Armchair Analysis

February 2012 NPD: A Tale of Two Portables

2012-03-09T17:43:00.000-08:00

Lots of you are probably wondering who "won" the portable showdown last month. Early estimates of 300,000 units for Vita seemed likely to nudge it past the 3DS, which would have made sense given that Vita is the newer platform and that early adopters would push it to a respectable launch number.

That didn't happen, however.

While I can't confirm the raw number for Vita sales in February, I can confirm that the 225,000 unit sales data on NeoGAF is acceptably close to the real number. That means that, yes, 3DS outperformed the Vita during the reporting period by roughly 35,000 units.

Before people start launching into "bomb" comparisons and claims of doom for the Vita, I think that it's important to keep some perspective.

Market conditions that the Vita is facing are quite challenging. Aside from the obvious challenge from the 3DS selling for $80 less, Vita also faces increasing competition from tablets and smartphones. People can feel free to claim all they want that mobile games aren't real games, aren't as deep, don't have buttons, or whatever other reasons... but iOS/Android is the growth market right now. I also consider the rapid rises in fuel costs in February to be a factor as disposable income levels were likely affected by putting more money into the gas tank instead of retail.

225,000 units in 11 days isn't bad. It's not great, and comes nowhere close to the record that Nintendo set with the 3DS last March, but it's not a disaster. If the number had come in under 200,000 units, then I'd be a bit more bearish. That didn't happen, though. I think that it ranges on the low end of expectations and that we need to wait and see how the base builds over the next few months. If the 225,000 number drops by more than 50% (to under 113,000) this month, then I think there might be some concern... although the release of the new iPad could hinder sales for both Vita and 3DS this month. We will see.

As for the 3DS, February was a nice bounce from what was a tough January (171,000 units last month). An limited price cut to $160 at GameStop prior to the Vita launch might have helped to boost numbers, and it's being reported that several 3DS games charted outside of the Top 10 but in the Top 25 games in February. This month will be the first month that we have YOY data for 3DS, and lower YOY numbers should be expected.

3DS may have won this first battle, but the war of the handhelds is just beginning and should be interesting to watch unfold over the coming months.

February 2012 NPD: Sea of Red

2012-03-09T17:07:00.000-08:00

In a way, it's good to see that there hasn't been the reaction to February's NPD data that I anticipated. On the flip side, February was another month of deep YOY negatives and presents questions to me about just how long the current console cycle can remain viable.

Here are the numbers that leap out at me:

Console hardware unit sales were -29% YOY.
Console software unit sales were -25% YOY.
Console hardware sales for the first two months of 2012 are -32% YOY
Console software sales for the first two months of 2012 are -29% YOY.

I knew that February 2010 was going to be tough to match for hardware, but Xbox 360 unit sales declined by 110,000 units (-21% YOY)-- and that platform is your current frontrunner. PlayStation 3 YOY unit sales were slightly better (-13% YOY), but we're still looking at a double-digit decline. Add these disappointing trends to the Wii's run to obsolescence, and I think that you've got at least early signs of either saturation or declining levels of interest. Hopefully it's the former and that new hardware will re-energize consumers, but that's far from a given.

Weakness in software is what concerns me a bit more. 3 million fewer units of software sold in February 2012 versus a year prior. That's a decline of $140 million. It wasn't like there wasn't software to choose from, either. Obviously there wasn't a Marvel vs. Capcom 3 kind of big seller last month, but no IP moved much more than 400,000 units-- and that was Modern Warfare 3. Final Fantasy XIII-2, the #2 best-selling combined release in the February reporting cycle, barely mustered 350,000 units sold. Compare this with February 2011, when Marvel vs. Capcom 3 moved just shy of 800,000 units combined and four other titles all exceeded the 400,000 benchmark. It's not a pretty comparison.

This month is already showing potential, with Mass Effect 3 well on its way to breaking a million units... but what else gets close? Mass Effect 3 sales will fill the 2.5 million unit gap left by not having a Pokemon release this March, but where this month's Homefront? Where's this month's Dragon Age II? I don't know if I see them. That should lead to lowered sales projections for March and should continue the trend of YOY negatives for yet another month.

Frankly, while I understand why Sony and Microsoft don't publicly want to address anything past the PlayStation 3 and Xbox 360, this console generation will continue to see lower revenues and weaker unit sales whether new hardware is announced or not. It's been 5-6 years now. Most consumers who want one of the available platforms have already bought one, and sales of games in even the most established IPs like Final Fantasy and SoulCalibur are flagging. If something isn't done to shake things up and renew consumer interest, this period of correction that we've been experiencing thanks to the Wii bubble deflating is going to translate into permanent damage in terms of lost consumers and lost revenue.

Before jumping completely on the "time for new consoles" bandwagon, I'll wait and see how March fares. If YOY declines continue to be in the 15-20% range (or worse), then I think it's time to stop being coy about new platforms. If we see better sales in March, then I'll be willing to back off a little bit and give more time.

We will see next month.

Vita Price Cut: A Risky Assumption

2012-02-23T10:54:00.000-08:00

It's interesting to read a prediction from Strategy Analytics that more than 12 million Vita units are expected to sell worldwide in 2012. That's a pretty lofty number for one year, especially considering weak sales in Japan and that we're still in the launch window in other territories this week.

The prediction comes with one caveat, however: There needs to be a price cut for the Vita this year, probably in Q4.

This prediction is null and void based on the assumption that Sony will follow Nintendo's lead and slash prices within six months. It's understandable that analysts believe substantial price cuts will drive sales, but consider these factors:

First, the platform is barely two months old in Japan, and two days old in other places. Without firm launch sales data to begin to draw analysis from, this prediction is making the assumption that Vita will stumble out of the gate. We don't know what sales expectations are, especially considering the target demographic for Vita at this point. With money still out there in the form of core consumers, it's possible that steady sales from that group can sustain Vita for some time. Here in the United States alone, over 20 million PlayStation 3 units have been sold. If 1 out of every 5 PlayStation 3 owners decides to take the Vita plunge in 2012, that projects to 4 million units. It's not an unrealistic goal for Sony to achieve in the first year before a price drop occurs.

Second, there's concern that Sony may not be able to afford dropping $50-$80 off of the the Vita price tag. We saw Sony's Q3 financials, and they were not pretty. Kaz Hirai has his work cut out for him, and it's fair to argue that slashing Vita pricing would only serve to make his job tougher. Can Hirai justify deeper short-term losses to build an install base for Vita? That's a tough sell, especially when it's expected that a drop for the PlayStation 3 is coming later this year to try and stem declining console hardware sales.

