The Big Bad Console Thread - Sway your Station with an Xboner !
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Vaclav
Bronze Baronet of the Realm
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I made a small comment a few pages back and everyone went crazy because their only love in this world may be falling slightly this generation. Sorry if you can't cope. I'm sure they will have some help lines set up for you guys after the outcome.
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I remember the 360 being sold out too. What does that matter? If 360 sold out and sold more consoles then why is the PS4 selling slightly less consoles sold with a much easier production line?
It just doesn't add up but I'm done since you want to play the mod card on me.
Szlia
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I believe you try to buy 999 and it adjusts the cart with how many are left if it's less than 999.
Soygen
The Dirty Dozen For the Price of One
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You're fucking weird, dude. You made a dumb comment that doesn't jive at all with the current trend on the PS4. I play way more PC games than console games(believe it or not, you can actually own more than one thing...), so I don't have some weird team affiliation like you seem to.
Vaclav
Bronze Baronet of the Realm
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A) 360 only shipped to the US initially, didn't it?
B) 360 was the only system that launched in its timeframe, didn't it?
C) 360's initial product available was higher regardless of ease of manufacture (and they did skip a number of QA checks on 360 - RROD existed for a reason...) - and there's more to shipping units than just making them - if each PS4 gets a day of burn in to make sure there's nothing like RROD (hypothetical I know they do a burn-in I have no idea how long) that slows time to shipping even if they're manufactured quicker - boiling it down to one point while ignoring the rest is rather silly. Fact is, product seen available is relatively slim. Period. [Or say if there was 20% or so stock held to make sure there were replacements for any defective units that occurred... which many people mused... suddenly "real numbers" would have been 20% higher if that was the case, since held stock can't sell...]
Szlia
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Some reading for Kudos taken from a very recent analysis of the game industry and its future by Wedbush Securities (Michael Pachter, Nick McKay, Nick Citrin). Hint: they don't agree with you and their job is to crunch numbers and derive trends from them to advise investors.
Video game software sales have had ups and downs, but none so pronounced as in the current
generation console cycle. Since the launch of the Xbox 360 in late 2005, interactive entertainment
software sales have ebbed and flowed, with sales in the U.S. and Europe growing by 70% from 2005-
2008, and declining by 45% since then. Sales of software grew from around $14 billion in 2005 to over
$24 billion by 2008, and in the past five years, sales have declined to the point where they are actually
below 2005 levels.
We believe there are many explanations for the decline: first, the explosive growth in software sales
was largely attributable to rapid sell-through of the Wii, which sold over 100 million hardware units
worldwide. The Wii brought in a large number (we estimate 50 million) of non-traditional consumers who
had never owned a console in the past, and who, we believe, will not buy another one in the future. As
these consumers moved on from purchasing Wii software, recurring sales of software overall were
negatively impacted. A second explanation is the increasing popularity of multiplayer games, which had
an estimated 3 million combined players in 2007 and grew to an estimated 30 million in 2013. As an
increasing number of games added multiplayer functions, consumers played those games longer, and
bought fewer new titles as a result. A third explanation is the evolution of smartphone and tablet games,
which provide a first-rate experience, often for free. We believe these games cut into the addressable
market for dedicated console and handheld games at the low end, and cannibalized sales overall.
Finally, the publishers contributed to the overall decline, by making fewer games as a way to control
research and development spending; with fewer choices overall, consumers bought fewer games.
We define "current generation" as software for the Nintendo DS, 3DS and Wii, for the Sony PSP, PS Vita
and PS3, and for the Microsoft Xbox 360, and will refer to this as "current generation" throughout this
report. We define "next generation" as software for the PS4, Xbox One and Wii U. Because current
generation console prices remain relatively high, we expect the current generation to generate sales for
several more years, with declines in software sales of roughly 30% annually going forward. Beginning in
2011, revenues from non-traditional sources (online games, casual games, mobile phone games,
downloadable content, and in-game advertising) began to contribute meaningfully to results for most
publishers, offsetting slowing growth of packaged goods software sales.
