First Impressions: Xbox One, Gamers Zero?

If you listen to the social mediasphere, the Xbox One is dead already. If you listen to common sense, however, you'll realize that the battle is just beginning. 

I found Microsoft's (MSFT) reveal of the Xbox One to be acceptable. I got pretty much what I expected from the event itself, and was even impressed at some of the things that the hardware will do. Fast-switching between different entertainment sources with only one input is a neat idea, and convergence in the living room is where I think we're headed. Microsoft seems bullish on the idea of diversified entertainment, widening its scope of potential Xbox One users instead of focusing mostly on the core gaming demographic. It's a strategy that's getting Microsoft ripped to shreds by video game fans, but could shake out to be beneficial in the long run if the theory that core gaming consumers alone can no longer support this business verifies. 

I do believe that kneejerk reactions from the social mediasphere when it comes to this alleged lack of focus on games can be mitigated by a more gaming-centric showing at Microsoft's pre-E3 keynote on June 10th. I don't believe that Microsoft is forsaking the core gaming community at the cost of attracting others, but rather that the company is picking its spots to showcase certain aspects of the platform. I can buy into the argument that this more general kind of presentation might have been better-suited to a different event, since many of the viewers were likely core gaming consumers and not analysts, retailers, or investors... but this by no means should be taken as a confirmation of lesser gaming importance for the device. 

What stands out to me even more is the rather stunning lapse in the chain of information from company to press when it comes to certain potentially controversial aspects of Xbox One. No mentions of used games or required Internet connectivity were made during the reveal, but after the event, stories began to surface about potential fees for used games and a requisite for at least daily Internet connectivity checks to maintain proper functionality of the Xbox One's feature sets. The fee for used story that Wired ran wound up getting contradicted shortly thereafter by another media source, but that didn't stop GameStop shareholders from dumping stock once the story broke. At one point, the stock sank by more than $3 per share before recovering late in the session to close nearly $2 lower at $36.78 (-5.11%). 

Misinformation and Microsoft's inability to share confirmed strategies about used games certainly hurt the reveal of the Xbox One. Perhaps the dozens of threats to buy PlayStation 4 over the Xbox One will ring hollow, but if they don't, who is to blame here? I charge that Microsoft should not have even bothered to field questions from the press about used games and required connectivity until a later date, when the company would be more prepared to give accurate, clear answers to these questions. Instead, there's a lot of crossed wires and even more doubt about the platform, which is only hours old to the public's eyes. 

It will be interesting to see how Microsoft deals with this suddenly negative perception and how the company approaches the core gaming demographic to allay fears and disappointment. Personally, I believe that we're at far too early a stage to damn the platform... but Microsoft must tread carefully over the coming weeks so as not to make a difficult situation worse. 

For now, I urge patience when attempting to gauge the level of interest or launch success for the Xbox One. There is still a lot of information to be shared before realistic, forward-looking analysis can begin. 

April 2013 NPD Reaction: Spring Swoon

Speaking candidly, I don't believe that anyone was ready for the numbers that we saw from NPD for the month of April... regardless of whether you're an armchair analyst like myself or whether you're a top-line professional in this business. Hardware sales numbers, in particular, were just painful to digest. It wasn't a total collapse, but when you drop by more than 40% from the past year-- and when that April's comp targets weren't crazy to begin with-- it just looks awful.

We have to start by looking at the Xbox 360. It's great for Microsoft that the 360 was #1 again, but the context behind that accolade isn't too great. A 45% decline versus last April? Only 130,000 units sold? Perhaps we've come to expect a bit too much from the platform, which is just a few months from celebrating its eighth birthday, but with many pre-NPD projections pointing to around 200,000 units, there's no other way to look at 130,000 then to question what happened. In my full analysis for Popzara, I posited that the news of the Xbox 360's successor getting a reveal in May might have convinced consumers to slow down on buying and wait to see what's coming. Before then, we had a lot of speculation and hearsay about the new Xbox, but it wasn't real. Now it is, and the Xbox 360 aged rapidly in the span of a couple of weeks. I do think that sales will recover for the 360, especially as more games arrive in the August-November time frame, but things may stay on the slow side for a little while and we should probably scale back our monthly projections accordingly.

I've been very vocal in the past about the slowing pace of 3DS sales, and after a brighter March, April was a step backwards for Nintendo's handheld here in the United States. I do believe that, as more software hits stores later this year, 3DS sales will accelerate and that it should be at least a consistent #2 on the hardware charts (if not higher). What surprised me was that 3DS sales contracted despite the platform having two titles in the software Top 10 list. I expected residual game sales to help bolster hardware sales and keep the 3DS within striking distance of April 2012 numbers, but it just wasn't meant to be.

Analysts calling for price drops isn't a new tactic, but that's what I'm doing here when it comes to the PlayStation 3. $250 isn't moving hardware, no matter what pack-ins that Sony decides to add in order to justify the price point. We're not in the launch window anymore, and consumers would much rather pay a lower cost of entry and pick their own games than pay a higher premium and be stuck with games like inFamous and Gran Turismo 5. If Sony comes through with a price cut at E3, and couples it with the release of The Last of Us, I think it's capable of making some noise especially since the Xbox 360 will be in the midst of a moderate software drought.

Wii U numbers continue to be low, and its six-month LTD totals are tracking lower than the Xbox 360 and the PlayStation 3 during the same time frame. Nintendo announced a multi-game partnership with SEGA during its last Nintendo Direct event, which demonstrates a step forward in the third-party arena; however, this partnership doesn't come close to filling the hole that the EA departure has left behind. Mario & Sonic at the Olympic Winter Games is no substitute for the losses of Madden and FIFA on the Wii U, and the absence of EA's upcoming Star Wars games will be a considerable mark against the platform. Having said that, I'm still intrigued by what Nintendo will tell us during E3 next month. Obviously its relationship with Ubisoft is still strong, but what of Activision and Take-Two? Hopefully those will be shored up. Otherwise, Nintendo will be fighting this battle pretty much on its own.