Third, there are no guarantees that Sony can replicate Nintendo's success with the 3DS by quickly dropping Vita prices. Nintendo had to deal with negative press and perception after its 3DS price drop as early adopters felt slighted, and similar bad feelings would likely be seen with the Vita as well. The gamble paid off as sales soared, but it can also be argued that the arrival of key software (in the form of Mario titles in Q4) propelled 3DS sales to the heights that they reached. Once the allure of new software subsided, however, we saw sales in January for the 3DS take a nosedive to a level below 175,000 units.

I'm not sure if the analyst here threw these numbers out to prove a point to Sony, or whether he's extrapolating based on currently available data, but making predictions based on a variable that's far from certain makes no sense. As I've mentioned before, it's vital that we give Vita fair time on the market and attempt to read and identify trends over that time instead of forcing analysis and making comparisons that may or may not verify. Even one month of raw data can give us a point of reference, compared to 3DS launch numbers 11 months ago, and we can begin to draw some conclusions then.

Five Burning Questions: The Vita Edition

2012-02-19T19:15:00.000-08:00

With the wide release of Sony's Vita handheld leading this week's headlines, it makes sense that it's also the hot topic for this week's Five Burning Questions column:

Will Sony's last-minute Vita marketing blitz pay off? TV spots and in-store advertising have picked up just in time for the Vita's release, and this is important for increasing visibility for and interest in the new platform. I'm not sure how much of an effect that the campaign will have, but I think that the effect will be a positive one and at least positions the platform as something to own (or want to own). I would have liked to have seen the marketing come along a bit sooner to fuel preorder numbers and interest, but we'll see how Sony's strategy plays out over the coming week.

Is the Vita overpriced? No. When details about the Vita's pricing were unveiled last June, $250 sounded like a great deal for the hardware that consumers would get. It still is a great deal, despite Nintendo's 3DS price drop that quickly makes $250 now feel like $500 to some. The technology is still the same tech that most people thought was going to be a lot more expensive not even a year ago. The challenge for Vita isn't necessarily the price tag; instead, it's finding a way to override the perception that $250 is now a lot of money to pay for a handheld device.

Are retailers nervous about Vita sales and its future? I think so. PSP sales never came close to Nintendo DS sales, and many retailers were stuck with PSP software that never sold, leading to lots of games going out on clearance racks. There's an air of nervousness about how the Vita will fare, given Sony's weaker track record in the portable arena and (as mentioned above) the perception that $250 is now a steep price to pay. Setting aside shelf space and purchasing hardware and software that isn't necessarily going to sell quickly is a risky proposition that some retailers probably fear won't pay off.

What's the minimum number of Vita units that must be sold to be considered a launch success? 350,000 units sounds about right to me. If you consider that the 3DS moved just under 400,000 units for $250 in a seven-day launch period for NPD's March 2011 reporting cycle, then it's fair to expect a number only slightly below that for the Vita. Remember that the Vita had a limited early release last week, in addition to this week's wider general launch. Preorder numbers haven't been on a record pace, but walk-in sales could benefit from tax refunds rolling in and more disposable income available to some consumers during this launch period. There's a fine line between perceived success and struggling, however; anything less than 300,000 units sold will likely raise red flags with analysts across the industry.

How will Vita fare in 2012? I think that it's going to be important to reserve any kind of judgment on the Vita until we get to Q3/Q4. I'm expecting that Vita sales, like the 3DS last year, will dip significantly after the launch window closes. Once we get to the holiday period, when more software (including Call of Duty) becomes available, we'll have to see how much Vita sales increase and if it is able to hang with the 3DS in terms of sales. I do think that Vita will struggle to overall in 2012, but first-year jitters and uncertainty should be expected. Without having a launch number to judge a sales prediction from, I'm going to say that a minimum 2.5 million units should be the Vita's goal for 2012 and that it won't top the nearly 4.3 million that 3DS moved in its first 10 months on the market.

Since we're talking about handhelds this week, here's one bonus question:

Will smartphones and tablets make dedicated handheld gaming obsolete? While it's unwise to say that something will never happen, I think that the probability of this scenario coming to fruition is pretty remote. I do believe that smartphones and tablets are eroding some of the consumer base for dedicated portables, but I also believe that there's still a significant number of consumers who want the dedicated experience. There needs to be an adjustment in sales expectations for the dedicated portable market. Smaller successes are still successes. Over 4 million 3DS units sold in a little over 9 months. That demonstrates to me that strength remains in the portable market despite the mild iOS/Android exodus, and that's not factoring in how core consumers adopt the Vita over the coming months. The portable gaming market is changing, and may even be contracting a bit, but it's far from obsolete.

Feel free to offer your Vita launch predictions in the comments below. How many units will be sold in the February period? What's the minimum number for you to be satisfied that the Vita launch was a success? Do you think my Vita number for 2012 is too small or overconfident?

Next week's Burning Questions column will be all about February's expected NPD numbers.

Yellow Alert: Weak Modern Warfare 3 Sales and Activision Stock Downgrade

2012-02-12T15:42:00.000-08:00

Call of Duty has arguably been the biggest and most successful IP that this console generation has seen. Yearly releases have set sales records and the first-person shooter genre reached heights never before seen. Activision has had a great run, and the publisher has become dependent on the success of Call of Duty to carry it to success.

Modern Warfare 3 looked to continue that success. Sales in November were staggering, with over 8 million units combined across the Xbox 360 and PlayStation 3 alone. Sales at that time were ahead of the pace set by 2010's Black Ops release and things were looking up early. The momentum eased a bit in December, as combined X360/PS3 sales dropped by over 50% from launch. The numbers still seemed all right, but Just Dance 3 for Wii outpaced both the X360 and the PS3 SKUs in that month. This was a bit worrisome, but with the first DLC map pack due in January, it was thought that sales would maintain at least some momentum.

We all know now how miserable a month for the console gaming industry that January was, and Modern Warfare 3 was not immune to poor sales performance. This article from the Financial Times mentions a few notable specifics:

Sales of Modern Warfare 3 were 50% less in 2011 than we saw for Black Ops in 2010 during the same launch period.
386,000 combined units of Modern Warfare 3 were sold in January 2012. That's a 49% decline from Black Ops sales in January 2011 and 41% less than Modern Warfare 2 sales in January 2010.
An analyst note from Cowen & Company's Doug Creutz warned that Modern Warfare 3 is now expected to sell "slightly fewer" units than Black Ops did.
Macquarie Securities' Ben Schachter downgraded Activision stock to a rating of Neutral on Friday, citing few "near-term catalysts" and saying, "Dark clouds and negative perceptions are hanging over the (video game) group right now."

There are some nervous analysts and investors out there right now. We saw evidence of this on Friday with lower stocks over most of the video game sector. It will be interesting to see whether cooler heads prevail this week, ahead of the Vita launch and with a broader number of software releases shipping to stores this month. What's troubling is that, if fewer consumers are answering the Call of Duty these days, it could be another sign of, as Ben Schachter put it, "an industry-wide problem".