The current generation began without fanfare in 2004. That year, Nintendo reinvented its handheld
Game Boy Advance as a dual-screen device, with a touch screen allowing the consumer to interact with
video game content in a different way. We believe few observers appreciated that the Nintendo DS
signaled a change in game play that previewed the company's plans for its console (the Wii) introduced
in 2006. In early 2005 (December 2004 in Japan), Sony launched the PlayStation Portable (PSP),
intending to capture share in the handheld market from Nintendo. Later that same year, Microsoft
launched the Xbox 360, offering true high-definition gaming. In late 2006, Sony and Nintendo launched
the PS3 and the Wii, respectively, and the current generation was in full gear. Although the last of these
launches completed the beginning of the current generation cycle, they by no means marked the end of
the current cycle. All major software publishers made a distinct effort to extend the value of the "legacy"
system in 2007 and 2008 by continuing to develop games for the PS2. Perhaps the most successful of
these new games were the music-themed rhythm games, Guitar Hero and Rock Band.
The preceding video game software cycle began with a dip. Annual industry software sales, reflecting
combined sales of console, handheld and PC games in the U.S. and Europe, declined by 9% in 2000,
followed by growth of 4%, 15%, 12%, and 11% in 2000-2004, respectively. The current console cycle
began with a similar dip, as sales declined by 2% overall, with a rebound to 4% growth in 2006. After a
relatively modest beginning, the current cycle became a force, with 35% sales growth in 2007 and 41%
growth in 2008. The 2008 figures were dramatically impacted by foreign currency translation (all of our
sales figures are stated in U.S. dollar terms). Two factors contributed to the robust results in 2007 -
2008: first, while consumers were slow to adopt current generation technology due to supply
constraints, they chose to continue purchasing legacy generation software while waiting to replace their
old consoles. While last generation software sales declined by 71% between 2005 and 2008, the
category still contributed almost $2.5 billion in overall sales (11% of the total) in 2008, compared to only
$550 million (4.2% of sales) for legacy software at a similar point in the last cycle. The second reason
for robust sales growth is the rate of adoption of the Wii, with non-traditional households buying Wiis and
Wii software in historically high numbers. At the same time, sales of the relatively high-priced PS3 have
been unimpressive, with the more moderately priced Xbox 360 performing about as expected.
In the console cycle that began in 2000, the installed base of legacy generation hardware (PS2,
GameCube and Xbox) peaked at around 115 million units in the U.S. and Europe. Total console and
handheld software sales grew from $6.6 billion in the U.S. and Europe in 2000 to $11.2 billion in 2005,
representing a compound annual growth rate of 11%. This growth rate accelerated between 2005 and
2008 to over 25%, and sales thereafter precipitously declined. Sales were down by 14% in 2009, 7% in
2010, 11% in 2011, 18% in 2012 and 13% in 2013, for a compound annual decline rate of over 12%. As
sales grew in the middle part of the decade, publisher stocks soared; as sales decline over the last five
years, publisher stocks stagnated.
We expect the next generation of consoles to usher in another growth cycle for software sales.
The potential for a rebound to phenomenal sales growth and the relative underperformance of video
game publisher stocks has triggered heightened investor interest in the dynamics of the video game
"console cycle", which began with the launch of the Wii U in November 2012 and continued with the
launches of the PS4 and Xbox One in November 2013. In this report, we explore industry fundamentals,
forecast industry sales growth by segment and geographic area, and compare several publicly traded
publishers to uncover the industry's likely top performers over the next several years. As packaged
good sales growth inevitably slows, we expect significant contribution from four non-traditional sources
of revenue: online subscription games (MMOs), free-to-play PC games, mobile phone and tablet games
and extra content sold via digital downloads. Later in this report, we forecast the overall market size for
each of these non-traditional sources, and attempt to quantify their impact on publisher earnings over
the next decade.
Ultimately, we expect console hardware sales to be closely correlated to the quality and quantity of the
underlying available content. There are two key differences between the current and next generation
console cycles: first, the Wii was the industry leader, while the Wii U is almost irrelevant; and second,
the sell-through and production plans for the Xbox One and PS4 suggest that both will sell at a more
rapid pace than their predecessors. We believe that Sony regrets its decision to allow Microsoft to gain
a first-mover advantage with the 2005 introduction of the Xbox 360, as it chose to forego potential PS3
sales that year in order to dominate the high-definition DVD market. However, by focusing on winning
the Blu-ray / HD-DVD battle, Sony lost the last console war. In the next generation, Nintendo launched
the Wii U first, to tepid consumer response, and Microsoft and Sony appear intent upon battling it out
with their respective consoles.