Finally, seeing Vita move less than 20,000 units in a month is just poor. The platform is still relatively new, and yet it's been unable to find any sales momentum and is in danger of becoming completely irrelevant. If Sony is serious about the Vita's chances here in the US, drastic steps must be taken to prove it. Sony must announce a price drop to $200 (or lower) at E3 and the company needs to announce compelling software that will interest a wide audience. Indie games aren't going to get this done. Partnerships with third-party partners must be forged and Sony needs to involve its own first-party studios more seriously in Vita software development. If not, Vita is going to be a tough sell for retailers, even despite its ties to the PlayStation 4. Months and months of inaction from Sony need to come to an end, and I hope that E3 is the turning point.

While I'm surprised by the severity of the declines posted for April, it's important not to overreact and make assumptions about the overall health of the industry. What I think we're seeing here is the beginning of a wait-and-see period for consumers as Sony and Microsoft prepare to show off their new hardware platforms and try to sell people on them. Combine that with a relatively soft release schedule over the next 2-3 months, and we should keep our expectations in check. I believe that trends will turn more positive late in Q3 and into Q4. Conditions may be challenging until then, but it's not a long-term weakness.

Crystal Ball: April 2013 NPD Data Pre-Release Speculation

NPD sales data for April is set to arrive on May 16th. I don't expect many surprises nor many changes to the status quo when it comes to hardware sales rankings for the month.

It's most likely that that Xbox 360 will maintain its pattern of dominance for the US market. Given static pricing for the hardware and that few major titles debuted in April, expect YOY sales to be lower, even with Walmart sales included this time out. Last April's number was 236,000 units. Getting to 200,000 this time may be a challenge-- though it's not out of the question given late tax returns for some, continued strength of Bioshock Infinite, and the debut of Injustice. My best range estimate is between 190,000-215,000 units.

The most interesting platform to watch will be the 3DS. With residual sales of Luigi's Mansion and Pokemon from March out there and with potentially increased interest thanks to some big future game announcements, it could be the one platform to see a YOY increase. Last year's number was only about 150,000 units, so the target isn't impossible to reach. After passing the PlayStation 3 last month and moving into the #2 position, despite a pair of notable exclusives for the PS3 from Sony, I expect further jockeying between the two platforms for the second spot behind the Xbox 360. One month doesn't make a trend in and of itself, but it was a positive step to see the 3DS show YOY on the plus side last month... despite the slim margin of improvement. My best range estimate is between 140,000-165,000 units.

Much like the Xbox 360, I expect a YOY decline for the PlayStation 3. The reasons are the same as the Xbox 360; the price point is still the same and new software releases were slow (save for Injustice). Last April saw less than 200,000 sold, and I think that number could dip below 175,000 this time around. I'll put the range between 155,000-180,000 units.

Wii and DS will probably take the 4th and 5th place spots, though DS is likely to be declining in the months to come as production has ended and remaining inventory will be sold. Wii software is still available at many retailers and the price is decent (though could arguably be lower) for a budget-conscious family, perhaps looking at a console for a child's bedroom or for another room in the house. I'd really like to see Nintendo drop the pricing on Wii to $99.99 sometime soon and accelerate the move to get these off of store shelves. Unfortunately, I don't know that we'll see that happen-- at least, not anytime soon. We'll see what Nintendo announces at E3 next month.

Wii U will be next, in the 6th spot. At this point, enough criticism has been made about the platform's poor start and Nintendo's culpability in that. We wait now and see what Nintendo has up its sleeve in Los Angeles. It makes sense that Wii U will be an important piece of Nintendo's strategy, and I'll be curious to see what games are coming, what the schedule is, and what else the company has in mind to reverse course and to get Wii U units moving more briskly off of store shelves. Whether it's a price drop, consistent new game releases, or something else... you have to think that the gloves are about to come off. It'll be another sub-100,000 month for Wii U, probably ranging between 50,000-75,000 units, based on my best guess.

Bringing up the rear will be the PlayStation Vita. Soul Sacrifice won't be enough to bring Sony's new handheld out of its malaise. $250 plus memory card costs is considered in the court of consumer opinion as too much, especially when the 3DS is $50-$80 less and comes with its own SD card. The obvious solution here is for Sony to drop the hardware price, but the question is when. Could it be during E3? My guess is yes, but that's purely speculation on my part. My estimated range for Vita units sold is between 35,000-60,000 units.

What about physical retail software sales? Expect Injustice to be the best debut of the month. It could be #1, with at least a top three showing the most likely result. It'll be interesting to see whether Bioshock Infinite and/or Tomb Raider can stay in the Top 10 for a second straight month. With the NBA Playoffs on full swing, expect to see NBA 2K13 in the Top 10 again, along with Call of Duty: Black Ops II.

Overall, expect video game sales to show a decline from last year's $630 million at retail. My guess is between $525-$575 million, or a decline of between 9-17%. A lot of that will likely come from hardware declines. Packaged software was at $307 million last year but the best-selling game (Prototype 2) moved  less than 236,000 units combined, and I think that Injustice beats that... so software could be slightly below to slightly above last year.

My full analysis will be posted exclusively at Popzara.com within a day or two of the data release.

Please note that my ranges are all speculative and are for reference purposes only. My analysis is more on trends at large and my predictions are based on last year's figures and personal instincts. I do not have full access to full NPD data and take my figures from public information shared by NPD, Microsoft, and Nintendo along with various trusted sources.