That problem would be fewer consumers, leading to fewer units sold, leading to less revenue being made. If Call of Duty falters, as staunch an IP as it has been, there may be stormy seas ahead for Activision-- and maybe for the industry at large.

Final January 2012 NPD Hardware Sales Data Analysis

2012-02-10T12:46:00.000-08:00

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 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 WiiU 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.

Preliminary January 2012 NPD Hardware Sales Analysis

2012-02-09T20:56:00.000-08:00

Note: This analysis is based on publicly available or shared NPD data as of 11:55pm EST on February 9th, 2012. Some data has been extrapolated and may be changed according to decisions of businesses to share their results with the press. Not all NPD data is made available to the public.

At first glance, the preliminary NPD sales data that has been shared with the public for January 2012 incite fear and panic. Sales fell from $1.14 billion in January 2011 to $750.6 million in January 2012. That's a stunning 34% YOY drop and is the lowest number since 2004. Sales of accessories were down 18%, but hardware and software both posted declines of 38% over last year. The figures were so dreadful that Wedbush Securities analyst Michael Pachter wondered about the integrity of the data, in comments to Mike Snider from USA Today:

"It also makes no sense that sales are below the level from 2004, when games were cheaper and the installed base of consoles was much lower... I don't know if NPD is getting faulty data, but these numbers make no sense."

Before addressing whether there's cause for alarm, let's look at a few other findings and extrapolations from the available NPD data:

270,000 Xbox 360 units sold in January of 2012, which led all hardware platforms. This is a YOY decline of 29%, or 111,000 fewer units sold.
The Xbox 360 accounted for 49% of the consoles sold in January, which extrapolates to approximately 287,000 units combined of the Wii and PlayStation 3 in January. Sony and Nintendo have not issued specific unit sales data via PR comments and are not expected to do so.
New software launch performance in January 2012 experienced a 99% YOY collapse. January of 2011 had new software launches including Dead Space 2, Little Big Planet 2, and DC Universe Online. January of 2012 had zero major new software launches.
Residual sales from Q4 2011 struggled in January 2012, showing a 31% decline versus sales of Q4 2010 games in January of 2011.

All of the evidence here looks damning. The decline in Xbox 360 hardware sales is steeper than anyone thought it would be, and the extrapolated numbers for the Wii and PlayStation 3 are even more. The decline in residual sales stings because the quality and quantity of sales in the Q4 2011 slate were arguably strong enough to stimulate post-holiday sales. 38% declines in hardware and software sales indicate that consumer interest waned considerably at retail and extends to a second straight month of steep YOY declines in hardware (-26% in December).

The key factor that bears consideration here is the fact that new software releases in January were sparse, if at all. SoulCalibur V and Final Fantasy XIII-2 hit stores after the January NPD reporting period had closed, and those were the two January highlights. Without new software to drive consumer interest, declines are bound to occur. We saw this in August of last year, when Madden NFL 12 was delayed and wound up missing the NPD reporting window. YOY console hardware sales were off by 20% and YOY console software sales were off by 40%. Deus Ex: Human Revolution was the only notable new software release that month.

We're looking at a repeat in analyzing January 2012 numbers, and the problem is exacerbated by tighter consumer spending after the holiday season. There was nothing to drive sales at all. No price cuts, no new games of note.

Nothing.

Just like August, though, we have new software title launches that leak into the following month. February could be similar to last September, when software sales rebounded to positive YOY territory thanks to late releases from the previous month and a solid slate of releases during the current month. We also have a new hardware platform launch in February with the PlayStation Vita, as well as temporary price cuts for the 3DS at select retail chains. All signs point to a stronger February with these factors in place, which should ease some of the panic and concern out there right now.

It's too early to panic. I do agree that price cuts are going to have to come if hardware sales continue to slow, but there is still a fair amount of life left in this generation of consoles. New software is coming, including an impressive gauntlet of games in the next 60 days. Consumer spending may loosen up a little with incoming tax refunds and as unemployment is starting to show signs of improvement. There are still challenges ahead, such as the possibility of current-generation console install base saturation, but it's advisable to hold severe reaction until after the end of Q1.

On the Clock: Pre-NPD Thoughts

2012-02-08T12:10:00.000-08:00

Microsoft has quite the streak going at the top of the NPD hardware sales chart, and the Xbox is still the platform to beat when January 2012 results are released tomorrow. Aside from a threat by the 3DS, which has been gaining sales momentum through Q4, the Xbox 360 doesn't look to have that much competition to defend against. Perhaps the biggest question is whether YOY numbers can be reached. 381,000 Xbox 360 units were sold in January 2011, which was 15% higher than in 2010. I don't see sales topping 381,000 this year, as there weren't any major software releases to stimulate sales in January. I think that Microsoft does emerge on top again, but will be looking at a second consecutive month with negative YOY and a sign that sales are slowing.

Nintendo will be looking to the 3DS remain strong in January. Expected residual interest in Mario Kart 7 and Super Mario 3D Land can be cited as factors, and there's a certainly a chance that the 3DS can stay close to Xbox 360 numbers. Gift card redemptions and purchases by younger consumers may also play a role in 3DS sales for the month. The big question for 3DS is whether the upcoming Vita launch may have some consumers playing a waiting game and making buying decisions in February instead. As for the Wii, last year's number of 319,000 units is likely a longshot. Outside of the holiday shopping season, there are fewer reasons to invest in a console that is on its way out. Bargain hunters may look to Wii, but I don't see Wii finishing higher than third place, behind the Xbox 360 and 3DS.

Sony is in a transition period as it prepares for the Vita launch in February. A weak slate of new software releases in January doesn't help the case for the PlayStation 3, and there isn't much-- if any-- buzz about Sony's console. Bundles, price drops, software exclusives, and Sony's free online service haven't been enough to sway consumers and I don't think this changes for January. The PlayStation 3 remains "the other console" and sees its comparative deficits to the Xbox 360 and maybe even to the Wii grow in January. Third place is the best possible scenario for Sony in January, and until a price drop hits or Microsoft reaches saturation with the Xbox 360, 2012 will likely continue this trend. The PlayStation 3 moved 267,000 units last January, and I don't think sales this January manage to hit that target.

Overall, I think that hardware YOY comparisons will be down for January. It won't be a huge decline, but with very few software drivers to push sales and with consumers struggling to pay down holiday spending debt, I think that we'll see some red. When Vita comes into play for February's results, along with the infusion of tax refund spending, I can see hardware numbers being a bit stronger... but not in January.

Look for a full analysis of available NPD data no later than Friday afternoon.

