Why is this man smiling?

JAN. 11, 2013 • Riding an undercover $50 price reduction at retail, Microsoft reported that Xbox 360 sales reached a total of 1.4 million units sold during the month of December in the U.S. (Microsoft cited NPD Group data). That performance marks the 24th straight month the console has topped sales charts. Microsoft also claimed that seven of the Top 10 games for the month were Xbox 360 titles. Consumers spent more than $1.27 billion on Xbox 360 hardware, games and accessories during December. By comparison, Nintendo announced that the Wii U moved more than 460,000 units at retail as well as 475,000 Wii units, during the month. November and December Wii U sales combined topped 890,000, totaling $300 million. Nintendo says those Wii U sales are ahead of numbers tallied by the original Wii back in 2006 ($270 million). Sony Computer Entertainment of America did not comment on December sales numbers.

Impact:  The NPD Group collects hardware and software video game sales data from major U.S. retailers.  In late 2010, NPD decided to no longer report hardware sales publicly, thus leaving it to individual companies to provide their own take on the numbers.  When NPD releases sales figures on the second Thursday of the month it has been the habit of Microsoft, Nintendo and Sony to make statements spinning the numbers in the most favorable light possible.  For most of 2012, the only company with much to talk about was Microsoft. 

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Amazingly Microsoft didn’t have to do much exaggerating as in its seventh full year on the market the Xbox 360 had a stellar performance.  For its generation, the Xbox 360, not the Wii, will end up as the number one selling console system in the U.S. Shockingly it was in the later years of its life that the Xbox 360 really took off. The success of Microsoft and the Xbox 360 during the past two years highlights a radical changing of the guard in the game industry. Much has been made about a steady video game sales decline in the past three years.  In reality the decline has mainly been due to the aging console systems and more importantly because of Nintendo’s collapse. Unlike Microsoft, Nintendo has been in a major downward cycle, much of it self-inflicted. Nintendo’s spin for the Wii U focused on how it made more revenue than the Wii at launch.  Of course, the Wii was supply constrained at launch and sold at a lower price so that is not surprising. The reality is that many Wii U systems were sitting unsold on shelves at year end.  Consumers love games more than ever but a new order of game providers is resulting in market shifts that are proving painful for Nintendo and other established game companies.

In 2013 DFC Intelligence plans to deliver extensive coverage of the new game order with a focus on providing detailed forecasts for all major segments and markets, along with analysis of business challenges and opportunities for major providers in the game industry value chain.  Make sure to sign up here to become a member of the DFC Dossier community and also to receive our upcoming free white paper The Video Game Industry Landscape 2013.

Next week the DFC Dossier will provide some more detailed analysis of the changing guard in the game industry.  Of course, for anyone interested in a more detailed dive into the nitty gritty of industry numbers we suggest the DFC annual research service, which covers the video game segment across multiple markets and platforms.  Either way, if you are interested in video games as a business stay tuned.