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.)

The PS4 Pricing Game: What might Sony do?

"Unlike PS3, we are not planning a major loss to be incurred with the launch of PS4..."

-- Sony CFO Masaru Kato, May 9th, 2013

It's understandable to want to jump to conclusions based on Mr. Kato's statement above. Does this mean that Sony would dare to repeat its $600 miscalculation from 2006? Could this mean higher costs than expected at retail and potentially put off consumers? Does this open the door for Microsoft to undercut Sony out of the gate?

To those of you asking these questions, I urge patience. While I'm comfortable at this point in projecting the suggested price point for the PlayStation 4 somewhere between $400 and $500, we've been down this road before. Flashing back to 2011, when Sony was set to unveil the Vita, there were similar questions as to the price point, given the tech involved. $250 was not what most people expected, even though Nintendo went on to drop the 3DS price point and made Vita seem far more expensive than what it was. I'm not saying that we should expect another bombshell in terms of asking price, but I'm suggesting that we leave the door open a bit wider when it comes to making pre-launch price estimates.

The $400-$500 window is not a mass-market window, and I believe that Sony and Microsoft execs know this. It is, however, enticing to early adopters and core consumers who have been waiting impatiently for new hardware and if that window is met, sales will be okay at the start. While we'd like console hardware sales to sprint off the blocks, the hardware race isn't a 100-yard dash. Generational transition will occur in waves, starting with early adopters and at least portions of the core consumer demographic in the launch window (first 6 months) and then will gradually expand to other demos from there as more games fill the channel and price cuts come.

The chances for actual launch pricing being outside of the $400-$500 window decrease on either side of the range. Anything more than $500 is risky given Sony's failure to drive the PlayStation 3 at a high price point and that it's still fresh in the minds of the consumer demographic that will be targeted at launch. Anything less than $400 would seem to call Mr. Kato's statement above, based on what we've seen and heard regarding the hardware. It's not going to be a cheap console to produce. If I had assign probability percentages for these ranges as of today, they'd look something like this:

• Less than $400: 25%
• Between $400 and $500: 60%
• Greater than $500: 15%

It's fair to point out that the idea of subsidized console sales makes sense to limit losses on hardware while also presenting the platforms at an affordable up-front cost. Microsoft piloted the idea with the Xbox 360 last year and the plan expanded from its own branded stores to other retailers. I believe that Microsoft is in a position to do so again with its new console, and I believe that Sony can present a comparable subsidy plan to match for the PlayStation 4. In the long run, these subsidy plans can make more money for Microsoft and Sony than by otherwise selling the hardware at a base price thanks to multi-year commitments to their online services. Nothing has been reported or rumored in terms of potential Sony subsidy plans, but it makes sense as something to watch for-- either during E3 or a bit later this summer when launch details are firmed up.

Of course, the time for speculation will be replaced by more accurate analysis and projection once Sony and Microsoft come forward with their launch specifics and strategies. For now, though, based on what we know, I believe that Kato's comments should not be misconstrued for another exorbitant launch.

On The Fly: Pre-NPD Thoughts (October 2012)

Let's get the obvious out of the way:

October will be the eleventh consecutive month of YOY declines. There's no escaping it, and we're likely to see the trend last for at least another month or two before lower 2012 results make for easy targets to hit.

Declines will be paced by poor performance in hardware sales, as generational fatigue and saturation have set in. Even with a price drop in October, the Xbox 360 won't make it's number of 393,000 units from 2011. I optimistically expect sales to be at around 300,000 units, though that number could be lower. 3DS sales should be relatively flat, despite launches of Pokemon Black & White 2. PlayStation 3 sales should post declines, perhaps moderately so, and Wii sales won't recover much despite recent price changes. Vita will be a non-factor once again.

Software is tough to predict, mainly because we're only privy to physical sales. My best guess is that NBA 2K13, Pokemon Black 2, and Pokemon White 2 comprise the top three games for the month. Expect Skylanders Giants and Just Dance 4 to also make the list, along with holdovers from September including Borderlands 2 and FIFA 13. Dishonored probably charts, but XCOM and Medal of Honor: Warfighter might not.

Overall, software should be down as opposed to last year. I'm not confident that NBA 2K13 and Pokemon can combine to sell 3.5 million units, as we saw Battlefield 3 and Batman: Arkham City move last year. As with prior months, software declines won't be as pronounced as we'll see on the hardware side.

I'm projecting October total revenue to come in somewhere between $840-$860 million. That's in the range of a 20-22% loss. That could be optimistic, but a decent slate of October releases and price cuts for Wii & Xbox 360 may mitigate some damage.

We'll see how everything shakes out next week.