Five Burning Questions: February 6-10

2012-02-05T22:02:00.000-08:00

Here are five burning questions for this coming week:

Which way does THQ bounce? Last week was a rough one for the struggling publisher. Earnings missed projections by a considerable amount, it was admitted that the Warhammer MMO needs a funding partner, there were 240 announced layoffs, and the stock value is sitting at just over 53 cents a share. It will be interesting to see how the stock fares today, after investors have had the weekend to consider THQ's position. There's some conversation that there could be some bounceback in prices today, but it's not a lock. That dwindling market cap-- which stands at a little over $36 million-- doesn't instill a lot of confidence that the publisher is going to last another year without a buyer or some kind of other financial intervention.

What can we expect from NPD data this week? A decline in YOY hardware sales is expected when the data goes public on Thursday afternoon. A lack of new releases in January and a trend towards console hardware saturation feeds this prediction. What will be interesting to see is how software sales fare. Although there were few new games launched in January, Q4 delivered many quality titles and it's possible that gift card redemption fuels software sales to keep levels flat YOY. It's interesting to note that Call of Duty: Black Ops and Just Dance 2 were the two best-selling games for January of 2011 and it's possible that Call of Duty: Modern Warfare 3 and Just Dance 3 log similar results for January 2012.

Is the Vita turning the corner in Japan? Hardware sales for the Vita were on the upswing in the last week of January, thanks at least in some part to the release of Namco Bandai's Tales of Innocence R. Weekly sales finally surpassed the PSP and were within 4,000 units of the PlayStation 3. New software can be a driver for hardware sales, but we will see how last week's numbers fare. Japanese sales are not necessarily an indicator of how the Vita will fare in other territories, but a second straight week of gains would be a good sign for the embattled handheld as the U.S. launch draws closer. With Sony enduring hefty loss in the last quarter, there's a bit of pressure on Vita sales to be at least competitive with the 3DS and show immediate positive impact on the market.

How will this week's releases fare? Kingdoms of Amalur headlines this week's slate of new releases, which is solid for a second consecutive week after a mostly dormant month of January. Early reviews have been quite positive for the game, which would be a boon to Electronic Arts. The Darkness II hits this week as well, although it seems to be flying under the radar a bit. First-person games, while still popular, aren't the guaranteed hits they once were. Resident Evil: Revelations also lands this week, either with or without the extra analog disc peripheral. Reviews for this game have varied, although the Metacritic average stands at 82. Lastly, the Jak & Daxter HD Collection hits stores this week at a rather low $40 price point. Amalur has received the lion's share of the attention from the gaming press, which could drive sales and be this week's biggest winner. Resident Evil continues to be a strong IP, so sales may be strong early. Confidence in sales of The Darkness II seems middling at best, although strong reviews may help. As for Jak & Daxter, the price may help at retail, but sales of these HD collections have generally been fair to moderate.

Has GameStop stopped the bleeding? After enduring five straight losing sessions, GameStop stocks righted the ship last Friday with a gain of 37 cents. With the Vita on the way and a strong month of game releases ahead in February, I think that there is decent upside for GameStop for much of February. As with Sony, we'll be watching how Vita sales affect GameStop later in the month. A weak launch could hurt investor confidence in the short term as fears about weakness in the hardware sector could cause some jitters. As long as Vita sales eclipse 400,000 units in February, fears should be limited; however, anything less than that number could generate some knee-jerk reaction. This is a stock worth following this week to see if trends have turned positive... or if last Friday's gains were outliers.

I'll be keeping an eye open for answers to these questions this week and beyond, but what do you think? Feel free to offer your best answers, or maybe even leave some additional burning questions in the Comments section below.

GameStop and the Case of Coincidence

2012-01-31T14:45:00.000-08:00

GameStop stock values are in the midst of a four-day losing streak, as shares have fallen from $25.00 on January 25th to $23.36 at the closing bell today. It's likely that any number of factors could be attributed to the slump. Maybe there's a fear that sales are weak after the holidays. Maybe there's some basic profit-taking going on. It's hard to really pinpoint anything.

Here's an interesting coincidence:

At about midday on January 25th, rumors began to circulate about Microsoft enabling some sort of used game lockout or restriction for its next-generation platform. Locking out used games would be a worst-case scenario for GameStop, which relies on profits from used game sales to be successful. Take used game sales out of the equation, and there's suddenly a much shorter shelf life for GameStop in its current form. More general retailers, like Wal-Mart and Target, have other retail lines that they can rely on for sales... so abolishing or limiting used games wouldn't affect these chains adversely and they would likely still carry hardware and software for the next Microsoft console.

On the morning of January 26th, GameStop shares shed $2.00 (-8%) within the first 15 minutes of trading. Prices did recover most of those losses, but this began the trend that we've seen since:

January 25, 2011: Closed at $25.00 (-0.00, -0.0%)
January 26, 2011: Closed at $24.70 (-0.30, -1.2%)
January 27, 2011: Closed at $24.32 (-0.38, -1.5%)
January 30, 2011: Closed at $23.74 (-0.58, -2.4%)
January 31, 2011: Closed at $23.36 (-0.38, -1.6%)

It's probable that the timing of this slump and the used game lockout rumor is nothing but coincidental. After all, Microsoft doesn't appear to be on track to release its next console in 2012, and the used game lockout rumor has not been confirmed. As I wrote last week, I don't see a strong chance of Microsoft taking such action without other hardware companies doing the same thing. I do believe that Microsoft has talked about implementing such measures, and I believe that it's a possibility that the rumor may verify, but I certainly don't consider it likely.

Having said that, there are a couple of things which raise an eyebrow. For starters, Microsoft has been dead silent on the rumor. The company won't even address it. It's standard procedure not to comment on rumors and speculation, but silence becomes more deafening as it lasts. Looking back at the THQ rumors a couple of weeks ago, not commenting on rumors can begin a firestorm of controversy and speculation and can ultimately require some sort of comment to undo any potential harm or damage. The situation was different because THQ was the focus of the rumor and was feeling adverse effects from it. Here, Microsoft owes GameStop no explanation. GameStop must now deal with growing concern and speculation and has no way to limit the damage until Microsoft decides to end its silence.

One last bit of coincidence is that Netflix decided not to pursue its game rental strategy, and the news broke at around the same time that the rumor of the used game lockout hit. The Netflix decision isn't necessarily related to the rumor. Digital distribution is gaining strength and the industry is actively combating used game sales and rentals with online passes and additional DLC. It's not a slam dunk decision to jump into a line of business that already has two prominent players (in GameFly and Redbox), especially when the risk is high and the industry just doesn't want it. Despite these explanations, the timing of the news is conveniently coincidental. Does Netflix know something that we don't know? That question is very hard to answer.

Bear in mind that I'm not predicting that GameStop is in any imminent danger of that anyone should start frantically selling off their shares in the chain. I can see a scenario where GameStop may close a few stores in saturated areas to decrease overhead and that expansion is likely at a full stop, but the chain isn't folding any time soon. I do, however, think that the coincidence at play here is interesting and that the stock should be watched just a little bit more closely for the short term.