The modestly priced Wii U was offered in late 2012 at an initial price of $349 in the U.S., and came
bundled with a game. Nintendo sold well below its plan, and cut the price to $299 for its bundle in mid-
2013. However, the price cut didn't help, and the company forecasted sales of only 2.8 million consoles
in its second full year. It appears that Nintendo was convinced that once again, its innovative control
mechanism would sell consoles, but the company missed the mark with its Game Pad controller, which
is not intuitive for more casual gamers. The company is not especially profitable on Wii U hardware, as
the Game Pad controller is expensive to produce.
The Xbox One and PS4 are differentiated from the Wii U insofar as they have significantly faster
microprocessors and standard controllers. Additionally, both Sony and Microsoft have invested heavily
in building out online networks and in driving subscriptions to these networks, with Microsoft having an
estimated 22 million Xbox Live Gold members and with Sony having an estimated 15 million active
paying PSN Plus subscribers. Nintendo benefited in the current generation from the large number of
standard definition TVs in global households at the time of the Wii's launch, but we believe the Wii was
often relegated to the storage closet when those households upgraded to HDTV. In the next generation,
we expect Sony and Microsoft to dominate sales with their respective consoles, and we forecast sales of
100 - 115 million of each console over the next seven years, with Wii U sales likely lagging far behind,
at 20 million or so. This means that the next generation installed base will be smaller than the current
generation base, but that the two "hard core" consoles will capture greater share, with combined sales of
220 million surpassing the combined 160 million unit installed base of their predecessors.
There have only been three "real" console cycles before the current one-the PlayStation cycle that
began in 1995, the PS2 cycle that began in 2000 and the Xbox 360/PS3 cycle that began in 2005/06. In
each of these cycles, advances in the quality of content drove robust sales growth, as advances in
processing power allowed content to be richer and more complex. In the current cycle, quality for
current generation games was noticeably better from the outset, leading to solid attach rates,
notwithstanding light hardware sales for the PS3 and the Xbox 360. Software attach rates for the Wii,
which were initially very strong, ended up below the other consoles in large part due to the lack of highdefinition
graphics. For the first three years of the current cycle, we believe high prices for current
generation consoles and more prudent planning from the publishers kept demand for last generation
PS2 games from falling off a cliff. PS2 software sales declined only 11% in 2006, 27% in 2007, and
31% in 2008, compared to a 37% decline in PS1 software sales in 2001 (the year after the launch of the
PS2). We expect a similar pattern for declines in PS3/Xbox 360 software sales, and expect the slow rate
of decline for current generation software to result in an overall sales gain of 18% in 2014, 14% for 2015,
and 11% for 2016 in the U.S. and Europe combined. Relatively stable development costs allowed
publishers to increase the quantity of software developed for the Xbox One and PS4, and we expect
market penetration for these new platforms to vastly exceed the rate of penetration by their
predecessors. At the same time, the Wii software has declined more rapidly than expected, and the Wii
U has not made up much of the shortfall. We expect Xbox One and PS3 to capture share from Wii U in
the next generation, and think that the poor performance of the Wii U may cause many Wii owners to
purchase a PS3 or Xbox 360 over the next few years, softening the natural decline of current generation
software sales. We believe that as a greater number of games are developed for each console, next
generation software sales will accelerate.
We believe that the Xbox One and the PS4 are similar to one another, much as their predecessors were,
and think that the economics of game development will limit the amount of third-party exclusive content
for either console. In a perverse way, the similarity between the two platforms will likely serve to lower
the costs of porting software from one platform to the other, and we anticipate that virtually every thirdparty
title produced for one will be produced for the other. The lack of differentiation between the PS4
and the Xbox One means that consumers will initially make their purchase decision based on brand
loyalty or price, with the former favoring Microsoft and the latter favoring Sony. We expect the Wii U to
remain an afterthought for most consumers, and do not expect significant third-party support after 2014.
