Pre-NPD: April 2013 Projection Comparison (versus Michael Pachter, Wedbush Securities)

In advance of this afternoon's release of NPD retail video game sales data for April, I wanted to compare my range projections with those of Michael Pachter from Wedbush Securities:

• We both agree that the Xbox 360 will be the best-selling hardware platform for the month. Mr. Pachter's projection of 205,000 units is squarely in the range of 190-215K that I projected. 
• Mr. Pachter believes that the 3DS moved 185,000 units for the month, which is considerably higher than my range of 140-165K. I'll be very interested to see actuals here; perhaps I'm not giving the platform enough momentum given residual sales of March games. 
• As for the PlayStation 3, Mr. Pachter projects 165,000 units sold. That is within my projected range of 155-180K. If this verifies, it will be the second straight month where 3DS beat PS3 and will be worth considering for trend analysis and projections moving forward. 
• Mr. Pachter projects Wii sales to be at 75,000 units. I did not put a number on Wii or legacy DS units for the month, but projected them to be 4th and 5th place respectively. Based on Mr. Pachter's numbers, this sounds like we agree. 
• The Wii U moved 55,000 units in April, according to Mr. Pachter. This is at the low end of my 50-75K range. My instinct tells me that the raw number could be a shade higher, but I can see where the lower projection could verify. 
• Finally, Mr. Pachter projects the Vita to have moved 30,000 units, which is below my projected range of 35-60K. 

I'll be very curious to see 3DS sales data. I think that it's a good sign if I'm underselling the handheld as that could signal strengthening for the device well in advance of more significant software releases later this year. It's also notable that the 3DS will likely be the only platform to show any kind of YOY sales gain, which is also a good sign. 

My full analysis of April's data will be live on Popzara soon. I'll also provide additional observations and opinions here over the course of the next few days as we digest the numbers and trends.

(Thanks to GameSpot and CNET for sharing Mr. Pachter's projections.)

On The Fly: Vita

Just took a look at Vita's sales numbers in Japan for last week, and they're not good. Again.

Over here, in the U.S., I don't expect great news for October sales when NPD data is released in a week or so. Assassin's Creed: Liberation came out after the close of the NPD October cycle, and there really weren't any significant releases for Vita for the period.

The question probably is: Does Vita break 60,000 units for October? It's not an impressive number, but it seems to be the base for movement-- up or down-- for unit sales. Over 60,000 means some strengthening, while less than 60,000 means that the platform is sliding back into irrelevance.

If you're looking for a healthy holiday season in the U.S. for the Vita, you're not likely to find it. The platform is not a priority in the handheld market, no matter what promotions Sony tries to run. As if competing with the more popular 3DS isn't hard enough, trying to compete for spend in a market that's leaning more and more towards mobile-- tablets and smartphones-- instead of traditional handhelds is a huge challenge.

I expect Vita to sell the lowest number of units of any current platform, outside of PlayStation 2 and PSP, over this quarter.

Weekly Buzz: August 13-17, 2012

After a few busy months and after receiving some positive feedback, this blog is going to be returning to active service. It'll be going hand-in-hand with my Twitter feed and I'll be making occasional updates to expand upon posts and observations that are made elsewhere. 

It makes sense to move forward now since the busy season is almost upon us once again and there should be plenty of data to cover. New releases should be hitting retail with more frequency in the coming weeks and months, the 3DS XL lands in stores in just a few days, and the launch of the WiiU will be closely watched to see how consumers react to the first new console to see release since 2006. 

Here are some stories and situations to watch as this week begins:

1. Rumors of a GameStop (GME) buyout have been making the rounds over the past few days. Interestingly, the share price soared more than 5% during the last trading day and has risen nearly $2 in the last week. GameStop will be discussing its AMJ earnings on Thursday morning, so we'll see how investors react. 

2. Speaking of rumors, two separate rumors surrounding WiiU include a possible announcement of pricing and/or release date this week, as well as a rumor that production woes may delay the hardware launch in Europe and could significantly impact supply in the US. Current thinking is that WiiU will ship in mid-November for $300 in the US, likely with a Nintendo Land pack-in. Stay tuned. 

3. With PlayStation Vita sales falling under 50,000 units for the month of July, it's a bit disconcerting to hear Sony Computer Entertainment America President and CEO Jack Tretton say that sales of the struggling handheld are "acceptable". I'm not sure how a platform with such a strong slate of software at launch can be deemed to be selling at an acceptable level when its competitor is outselling it by nearly 2:1 in 2012 and that LTD sales are still short of 700,000 through its first six NPD periods. More games are obviously needed, but the question of a price cut is made more complicated by Sony's increasingly more challenging financial situation. 

Look for my full analysis of July's NPD data during this week over at Popzara Press. Furthermore, expect my analysis to appear on other sites as well throughout the rest of 2012 and beyond. As always, questions and comments are welcome either below or via e-mail. 

February 2012 NPD: A Tale of Two Portables

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.

Vita Price Cut: A Risky Assumption

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

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.