We'll see if GameStop can break the streak over the remainder of this week.

Yellow Alert: THQ Delisting Warning

2012-01-31T13:04:00.000-08:00

I've been talking about the possibility of THQ getting delisted from the NASDAQ for a few weeks, and now the first step has been taken. It shouldn't come as a surprise, as THQ stock has been under $1 since early December. The warning doesn't mean that THQ is certain to be delisted, as the publisher has until July 23rd to show a 10-day stretch of values peaking over $1 per share; however, it's a surefire sign of trouble just ahead of THQ's upcoming Q3 earnings call.

The warning signs have been there as stock values have declined steadily since late December of 2007. On December 21, 2007, THQ stock closed at $29.63 per share. It's now valued at $0.68 per share as of this writing, or a 98% decline. Looking at the publisher's stock chart, it's easy to see the sharp devaluation in 2008 and generally flat years in 2009 and 2010 before the bottom began to fall out in July of last year. That's when I first started discussing possibilities of a buyout or closure. A delisting possibility became more apparent in October and November as values dropped to near $1.50 at times.

Some observers are dismissing the delisting warning, citing examples like Majesco and Atari as managing to stick around despite the challenges that come with such a state. It's true that delisting has been overcome in the past. Majesco managed to overcome delisting twice. Atari was also delisted. It's also important to note that this is merely a warning at this point. It's not out of the question that stock values may rise due a number a factors, such as strong sales, executive changes, or a surprisingly positive Q3 earnings call.

The only thing that's changed from 24 hours ago is that THQ is now on the clock to avoid having its stock delisted. Perhaps a reverse split will do the trick if things don't turn around. Maybe THQ can win an appeal from NASDAQ for an extension if sales and earnings start to turn the corner. Perhaps a potential buyer will emerge and prices will react favorably. There are options and possibilities, as long as THQ's debt doesn't catch up with it.

All eyes and ears will be on the THQ earnings call this week, followed by investor response to it. Calls for the resignation or removal of CEO Brian Farrell will likely go unanswered, but if earnings beat estimates and show some improvement down the road, it may be enough to weather THQ out of the woods and towards a recovery period. If the earnings call doesn't go that well, however, it will be interesting to see just how low THQ stock may fall.

January 2012 NPD Hardware Sales Predictions

2012-01-30T01:10:00.000-08:00

January has flown by and it's time for the first NPD predictions column of the year.

I'm not sure that we see many changes in terms of the hardware rankings from a month ago. New software releases were slim in January and hardware pricing remained the same, so there isn't much to alter buying trends. We likely won't see any platform move over a million units as the holiday sales rush has diminished and more normal buying habits resume.

As a refresher, here are the hardware numbers (courtesy of NeoGAF) from January 2011:

Xbox 360: 381,000
Nintendo Wii: 319,000
PlayStation 3: 267,000
Nintendo DS: DATA NOT RELEASED

All of those numbers were severe declines from December 2010. Wii sales were down by nearly 2,000,000 units. Xbox 360 sales fell by almost 1,500,000 units. PlayStation 3 sales were off by almost 1,000,000 units. The moral of the story here is that we're likely to see steep declines from December 2011 to January 2012, and that's a normal expectation. It looks jarring, but with consumers resuming belt-tightening as more cash flow goes to paying bills and less goes into disposable income, it's important not to overestimate hardware sales when making predictions.

Here's how I think that the rankings will stack up for January 2012:

Xbox 360
Nintendo 3DS
Nintendo Wii
PlayStation 3

There have been two major things going for the Xbox 360 for January. First, the console still carries sales momentum with nothing to stop it. The Xbox brand has become stronger than the PlayStation brand here in the United States, and this will continue for the foreseeable future. The other major factor to consider is that new Modern Warfare 3 downloadable content (DLC) became available late in the month. Historically, DLC releases have led to hardware sales spikes for Microsoft because the Xbox 360 gets the DLC first. The one big difference this time around is that the DLC is tied directly to Call of Duty Elite and cannot (as of this writing) be purchased outright via the Xbox LIVE Marketplace. The release of the DLC does get the gaming community talking about Modern Warfare 3 again, and consumer interest likely rises at least slightly. I don't think that will be enough to keep sales from dipping below last year's number, but it shouldn't be by too much. The maximum number for Xbox 360 unit sales that I see is 400,000 units, but I expect to see a number less than that.

January is a big test for the 3DS. With the holidays done, can sales stay respectable for a $170 dedicated portable device? Having two Mario titles on the market is certainly an advantage, but the PlayStation Vita now looms large. Do consumers keep pulling the trigger on 3DS sales, do they slow down and wait for Vita, or do they slow down for other reasons? There is new software on the horizon for the 3DS, but that doesn't really help sales right now. Nintendo has to hope that Mario can power the 3DS through one more month before Resident Evil: Revelations arrives in early February. Putting a number on unit sales is tough, but I think it doesn't exceed 300,000 units-- and that may be optimistic.

The Nintendo Wii is a tough platform to call. The price is still right for consumers who have waited-- or who might want a second unit for another room in the home-- but enthusiasm seems to continue to be on the wane. New quality Wii software continues to be rare, although Just Dance 3 should perform well once again. It's a bit of a wild-card scenario; it could finish as high as second or as low as dead last. My best guess is a 3rd-place finish with less than 280,000 units sold.

The PlayStation 3 is coming off of a comparatively weak month of sales performance, and trends don't seem to favor much improvement for January. The PlayStation brand has lost considerable strength among consumers, it's still perceived as expensive, and there just doesn't seem to be a draw to get people to buy in. The 2012 slate of PlayStation 3 exclusives begins in February with Twisted Metal, but that doesn't do much to turn things around right now. As we saw last year, the PlayStation 3 and the Wii will again be close competitors in the rankings. I'm going to cap sales at 265,000 units, which is basically a flat number as compared to last year.

I believe that we'll see hardware post a negative Year Over Year (YOY) comparison against 2011. I think the trend actually began last month and continues in January and beyond. Call it what you will: console saturation, nearing the end of this console generation, or something else... but I think that, after 5+ years, most of the consumers who wanted in on this generation of consoles have done so. The Xbox 360 is destined to see its YOY numbers start to falter, and, when combined with the Wii's continued descent, that's a signal that lower overall hardware sales should be expected.

We'll see how the final numbers shake out when they're released in a week or two. In the meantime, the Armchair Analysis homepage poll shows that the majority of you agree with my pick of the Xbox 360 taking the top spot in sales again for January. The Xbox 360 took 55% of the vote, followed by the Wii (22%), and either the 3DS (11%) or the PlayStation 3 (11%). If you'd like to try predicting the sales rankings and/or unit sales numbers, feel free to list your predictions in the comments below. I'd love to see what your thinking is on where sales will be and how close (or far apart) your predictions are to mine. Your questions, comments, and feedback are always welcome.

