Fallout From the November Console Wars

All three 'next generation' consoles are out, and we can finally stop using that term. The NPD numbers for last month have been released, and there's plenty of information there to discuss. Analysts have already made some observations, with brandintel specifically pointing out the Xbox 360's 'surprising' role in last month's fight. For some more well-reasoned thought, Dean Takahashi's take is the place to turn: "At this rate, Microsoft isn't going to hit its goal of 10 million units by year end ... Sony's number is consistent with its warnings, but 197,000 is worse than what many expected ... the fair fight is really going to be what happens in the year 2007, when all three console makers should be able to ship as many consoles as consumers want. To me, this looks like consumers are hit with a case of sticker shock. The mass market is paying for cheap PS2s, DS Lites, and GBAs." Despite the Wii's success last month, it should be noted that Nintendo is no longer bragging of 1 Million units in the U.S. by the end of the year. So, essentially, it looks like all three companies will fail to hit their console goals for the year.

Comments

Remedial geography

[Anonymous Coward]

All three 'next generation' consoles are out and we can finally stop using that term.

*Cough* Europe.

Despite the Wii's success last month, it should be noted that Nintendo is no longer bragging of 1 Million units in the U.S. by the end of the year. So, essentially, it looks like all three companies will fail to hit their console goals for the year.

That was for 'The Americas'.

One more system

[Sciros]

But what if I want to talk about the Infinium Labs Phantom? can I still use the term "next generation?" A friend of mine was really confused about the console sale figures, as was I. And then we both realized we're playing the PS2 I bought just a month ago :-) (for FFXII). With so many folks being excited for the Wii/PS3 releases, I'd say not only sticker shock but also a determination to have at least something to play is what sold the other consoles. That and black friday making Game Boys cheap-as-free. I wonder just how many sold on that day...

Sticker shock for sure

[analog_line]

I've no plans to buy an Xbox or a PS3 for only reasons of price. $500 as the minimum cost of entry for a system and one game is just nuts. I can't afford it, and I won't bother with it. There's nothing inherent that I will get out of either of those systems over the Xbox and PS2 that I own now, other than the derision of my friends, that I spent a pile of money I could've spent on food or rent on those. I'm sure the games are great, and I wouldn't mind owning one, but they're not worth that, no matter how many fools are willing to overpay for it.

I'd like to get a Wii, and I have a reasonable chance of both affording and getting my hands on one at some point soon. However, right now, I'm actually considering getting a new GBA SP, because I have a lot of games I like for GBA, and an SP is a lot easier to carry around than even the new DS Lite (and a lot easier than my original recipe DS). And a second PS2 to backup my current box, so I can play all the good PS2 games that are now showing up in bargain bins before they become collectors items. Once the price comes down to something resembling reasonable, I'll get a PS3, and maybe even an Xbox 360, but it's got a LONG way to fall before it gets there.

impossible business model

[edwardpickman]

The technology is so expensive that they almost have no choice but to give away the consoles. By give away I'm referring to dropping the prices below $200. They need to sell games and a lot of them to pay off the machines. If you're already loosing a few hundred on a machine you have no choice but to depend on game sales. Prices have to drop like a rock next year or they'll never sell enough games to break even let alone show a profit. They are taking advantage of early adopters now but there will be price drops once the manufacturing volume chatches up. If you have a million machines out there and you are loosing a couple of hundred on a system and after buying the expensive box people can only aford three games you are loosing a fortune. Better to sell 5+ games to ten million customers. Xbox can better aford to loose the money on sales than Sony can with P3. They have far more units on the streets. Sony needs to drop to at least $250 ASAP to promote game sales. Sony dropped the ball on this release and may never catch up again. Microsoft is now positioned to release their next generation consoles a full year before Sony and they already have a commanding lead in sales. Sony may be forced to accept the Apple position of a perminate second place. They may be more innovative in the future but it's doubtful they'll ever catch up. The company is not positioned well to take risks where as Microsoft is cash rich and can take risks. Wii is kind of the small nimble hare in this race. They'll eventually have to drop their prices but for now they are the cheap fun alternative to the bloated big boy systems. They can't compete with Microsoft but they can blow Sony out of the water. Both Microsoft and Sony are likely to come out with competing controllers for their next generation systems but the Wii will have several years jump on either and will have a huge backlog of games based on the controller. The strategic win has to go to Nintendo even if they can't win overall sales.