We believe that digital content offers the potential for tremendous growth, and expect a significant
revenue contribution from sales of digital content over the next several years. Digital content takes four
forms: free-to-play PC games, full-game downloads, mobile games and downloadable console content.
Each of these has a different growth trajectory, with free-to-play PC games and mobile games expected
to generate 20 - 25% annual growth for the next several years, and with full-game downloads and
downloadable console content to grow at a rate more closely mirroring overall demand growth for
console games. We did not include online subscriptions in our description of digital content, as we
believe that the subscription model is outdated and destined to see declining revenue; Activision
Blizzard is the exception to the rule above, with approximately 20% of its revenues and 33% of its profits
derived from its World of Warcraft online game.
generation console cycle. Since the launch of the Xbox 360 in late 2005, interactive entertainment
software sales have ebbed and flowed, with sales in the U.S. and Europe growing by 70% from 2005-
2008, and declining by 45% since then. Sales of software grew from around $14 billion in 2005 to over
$24 billion by 2008, and in the past five years, sales have declined to the point where they are actually
below 2005 levels.
We believe there are many explanations for the decline: first, the explosive growth in software sales
was largely attributable to rapid sell-through of the Wii, which sold over 100 million hardware units
worldwide. The Wii brought in a large number (we estimate 50 million) of non-traditional consumers who
had never owned a console in the past, and who, we believe, will not buy another one in the future. As
these consumers moved on from purchasing Wii software, recurring sales of software overall were
negatively impacted. A second explanation is the increasing popularity of multiplayer games, which had
an estimated 3 million combined players in 2007 and grew to an estimated 30 million in 2013. As an
increasing number of games added multiplayer functions, consumers played those games longer, and
bought fewer new titles as a result. A third explanation is the evolution of smartphone and tablet games,
which provide a first-rate experience, often for free. We believe these games cut into the addressable
market for dedicated console and handheld games at the low end, and cannibalized sales overall.
Finally, the publishers contributed to the overall decline, by making fewer games as a way to control
research and development spending; with fewer choices overall, consumers bought fewer games.
We define "current generation" as software for the Nintendo DS, 3DS and Wii, for the Sony PSP, PS Vita
and PS3, and for the Microsoft Xbox 360, and will refer to this as "current generation" throughout this
report. We define "next generation" as software for the PS4, Xbox One and Wii U. Because current
generation console prices remain relatively high, we expect the current generation to generate sales for
several more years, with declines in software sales of roughly 30% annually going forward. Beginning in
2011, revenues from non-traditional sources (online games, casual games, mobile phone games,
downloadable content, and in-game advertising) began to contribute meaningfully to results for most
publishers, offsetting slowing growth of packaged goods software sales.
The current generation began without fanfare in 2004. That year, Nintendo reinvented its handheld
Game Boy Advance as a dual-screen device, with a touch screen allowing the consumer to interact with
video game content in a different way. We believe few observers appreciated that the Nintendo DS
signaled a change in game play that previewed the company's plans for its console (the Wii) introduced
in 2006. In early 2005 (December 2004 in Japan), Sony launched the PlayStation Portable (PSP),
intending to capture share in the handheld market from Nintendo. Later that same year, Microsoft
launched the Xbox 360, offering true high-definition gaming. In late 2006, Sony and Nintendo launched
the PS3 and the Wii, respectively, and the current generation was in full gear. Although the last of these
launches completed the beginning of the current generation cycle, they by no means marked the end of
the current cycle. All major software publishers made a distinct effort to extend the value of the "legacy"
system in 2007 and 2008 by continuing to develop games for the PS2. Perhaps the most successful of
these new games were the music-themed rhythm games, Guitar Hero and Rock Band.
