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.
Showing posts with label sales. Show all posts
Showing posts with label sales. Show all posts
Wednesday, October 31, 2012
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.
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.
Thursday, August 16, 2012
Take Five: GameStop's (GME) Q2 2012 Earnings & Conference Call
GameStop has released its earnings and financials for the second quarter of 2012, and recently held a conference call to discuss the details and more with investors and analysts.
Overall sales for the period were down by more than 11%, which was attributed to slow traffic due to a weak new release slate. Sales of pre-owned merchandise, which is GameStop’s most significant margin category, were also down more than 11%. The bright spot for the quarter was growth in GameStop’s “Other” category, which was up nearly 41%. This category includes mobile and digital sales, which are new sectors of business for the retailer.
Here are five other observations that I made during the earnings call:
1. DLC, especially at launch, is vital for GameStop and for publishers. GameStop CEO Paul Raines and his executive team made this a recurring theme during the call. Despite the negative associations made by some consumers with this practice, it was made clear during the call that it’s only going to expand moving forward. Quotes from the call driving this point home included “You need to have DLC at launch” and “Every single major title is releasing with DLC”. The market is increasingly as reliant on off-disc content as it is on what’s on the game disc.
2. The PlayStation 2 is (finally) dead. We’ve known for some time that GameStop has been taking its PlayStation 2 inventory out of some stores, and the reasoning is becoming more and more clear: Very few customers are buying them anymore. Proof of this point: Sales of current-generation preowned games were flat for the quarter, and yet overall sales were off more than 11%. It’s not hard to figure out what’s pulling the number down here. It was noted that PlayStation 2 inventory was moved to stores in more urban areas, generally with lower income levels.
3. Caution for Q3 and Q4... GameStop predicts that its 2012 revenue will be between 2-10% lower than 2011. The company is trying to be "pragmatic" with its projections for the remainder of 2012, especially with regards to the launch of the WiiU and how it will affect the retailer's overall results. While all the right words were said about the WiiU launch, there was a sense of doubt in terms of Nintendo's ability to meet demand for the WiiU. This can be attributed to supply issues with the launch of the Wii in 2006-07, but there continues to be some concern about how much product that Nintendo can get to retail due to "manufacturing issues". GameStop also seems to be concerned that, despite a solid release slate for the remainder of the year, traffic won't recover to former levels.
4. ...but a brighter Q1 2013. GameStop does, however, see growth returning in the first quarter of next year. There's a formidable release slate during the period, especially as compared to the rather weak slate seen this past year. Weak comps will aid the growth outlook, plus the WiiU variable will likely add to better numbers overall. It doesn't seem like much of a stretch to call for growth given the facts, but good news is still good news.
5. Gen4 and physical media seem be to stuck together. Observations from both GameStop execs and an analyst during the question & answer session of the call seem to point to Gen4 hardware from Sony and Microsoft as having some sort of physical media option. Gen4 consoles, according to GameStop execs, "will have plenty of discs in them." It should be noted that GameStop execs have not yet seen the purported new hardware from either Microsoft or Sony, but I believe that it's becoming safer to expect that physical media will stick around for the next generation, when it finally arrives.
GameStop seems to be doing all it can to keep itself relevant in a changing marketplace. Results in its digital and mobile sectors are showing some promise, and the retailer is continuing to expand efforts there. I think that GameStop is right to be concerned about Q3 and Q4 results, given recent trends and economic developments; however, if their hunch is right about Q1 2013, perhaps there's a light at the end of what's been a long and deep tunnel.
Overall sales for the period were down by more than 11%, which was attributed to slow traffic due to a weak new release slate. Sales of pre-owned merchandise, which is GameStop’s most significant margin category, were also down more than 11%. The bright spot for the quarter was growth in GameStop’s “Other” category, which was up nearly 41%. This category includes mobile and digital sales, which are new sectors of business for the retailer.
Here are five other observations that I made during the earnings call:
1. DLC, especially at launch, is vital for GameStop and for publishers. GameStop CEO Paul Raines and his executive team made this a recurring theme during the call. Despite the negative associations made by some consumers with this practice, it was made clear during the call that it’s only going to expand moving forward. Quotes from the call driving this point home included “You need to have DLC at launch” and “Every single major title is releasing with DLC”. The market is increasingly as reliant on off-disc content as it is on what’s on the game disc.
2. The PlayStation 2 is (finally) dead. We’ve known for some time that GameStop has been taking its PlayStation 2 inventory out of some stores, and the reasoning is becoming more and more clear: Very few customers are buying them anymore. Proof of this point: Sales of current-generation preowned games were flat for the quarter, and yet overall sales were off more than 11%. It’s not hard to figure out what’s pulling the number down here. It was noted that PlayStation 2 inventory was moved to stores in more urban areas, generally with lower income levels.
3. Caution for Q3 and Q4... GameStop predicts that its 2012 revenue will be between 2-10% lower than 2011. The company is trying to be "pragmatic" with its projections for the remainder of 2012, especially with regards to the launch of the WiiU and how it will affect the retailer's overall results. While all the right words were said about the WiiU launch, there was a sense of doubt in terms of Nintendo's ability to meet demand for the WiiU. This can be attributed to supply issues with the launch of the Wii in 2006-07, but there continues to be some concern about how much product that Nintendo can get to retail due to "manufacturing issues". GameStop also seems to be concerned that, despite a solid release slate for the remainder of the year, traffic won't recover to former levels.
4. ...but a brighter Q1 2013. GameStop does, however, see growth returning in the first quarter of next year. There's a formidable release slate during the period, especially as compared to the rather weak slate seen this past year. Weak comps will aid the growth outlook, plus the WiiU variable will likely add to better numbers overall. It doesn't seem like much of a stretch to call for growth given the facts, but good news is still good news.
5. Gen4 and physical media seem be to stuck together. Observations from both GameStop execs and an analyst during the question & answer session of the call seem to point to Gen4 hardware from Sony and Microsoft as having some sort of physical media option. Gen4 consoles, according to GameStop execs, "will have plenty of discs in them." It should be noted that GameStop execs have not yet seen the purported new hardware from either Microsoft or Sony, but I believe that it's becoming safer to expect that physical media will stick around for the next generation, when it finally arrives.
GameStop seems to be doing all it can to keep itself relevant in a changing marketplace. Results in its digital and mobile sectors are showing some promise, and the retailer is continuing to expand efforts there. I think that GameStop is right to be concerned about Q3 and Q4 results, given recent trends and economic developments; however, if their hunch is right about Q1 2013, perhaps there's a light at the end of what's been a long and deep tunnel.
Sunday, February 19, 2012
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.
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.
Thursday, January 19, 2012
Launchpad Analysis: Patience is Vita-l
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:
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.
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