Mid-week Musing: Microsoft's Potential Gamble

2012-01-25T19:44:00.000-08:00

Let me preface today's column by asking you to read this Kotaku article, if you haven't already. The article contains the first mention of Microsoft's next platform potentially locking out used games.

There's a lot of mixed reaction to this rather juicy rumor. Opponents of the economy and culture of used games are obviously cheering the rumor. This would be a crucial turning point in the console gaming industry's fight against used games and would put retailers of these products on the defensive. There is also a fair amount of vocal criticism of the rumor, with promises to not buy Microsoft's new console or perhaps drop out of the next console generation altogether.

The decision to lock out used games would be a major gamble for Microsoft to make. While the decision would likely be cheered by the industry, the possibility of fewer consumers and doing irreparable harm to relationships with retail partners has serious implications. Consumers have been buying used games for decades, and removing the ability to borrow a game from a friend or buying a game in any condition other than new could be a quick turn-off for many other than the most loyal core users. Slamming the door on alternate revenue streams for GameStop, Best Buy, and other retailers that deal with used product may earn Microsoft a closed door for sales of its new hardware and software. (There is precedent for such a move; several retailers declined to carry SEGA's Saturn platform in 1995 after an early release was granted for a few select chains.)

It should be understood that growth in the digital market may provide some support to put a padlock on used games for the next console generation. While digital distribution won't completely take over as the primary delivery vehicle for games on the new platforms from Microsoft and Sony, it's clear that digital is the direction that the industry wants to head in. Cost savings can be had be doing away with disc printing, packaging, shipping, and cuts for retail marketing. Logistics for street dates would no longer be as challenging, as uploads of files to Xbox LIVE and the PlayStation Network take less time than shipping product to retail warehouses for delivery to individual stores. Lastly, digital products mean that the likely end to the used game market, which is something that the industry has targeted for some time. Any "trade-in" programs would have to be negotiated through Sony and Microsoft, and would probably include at least a portion of that resale revenue going to publishers. If more games are digital, which we will likely see starting with the next generation, there won't be any used games-- and hence, the topic of locking out used games will become moot.

The argument makes sense, but I don't buy the rumor at this point. With the industry in correction after the Wii boom, taking such a risk to appease publishers and try to make some extra revenue is unwise at this time. Alienating some of your consumer base and your retail partners adds unnecessary challenges to an already uncertain situation. Mass market consumers will have other gaming options if they decide not to buy into Microsoft's vision, thanks to the rise in iOS and Android device usage. Core consumers, the key group for success in the next generation, could decide to spend money elsewhere. Lastly, if Sony and Nintendo don't follow suit, Microsoft would be at a distinct disadvantage. Being the only platform that doesn't support used games will likely make it look like a questionable purchase at best, even with Microsoft's success this past generation and despite any other hardware advantages it may have.

I think that we'll find out what's really going on during E3 in June. For now, I'm only giving this rumor a 15% chance of verifying. I think that it's something that may be in consideration, but the risks outweigh the potential advantages. Online passes will more likely grow in use, to continue to offset the argued loss of revenue in the used games market... but unless Sony, Nintendo, and Microsoft all band together to lock out used games, Microsoft stands to lose more than it gains by taking a stand like this with its new platform.

Launchpad Analysis: Patience is Vita-l

2012-01-19T22:51:00.000-08:00

There has been a lot of attention paid lately to the rather tepid response for the PlayStation Vita over in Japan. According to Media Create data, a mere 18,361 Vita units sold last week. That boosted the number over 500,000 units overall, and it took just shy of a month to reach that benchmark. It's likely that you've read the doom-and-gloom stories about the Vita and how disappointing that sales have been over there. Some analysts are worried, some consumers are worried, but Sony isn't worried yet.

Nobody should be worrying yet, in fact.

Indeed, the Vita will face a big comparison test right out of the gate. There's already a number in place for Vita to match: 400,000 units. That's the number of 3DS units that Nintendo sold in its first three days on the US market back in March of 2011. The target for Vita should be no less than 380,000 units. If it sells less than that number, given the better software lineup, then issues with perceived high pricing come into play... and that's something that Sony doesn't want to have to deal with. Sony really can't afford to sell the Vita for less than what the MSRP is set for, either.

I do feel, very strongly, that the price is going to be a significant hurdle for Sony to clear with the Vita. The Vita is undoubtedly an impressive device; I had a chance to spend time with a Vita during E3 last June and was impressed with my experience back then. I can only imagine that things are better now that the software is complete and the hardware is in its ready phase. The Vita is worth $250. The problem is that $250 is perceived to be a lot of money to spend on a dedicated portable video game platform now. Nintendo's price cut for the 3DS last August shifted the advantage in its direction, and when that lower price is combined with two strong Mario titles, it creates a sales monster. Now the Vita seems exorbitant, despite its more impressive hardware and feature sets.

The high price is complicated by the need for a separate memory card purchase, which can add between $20-$100 extra to the cost of the hardware. Sony's final pricing for the near-mandatory memory cards did come in less than expected, but the fact that even a small card isn't included in the package will cause problems at retail with some consumers. Uncharted: Golden Abyss is perhaps the killer app for the Vita, but it will not work without a memory card. Consumers who fail to realize this will be unhappy at the very least.

If the average consumer looks at pricing alone, Vita becomes a tough sell. Look at the difference:

PlayStation Vita: Hardware costs $250-$300. 4GB memory card is $20. Average game price is $40. Total is $310-$360.
Nintendo 3DS: Hardware costs $170. New games still run about $40. Total: $210. Difference: $100-$150 less than Vita.

$100-$150 is a lot of money. Yes, the Vita is a more powerful piece of hardware... but is the difference worth $100 to the mass market? That's the challenge that lies ahead for Sony: Convince consumers that spending $100 is justified. Even with Uncharted at the forefront (which is also the most expensive Vita title at launch), I suspect that it's going to be a tough sell.

Even if Vita launch numbers come in at 350,000 or less, the platform's viability should not be immediately dismissed. Sony has been a runner-up to Nintendo before and has still managed to keep its PlayStation Portable relevant for over five years. Over time, and with popular IPs like Mortal Kombat and Call of Duty on the horizon, more consumers may buy in outside of the launch window. It's important to keep extreme judgments in check for at least the rest of 2012. The Vita almost assuredly won't "fail" before the end of the year. It would take some dire numbers-- like less than 50K sold for three straight months-- for something drastic to happen.

The Vita launch will be fascinating to observe and analyze. I believe that the platform is set up to fare better outside of Japan, given the software lineup, but it will be up to consumers to decide whether they feel $300+ is a solid investment-- and something that they can afford to do in this still-trying economic climate.