Re:impossible business model

[old-lady-whispering-]

I agree. I see PS3 struggling into 2007 until they can drop price or provide a compelling differentiator. I certainly don't rule out Sony pulling a hat trick. PS3=Mac is a very interesting point. I am not sure that will happen. The PS3 will either get significant market share or they will be a loser. If they can't get their shipped numbers up to at least 100,000 a week starting Jan then they have no chance of catching the 360. Sony has alot of great titles comming for the PS3 but unless 360 sales stop completely the PS3 is unlikely to catch up in any market except Japan.

Nintendo is taking a mind blowing risk. I certainly could not have concieved of them agreeing to this type of risk when conteplating their next move after the Gamecube. The problem is the Wii is more novel than inovative. Both Sony and Microsoft can easily produce a competing controller which could devalue the Wii's uniqueness. Compounding this is the fact that PS3 and 360 games will on average look spectacularly better because of the graphics power houses built into both of them. The sales for the Wii should be supported by demand in Japan which will keep it going but I don't see them dominating anywhere else. Let's face it everyone likes the cutting edge graphics when selecting games and the screen shots of Twilight princess provided the proof for me to wait for the gamecube version. The Wii will soon be looking like last gen once the novel controller wears off. When you adopt HD TV would you rather have a Wii or a PS3/Xbox360? By the way HD sets are on schedule to hit the consumer sweet spot within the next two years.

The Xbox360 got off to a rough start but it seems to be fairing much better than their competitor's launches. The 360 has struggled with the slow growth of sales which coincides with the slow release of major hits. Though Xbox Live is at the top of the hill it requires a subscription where it's competitors do not. Despite all these weaknesses it's competitors will be confounded by about an 8 million unit lead; hardware performance that should equal the PS3; difficulty in differentiating themselves from the well funded Xbox Live; and the looming possibility of a price drop in 2007.

Also Keep in mind that most of the sales of consoles happen in the last 2/3rds of it's lifespan where the Wii will certainly be viewed as long in the tooth. For me the Wii is the worst choice this gen and only the PS3 and 360 should be considered.

I don't own any next gen yet but am planning to buy an 360 at the first price drop in 2007. I can't imagine the PS3 will see a price drop anytime soon but like you said we may be surprised this spring.

Re:Couldnt be worse for Sony

[Jace of Fuse!]

I am not going to knock Gears of War, since I just bought it the other day and have yet to have a chance to really sit down with it. But I don't think Gears of War is going to appeal to too many people other than shooter fans and Xbox 360 fans.

Sure, the game looks beautiful, amazing even. But to jaded gamers or casual gamers there isn't enough there to draw in anyone who wouldn't have already been drawn in already. I personally picked it up, played it for about 10 minutes, said "neat", and put it down. I'll get back to it when I have more time.

When I picked up Wii Sports, on the other hand, I said "neat", and I couldn't put it down.

There is a huge difference here.

Gears of War isn't going to expand the 360 much further beyond the existing gaming crowd. Wii Sports will.

On the other hand, there is a lot to be said about stores actualy having 360's and Gears of War in stock. Because, you know, you can actually get those if you want 'em. Of course, you can also get a PS2 and FF12 or Guitar Hero II as well... for less money.

And the loser is...

[danwesnor]

I was in Best Buy today and noticed the console displays. One guy in his mid-40's playing the PS-3, nobody watching. There was nobody near the Wii. I didn't look at the 360 (forgot about it, actually), but there were about 10 people standing around watching a kid play Guitar hero on a PS-2.

Looks like the last gen is winning the next gen war.

