units shipped – 20% ahead of the 22.5m X360s shipped through 12 quarters. The PS3 attach rate dropped this quarter – but is still easily within 20% of the X360 attach rate even though it has been on the market for a year less time. Assuming slow but steady attach rate growth and continued outperformance of X360 at comparable points from launch, the PS3 should overtake X360 software shipments at some point in the future.

Conclusions

The December 2009 quarter is going to be very strong for software shipments for Wii and DS. At the end of December 2008, Wii shipments were almost 45m but software shipments for the Christmas 2008 quarter were over 82m. This suggests that the average Wii owner bought about 1.8 games in the quarter. At the end of 2009, the Wii base will be ~67m units. If the average Wii owner buys 1.5 games in the quarter, then Wii software shipments would be 100m units. I don't think software will be quite that high, maybe 1.4 games per Wii owner but it will close to 100m nonetheless. ~95m Wii games over the December 2009 quarter would be in line with Nintendo's shipment forecast, since the 180m projection does not include the copies of Wii Sports bundled with hardware in the west. For the DS, software shipments were 78m in the December 2008 quarter with the DS base hitting 96m at the end of 2008. That means the average DS owner bought 0.8 games in the quarter. The DS base should reach ~124m at the end of 2009, so if the average DS owner buys even half a game, software shipments would hit 62m. This seems to be higher than what Nintendo is expecting given that DS software shipments were 71m units in April to October 2009 and are projected to be 150m in the year ending March 2010. But with DS hardware on target for 30m, lowering the target from 180m to 150m seemed too cautious. If the rate is even a bit higher though, say 0.65 games purchased per DS over the Christmas quarter – a rate down 20% from last year – Nintendo could end up slightly beating its original 180m forecast for DS.

For Sony, the average PS3 owner bought 2.5 games in the Christmas 2007 quarter and then 2 games in the Christmas 2008 quarter. At the end of 2009, Sony will have shipped 33.5m PS3s or so. Assuming the average PS3 owner buys 1.5 games in the December 2009 quarter, PS3 game shipments will be 50m in the Christmas 2009 quarter. That would be up 25% from the Christmas 2008 quarter. On PS2 though, the rate of software decline is likely to exceed the rate of PS3 software growth. The average PS2 owner bought 0.5 games in the December 2007 quarter, but only 0.22 games in December 2008 quarter. For the coming quarter, the rate should be about 0.1 games – or about 14m units of software, down 15m units from the previous year. PSP software appears to be in decline too – with game purchases declining from 0.47 to 0.32 in the transition from the Christmas 2007 to Christmas 2008 quarters. This decline was masked by PSP hardware sales – so it was only a 3m decline overall. PSP is running behind last year though in 2009, and software purchasing rates are still in decline so there will likely be a decline here as well. Essentially, PSP software purchases per owner should be something like 0.18 to 0.22 in the coming quarter, putting PSP software at ~12m for the Christmas 2009 quarter. With PSP down 3m and PS2 down 15m, the 10m rise in PS3 software probably isn’t enough to keep Sony out of the red.

Microsoft will end up with a 39-40m Xbox 360 base by the end of the year, but we don’t have quarterly shipment figures from last the last Christmas quarter. I suspect X360 software shipments will be flat year over year though.

Contact Vgchartz at jmazel@vgchartz.com