December 2011 NPD Analysis Part II: Software

2012-01-17T13:50:00.000-08:00

Software sales were the highlight of November's NPD report. Strong Year Over Year (YOY) comparisons were the result of one of the strongest months of software releases in recent memory. Residual success for October releases like Batman: Arkham City and Battlefield 3 were complemented by a battery of AAA releases like The Elder Scrolls V: Skyrim, Assassin's Creed: Revelations, Saint's Row: The Third, and Call of Duty: Modern Warfare 3.

Initial thinking was that software sales strength could carry over to December with three solid weeks of sales to fill, but the numbers painted a very different story. A 6% decline in unit sales for the month of December versus the same period in 2010 was the result, with a steeper loss in terms of dollars spent. The poor month also sent the year 2011 into the red (-1%) overall.

At first glance, as with hardware, it's easy to step back and assume that the industry is in trouble. Negative numbers obviously aren't good news. It's important to take a step back, however, and look inside the numbers. Software sales for the Xbox 360 and PlayStation 3 were both up YOY in December. Wii software sales were down, which is predictable. Looking at 2011 as a whole, the same trends apply with strong growth in the Xbox 360 software market (over 20%), lesser strength in the PlayStation 3 software market (over 6%), and weakness in the Wii market.

This is a market shift. Consumers seem to be going one of two ways:

Moving to HD consoles, like the Xbox 360 and PlayStation 3, thanks to recent price cuts which make them affordable for more households.
Moving away from console gaming altogether, as they move to social gaming and smartphone/tablet gaming.

The Wii bubble was bound to deflate, and that's exactly what 2011 has been. It's not feasible for the industry to sustain such lofty sales numbers now that the Wii's best days are behind it.

Having said all of that, there's one thing that makes the December NPD chart very interesting: Just Dance 3 for the Wii annihilated the competition at retail, selling nearly 800,000 more copies than its closest individual SKU competitor (Modern Warfare 3 for the Xbox 360). That's shocking, especially considering that Just Dance 3 was released in early October and had already moved a million units on the Wii in November alone. This shows me that Wii usage is still strong, but there's less demand for the console. Admittedly, 2011 wasn't a banner year for Wii software releases, either. There wasn't much to get consumers enthusiastic about the Wii. This can happen when a successor is close at hand, but it's wise to note that if good games in familiar franchises are delivered for the Wii, they can still sell to a significant installed consumer base.

There's not much to say that hasn't already been said about Modern Warfare 3. The Call of Duty IP is showing no signs of slowing down, although sales were down significantly in December as compared to the launch in November. 3 million combined units sold between Xbox 360 and PlayStation 3 isn't bad, but the drop was more than 50% from over 8 million combined in November. We did see a similar drop last year with Black Ops, so it's not unusual. It will be interesting to see how planned DLC releases affect Modern Warfare 3 sales moving forward.

When two Mario titles for one platform are on the software chart, connecting the dots is easy to figure out why the 3DS was the second best-selling platform in December. The two games combined to sell two million units. Sales of Super Mario 3D Land shot up over 40% from its opening month and Mario Kart 7 raced out to a debut of well over a million units. 3DS software marketshare also shot up from nearly 3% in November to nearly 7% in December. That's one impressive leap. I expect this number to continue to rise in 2011, albeit more slowly, with more consistency in software releases on the way.

It will be interesting to see how YOY comparisons fare for 2012 versus 2011. The industry has steadily been sliding for a couple of years now, and with the bar continually set lower, it's hoped that the bottom can be reached. There's still a year of life left in the HD console market, at least, and I believe that software sales will be counted upon to lead the industry this year. The releases of the PlayStation Vita in February and the WiiU sometime in the second half of the year are wild cards and can't be counted upon to boost hardware sales higher.

Overall, I am projecting somewhere around a 5% decline for hardware sales in 2012 versus 2011 and a flat to slightly positive improvement for software sales. I believe that the Xbox 360 peaked in 2011 and that it will be very challenging for the platform to maintain its torrid sales pace this year. Combine that with Wii sales continuing their slide, and I don't think that Vita and WiiU can make enough of a difference. Software sales could see a bump given fewer consoles sold, clearing the way for more games sold.

That does it for another month, and another year. 2011 was a successful year in many ways, and even if the industry isn't able to pull the anomalously high sales figures that it has in previous years, there is still success to be found. You just have to look at the numbers to see it.

Weekend Update: THQ Watch

2012-01-16T00:01:00.000-08:00

After a weekend rife with rumors and denials, eyes should be on THQ this week to see whether any fallout results from the currently unsubstantiated turmoil.

Here's a basic rundown of what happened:

Late Saturday night, Kevin Dent posted a series of tweets discussing some things that he's heard about THQ. As I consider Mr. Dent to be quite reliable, I retweeted him and mentioned both on Twitter and Google+ that the situation may bear watching but required confirmation before any major concern occurred. That was the last I thought about it and figured that confirmations or denials would hit next week.

On Sunday, however, the situation had blown up courtesy of the NeoGAF message board. There was further speculation about THQ's financials, as well as a rumor that layoffs could be imminent. The rumors spread across gaming press like wildfire. One site even sourced me, which was surprising. As the day went on and THQ remained relatively quiet, fear of a silent confirmation began to grow. An air of negativity began to take hold, despite some lesser denials. THQ issued an official denial of the rumors late Sunday night, attempting to calm the waters and restore some confidence in the publisher's outlook.

Here's my take on the situation, currently:

THQ's denial is a positive step, but there's still the possibility of fallout from shaken investor confidence this week. Markets are closed today, but Tuesday will be a key day for the publisher's stock. At the closing bell on January 13th, THQ stock was valued at $0.66 per share. It had been as low as $0.65 earlier in the session. Another major dip in stock values is a legitimate possibility, especially if investors got wind of this weekend's events. In spite of THQ's denial and attempt to stem the negative tide, it's impossible to ignore that stock values are again hovering near 52-week lows and that the stock has been valued at less than $1 since December 7th, 2011. The spectre of disappointing earnings thanks to uDraw still hangs over the company, too.

As THQ pointed out in its denial statement, software sales for the publisher were higher in 2011 (+18%) than in 2010. Only Bethesda and Warner Bros. Interactive posted better 2011 versus 2010 comparisons. While Saints Row: The Third did fall off of the NPD Top 10 chart for December, THQ did have a decent month overall. These are positive signs, but it remains to be seen if they'll be positive enough.

At this point, it's too soon to throw dirt on THQ's grave. I believe that close observation of THQ's stock value is warranted, however, as well as keeping the possibility open of hearing about some project cancellations moving forward. Even if the situation isn't as dire as rumors seemed to indicate, the publisher still has some work to do in order to find its way out of the woods. For now, unless THQ brass reverses course and makes a surprise announcement this week, the rumors should be set aside and a "wait and see" attitude should be adopted.

Part II of December's NPD analysis will go up on Tuesday.