The preceding video game software cycle began with a dip. Annual industry software sales, reflecting
combined sales of console, handheld and PC games in the U.S. and Europe, declined by 9% in 2000,
followed by growth of 4%, 15%, 12%, and 11% in 2000-2004, respectively. The current console cycle
began with a similar dip, as sales declined by 2% overall, with a rebound to 4% growth in 2006. After a
relatively modest beginning, the current cycle became a force, with 35% sales growth in 2007 and 41%
growth in 2008. The 2008 figures were dramatically impacted by foreign currency translation (all of our
sales figures are stated in U.S. dollar terms). Two factors contributed to the robust results in 2007 -
2008: first, while consumers were slow to adopt current generation technology due to supply
constraints, they chose to continue purchasing legacy generation software while waiting to replace their
old consoles. While last generation software sales declined by 71% between 2005 and 2008, the
category still contributed almost $2.5 billion in overall sales (11% of the total) in 2008, compared to only
$550 million (4.2% of sales) for legacy software at a similar point in the last cycle. The second reason
for robust sales growth is the rate of adoption of the Wii, with non-traditional households buying Wiis and
Wii software in historically high numbers. At the same time, sales of the relatively high-priced PS3 have
been unimpressive, with the more moderately priced Xbox 360 performing about as expected.
In the console cycle that began in 2000, the installed base of legacy generation hardware (PS2,
GameCube and Xbox) peaked at around 115 million units in the U.S. and Europe. Total console and
handheld software sales grew from $6.6 billion in the U.S. and Europe in 2000 to $11.2 billion in 2005,
representing a compound annual growth rate of 11%. This growth rate accelerated between 2005 and
2008 to over 25%, and sales thereafter precipitously declined. Sales were down by 14% in 2009, 7% in
2010, 11% in 2011, 18% in 2012 and 13% in 2013, for a compound annual decline rate of over 12%. As
sales grew in the middle part of the decade, publisher stocks soared; as sales decline over the last five
years, publisher stocks stagnated.
We expect the next generation of consoles to usher in another growth cycle for software sales.
The potential for a rebound to phenomenal sales growth and the relative underperformance of video
game publisher stocks has triggered heightened investor interest in the dynamics of the video game
"console cycle", which began with the launch of the Wii U in November 2012 and continued with the
launches of the PS4 and Xbox One in November 2013. In this report, we explore industry fundamentals,
forecast industry sales growth by segment and geographic area, and compare several publicly traded
publishers to uncover the industry's likely top performers over the next several years. As packaged
good sales growth inevitably slows, we expect significant contribution from four non-traditional sources
of revenue: online subscription games (MMOs), free-to-play PC games, mobile phone and tablet games
and extra content sold via digital downloads. Later in this report, we forecast the overall market size for
each of these non-traditional sources, and attempt to quantify their impact on publisher earnings over
the next decade.
Ultimately, we expect console hardware sales to be closely correlated to the quality and quantity of the
underlying available content. There are two key differences between the current and next generation
console cycles: first, the Wii was the industry leader, while the Wii U is almost irrelevant; and second,
the sell-through and production plans for the Xbox One and PS4 suggest that both will sell at a more
rapid pace than their predecessors. We believe that Sony regrets its decision to allow Microsoft to gain
a first-mover advantage with the 2005 introduction of the Xbox 360, as it chose to forego potential PS3
sales that year in order to dominate the high-definition DVD market. However, by focusing on winning
the Blu-ray / HD-DVD battle, Sony lost the last console war. In the next generation, Nintendo launched
the Wii U first, to tepid consumer response, and Microsoft and Sony appear intent upon battling it out
with their respective consoles.
The modestly priced Wii U was offered in late 2012 at an initial price of $349 in the U.S., and came
bundled with a game. Nintendo sold well below its plan, and cut the price to $299 for its bundle in mid-
2013. However, the price cut didn't help, and the company forecasted sales of only 2.8 million consoles
in its second full year. It appears that Nintendo was convinced that once again, its innovative control
mechanism would sell consoles, but the company missed the mark with its Game Pad controller, which
is not intuitive for more casual gamers. The company is not especially profitable on Wii U hardware, as
the Game Pad controller is expensive to produce.
The Xbox One and PS4 are differentiated from the Wii U insofar as they have significantly faster
microprocessors and standard controllers. Additionally, both Sony and Microsoft have invested heavily
in building out online networks and in driving subscriptions to these networks, with Microsoft having an
estimated 22 million Xbox Live Gold members and with Sony having an estimated 15 million active
paying PSN Plus subscribers. Nintendo benefited in the current generation from the large number of
standard definition TVs in global households at the time of the Wii's launch, but we believe the Wii was
often relegated to the storage closet when those households upgraded to HDTV. In the next generation,
we expect Sony and Microsoft to dominate sales with their respective consoles, and we forecast sales of
100 - 115 million of each console over the next seven years, with Wii U sales likely lagging far behind,
at 20 million or so. This means that the next generation installed base will be smaller than the current
generation base, but that the two "hard core" consoles will capture greater share, with combined sales of
220 million surpassing the combined 160 million unit installed base of their predecessors.