Re:Analysts

[Hes Nikke]

An interesting catch: All these companies depend on IBM. Apple dropped IBM largely because they didn't seem ready or willing to develop and produce mainstream chips on a schedule that suited Apple.

ah, but apple wanted faster iterations of PPCs every 6 months. What they got was a 700 MHz upgrade in 1.8 years, and then the top speed got cut back by 200 MHz to make room for dual core CPUs. Nintendo, Sony, and Microsoft all have PPC specs set in stone for the next 5 or 6 years. much more compatible with IBM's slow pace of consumer chip upgrades.

Stop calling.

[Anonymous Coward]

I got a Wii in downtown Vancouver. Just walked into EB Pacific Centre right after opening, asked, and bought one. Same deal later on when I wanted an extra controller.

They had seven Wiis when I bought mine, but when people called while I was checking out, the clerk said they didn't have them. The staff knew by the time anybody on the phone got down there the systems would already be gone. Then EB would have to deal with several dozen pissed-off Wii fans who'd been "promised" a Wii.

They also know that if they tell people the day before that the systems are coming in, they'll have to deal with that line-up mess. Best Buy doesn't mind that because they got a huge store full of other consumer crap. Disappointed customers are, for them, people who might buy a DS and a whole bunch of games "just in case" they can't get a Wii for Johnny. Places like EB and Zeller's don't want to put up with the shit, so they just bring 'em in and sell them to walk-ins.

I bought a DS Lite (new) and a GameCube (used)

[sjonke]

At home the game system is for my kids, 4 and 5. I have little to no time to play a console system, other than playing with them a little bit. I got them a used GameCube (w/box) with one official wired controller and official memory card for $54. I've gotten them a used (complete) copy of Super Mario Sunshine for $12, a used (complete) copy of MX Superfly for $8 and a new copy of Donkey Konga w/bongos for $20. I purchased one extra official wired controller for $20 and then another from amazon for $18, both new. I also got a pair of extension cables for $6. I just ordered a copy of Donkey Kong Jungle Beat w/bongos and a free 2nd set of bongos from gamestop for $21 shipped. Those are all new. I actually intend to sell Jungle Beat w/bongos on ebay and believe I'll net about $21 for it, effectively getting me the extra set of bongos for free. Total price for the GC w/3 nintendo-brand controllers (one used, two new), memory card, Super Mario Sunshine (used, complete), MX Superfly (used, complete) and Donkey Konga w/ 2 sets of bongos (all new) was around $140. More than $100 less than a Wii system alone (albeit with Wii sports). Or, if multiplayer Donkey Konga is all it's cracked up to be, I could keep Donkey Kong Jungle beat w/bongos and have a 3rd bongo controller (as well as DKJB) for an extra $21. The used games were purchased on ebay. I tested them and they work fine. Every price noted includes shipping.

For myself I'm getting a (new) DS Lite which I'll be able to play on the train every day. Unlike the Wii, no accessories are necessary, so the $117 I paid for it (shipped) from buy.com is all I have to pay for it other than games. Lots of great games are available for it for little money, including a thriving used market. Indeed, even new games are only $30 to $35, compared to $50 for Wii/360/PS3. Before long new titles drop to $20. I picked up used/complete copies of Meteos and Madden '05 for about $19 total (including shipping). I'm also getting Gunpei DS (new) for $20. So all told it sets us back about $156 for the DS Lite (new) and 3 good games (2 used/complete, one new.)

Total for both the complete GameCube setup and the complete DS setup was about $296. That's less than the price of core-version Xbox 360 alone and less than a Wii with one extra set of controllers (pretty much a necessity.) The Wii is no doubt a ton of fun and better than the GameCube, and unlike the 360 and PS3 seems to offer new/fun gameplay, but I'd rather have a nice system for my kids and a nice portable system for myself that I can actually use, not to mention lots of games to play on both of them. Some day I will get a Wii, in part because it will be able to play the GameCube games we'll have, but there's no hurry. At the earliest it will be next Christmas, when the price will have dropped, there will be a used games market, and new games will better utilize the system.