December 2011 NPD Analysis Part I: Hardware

2012-01-13T02:11:00.000-08:00

Note: The following analysis has been prepared using the full NPD report for December; however, per NPD reporting policy, numbers that have not been shared publicly as of press time will not be shared here, either. Armchair Analysis thanks NPD for its hard work and for sharing some data with the public. Please understand that Armchair Analysis and its author are unable to reveal any additional numeric data without obtaining permission from NPD or the specific companies that it tracks.

December 2011 is a month that, upon review of the NPD report, continues the slide that the console video game industry has seen for much of the year. Hardware sales were down 32% from a December ago, with weaker Wii and PlayStation 3 sales leading the decline. It's important to note that Wii sales are still sliding from extraordinary plateaus during the height of the console's popularity, so the YOY decline appears precipitous.

Gathered from publicly released (and confirmed) data, here are the hardware rankings and unit sales (where available) for December:

Xbox 360: 1,700,000+ units sold (-8.6% YOY)
Nintendo 3DS: NO PUBLIC DATA RELEASED [NPD report confirms 2nd place, however]
Nintendo Wii: 1,060,000 units sold (-55.0% YOY)
PlayStation 3: ~936,000 units sold (-22.6% YOY) [via NeoGAF extrapolation, close to actual]
Nintendo DS (Legacy): NO PUBLIC DATA RELEASED [NPD report confirms 5th place]

Microsoft led the way once again, closing an impressive year for the Xbox 360 as it finished 2011 as the best-selling platform of the year and logged the best YOY comparison (+7.3%) of 2011. This December wasn't as strong as last year, which is somewhat disconcerting given that there were supply constraints a year ago and the economy was arguably worse in 2010. That's the only blemish on what is a decent performance for the last month of the year. Expect the Xbox 360 to maintain its momentum in 2012, although I do expect YOY comparisons to stay flat or show slight declines for at least the first 6 months.

While unit sales for the 3DS remain under wraps, it's worth noting that an extrapolation of 1,500,000 units isn't far from the actual number. The extrapolation can be made subtracting 2.5 million units (as of November 2011 NPD) from Nintendo's boasted PR figure of 4 million units installed. It's an increase of nearly 50% over November unit sales. Two Mario titles-- Mario Kart 7 and Super Mario 3D Land-- have helped to lead the 3DS' charge over the hump. With the release of the PlayStation Vita a little over a month away, it will be interesting to see how 3DS sales change. Nintendo will need to keep delivering first-party software and rely on strong third-party offerings (like Metal Gear Solid 3D and Resident Evil: Revelations) to keep numbers strong.

Wii sales are continuing their declines from where they once were, and that shouldn't surprise anyone. Lagging Wii sales are the biggest reason why hardware sales comparisons continue to bleed red. Having said that, seeing Wii outsell the PlayStation 3 is a bit of a surprise, given where the platforms are in this console generation. The Wii's December performance helped to nudge it ahead of the PlayStation 3 for overall sales in 2011 by less than 20,000 units, despite posting a -36% full YOY comparison versus 2010. Expect declines to continue in 2012 leading up to the WiiU launch, most likely sometime after August 26th.

It's tough to put much of a positive spin on the PlayStation 3. The platform is a sales enigma, unable to break 1,000,000 in unit sales in either November or December and in spite of attractive bundles, free online play, strong first-party exclusives, and Blu-ray capability. The 23% December YOY decline follows a lesser decline of 11% from 2009 to 2010. One bright spot for Sony is that the PlayStation 3 sold more units in 2011 than in 2010 (+4.3% YOY). A price cut for the second straight year seems to be in the cards for Sony, especially if the company seems to be shying away from next-generation console plans as Kaz Hirai indicated during CES this week.

Troubling hardware sales numbers in December don't necessarily mean a bleak future. Microsoft and Sony likely have room for price cuts this year, if sales decline enough. It's also nearly impossible for YOY comparisons to be fair indicators of the health of the industry, given the anomalous sales cycle of the Wii. Take Wii out of the equation and the results have less gloom to them. 3DS has finally caught on, and despite being long in the tooth, Xbox 360 hardware is still selling at a decent clip. Results from Q1 2012 will be closely watched; if YOY figures for the Xbox 360 and PlayStation continue to be in the red, perhaps previous notions about playing the waiting game for next-gen hardware may need rethinking; however, it's also a risk given the tenuous state of the economy and smaller amounts of disposable income. Some consumers may be ready for the jump to the next generation, but is that number going to be enough? That's what we'll watch.

Look for Part II of this feature soon, as Armchair Analysis covers the NPD software results. In the meantime, your feedback is always welcome. Feel free to talk about the format, the data, the predictions, or even offer your own interpretation on the numbers that we've been given.

Welcome!

2012-01-12T23:02:00.000-08:00

Welcome to my new Armchair Analysis blog!

After careful consideration, I decided that it was worth setting up a blog to specifically discuss and analyze retail sales and business trends in the console video game industry. While I've been writing about this topic since 2008, this is the first step in establishing specific experience and subject matter. Unlike my writing at my other blog, Consoleation, my aim here is to focus strictly on analysis. This means a lot of data, a lot of numbers, and some predictions.

Some have asked me why sales data is important. Why write about it? Does it really matter that the Xbox 360 sells more than the PlayStation 3? Does one month of disappointing sales means doom and gloom? The fact is that I find this data interesting. These numbers can be indicators of trends to come, or things to be watchful of as time marches on. Numbers can be spun many different ways, but it's not always easy to interpret their meaning. My predictions aren't necessarily going to be taken under advisement by the powers that be, but I've had decent success in the past.

I want to thank Michael Pachter and Jesse Divnich for their inspiration and support. I had the honor of meeting both men in Los Angeles during E3 in June of 2011, and it was very flattering that they had read my previous work and knew who I was. Analysts get a bit of a bad rap among the core gaming community, and I admit that I used to be equally negative about the work that they do. However, once you get an idea of the numbers that they crunch and what their responsibilities are, you'll see that they don't work to make friends or say what gamers want them to say. They make calls as they see them, despite whether it's a popular opinion or not. While I'm not a professional analyst and base my analysis on observation and general retail experience, I do strive to be another voice in the field.

Your feedback is always welcome. Comments are active, or you can send an e-mail to gameguypeter@gmail.com with questions or comments that you'd like to keep off the record. I'd like to make this blog interactive, including getting predictions from you. I do ask that you keep your comments civil and respectful. I'm sure that you'll likely disagree with a thing or two that gets posted here, but you're more likely to get your disagreement acknowledged if you keep the vitriol to a minimum.

My posting schedule will vary, so if it's been a few days between posts, don't be alarmed.

Thanks in advance for reading, bookmarking, and replying to my work. I'm looking forward to 2012 as the PlayStation Vita and Nintendo's Wii U make their debuts and the industry continues to captivate millions of consumers.