There have only been three "real" console cycles before the current one-the PlayStation cycle that
began in 1995, the PS2 cycle that began in 2000 and the Xbox 360/PS3 cycle that began in 2005/06. In
each of these cycles, advances in the quality of content drove robust sales growth, as advances in
processing power allowed content to be richer and more complex. In the current cycle, quality for
current generation games was noticeably better from the outset, leading to solid attach rates,
notwithstanding light hardware sales for the PS3 and the Xbox 360. Software attach rates for the Wii,
which were initially very strong, ended up below the other consoles in large part due to the lack of highdefinition
graphics. For the first three years of the current cycle, we believe high prices for current
generation consoles and more prudent planning from the publishers kept demand for last generation
PS2 games from falling off a cliff. PS2 software sales declined only 11% in 2006, 27% in 2007, and
31% in 2008, compared to a 37% decline in PS1 software sales in 2001 (the year after the launch of the
PS2). We expect a similar pattern for declines in PS3/Xbox 360 software sales, and expect the slow rate
of decline for current generation software to result in an overall sales gain of 18% in 2014, 14% for 2015,
and 11% for 2016 in the U.S. and Europe combined. Relatively stable development costs allowed
publishers to increase the quantity of software developed for the Xbox One and PS4, and we expect
market penetration for these new platforms to vastly exceed the rate of penetration by their
predecessors. At the same time, the Wii software has declined more rapidly than expected, and the Wii
U has not made up much of the shortfall. We expect Xbox One and PS3 to capture share from Wii U in
the next generation, and think that the poor performance of the Wii U may cause many Wii owners to
purchase a PS3 or Xbox 360 over the next few years, softening the natural decline of current generation
software sales. We believe that as a greater number of games are developed for each console, next
generation software sales will accelerate.
We believe that the Xbox One and the PS4 are similar to one another, much as their predecessors were,
and think that the economics of game development will limit the amount of third-party exclusive content
for either console. In a perverse way, the similarity between the two platforms will likely serve to lower
the costs of porting software from one platform to the other, and we anticipate that virtually every thirdparty
title produced for one will be produced for the other. The lack of differentiation between the PS4
and the Xbox One means that consumers will initially make their purchase decision based on brand
loyalty or price, with the former favoring Microsoft and the latter favoring Sony. We expect the Wii U to
remain an afterthought for most consumers, and do not expect significant third-party support after 2014.
We believe that digital content offers the potential for tremendous growth, and expect a significant
revenue contribution from sales of digital content over the next several years. Digital content takes four
forms: free-to-play PC games, full-game downloads, mobile games and downloadable console content.
Each of these has a different growth trajectory, with free-to-play PC games and mobile games expected
to generate 20 - 25% annual growth for the next several years, and with full-game downloads and
downloadable console content to grow at a rate more closely mirroring overall demand growth for
console games. We did not include online subscriptions in our description of digital content, as we
believe that the subscription model is outdated and destined to see declining revenue; Activision
Blizzard is the exception to the rule above, with approximately 20% of its revenues and 33% of its profits
derived from its World of Warcraft online game.
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November 22, 2005[7]
Canada
United States
December 2, 2005
Norway
Sweden
UK
Latvia
Finland
Ireland
Portugal
December 10, 2005
Japan
By the end of the year. They also were producing 2 different consoles (though it was only a hard drive and outer case change).
Please note: I'm not arguing anymore. Just answering his question is all.
PS3 Launched
Nov 11 in Japan and Nov 17 in US.
It actually launched in less countries than the PS4 did and still sold almost as many units as the PS4 has in the same time span (using the data given earlier).
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Oh you mean like Michael Pachter? Yeah I hear he's real popular. Gamers love to pick and choose I guess. Such a Love/Hate relationship with that guy. I remember when even mentioning that guy on neogaf would get 100+ page of shit saying he's a moron. But let's use him as your example now!
