Gamasutra

[As part of his end of year in-depth NPD analysis, Gamasutra analyst Matt Matthews examines how a revamped Xbox 360 and the launch of the Kinect led to an almost "flawless" 2010 U.S. retail performance by Microsoft, as it chased market leader Nintendo.]

The biggest video game hardware story of the year in the U.S. is clearly Microsoft's execution of its two-stage relaunch of the Xbox 360 platform.

In June 2010, the platform saw a tremendous gain of momentum with the launch of the Xbox 360 S Model. More than just a hardware revision, the restyled console saw its sales jump 63 percent in the June-October period compared to the same period in 2009.

Amidst the resurgence in hardware sales, Microsoft also launched Halo: Reach, the latest entry in its flagship shooter series. Hardware surged to over 480,000 units for the month while 3.3 million copies of Reach were sold to consumers.

Then Kinect – a camera and software combination that permits users to control software with body motions – launched in November 2010 and hardware sales accelerated further. 

While December sales were up a less spectacular 42 percent, Larry “Major Nelson” Hryb of Microsoft claimed that the company had run out of consoles by the end of the month, suggesting that supply was at least somewhat constrained.

Absent those shortages, we would have called Microsoft's 2010 performance flawless. As it stands, they still pushed their console to a very strong finish, with annual hardware sales of 6.8 million systems, up 42 percent from 2009.

(We will discuss software sales in more detail later, but for the moment let us note that Xbox 360 software was up 17 percent in units and 14 percent in dollars over its 2009 levels.)

Microsoft's Xbox 360 nearly outsold the Wii in 2010, falling short by only 305,000 units. That the two consoles ended the year so close has as much to do with the 2.5 million system (or 26 percent) decline in Wii sales as it has to do with the 2.0 million increase in Xbox 360 sales.

All signs point to continued momentum for Microsoft's console business in 2011, which suggests that it will increase its hardware sales in 2011. This is particularly likely if it finally gives its consoles a proper price cut, something that hasn't happened since September 2008. Should the entry-level Xbox 360 have an MSRP of $150 before Christmas, we would expect it to see hardware sales levels similar to 2010.

To put the Xbox 360 sales into context, let us consider the following figure which shows annual hardware sales from 2009 (i.e. not the year that just completed).

Now we present the same figure, but for 2010.

In subsequent analyses, we will consider how the Nintendo Wii and PlayStation 3 each fit into the hardware picture from 2010, and where they might be headed in 2011.

http://www.gamasutra.com/view/news/32451/Analysis_How_Xbox_360_And_Kinect_Nearly_Toppled_Wii_In_2010.php

As things are going, I'd expect a ~500k lead for the 360 this year against the Wii. If only Wii gets a price cut, Wii would probably take back the lead and add some ~750k of a gap. If they both get price cuts of same value, I'd actually expect Wii to get an ever so slight advantage for the year in US.

This all changes if something unexpected (VS? SuperSlim?) pops up, obviously.

It all looks good for 2010 and perhaps even better for 2011. In the context of flat sales between 2006 and 2009 the massive increase in sales for 2011 shows how much Microsoft truly increased the demand for their console. Ideally in 2011 we will also see a price cut as they move down their cost curves on both the Xbox 360s and the Kinect add-on. Still their sales will as much depend on their objectives as it does on their ability to feed compelling Kinect software to the market whilst staying on top of the needs of their core gamers. I don't really fret on either point but it is something which has to be said.

Overall I would say that true growth for the consoles in 2011 may be quite limited given a lot of the PS3 purchasing and Xbox 360 purchasing may indeed be multi-console ownership which wouldn't significantly improve the overall number of titles purchased, just spread them out over a larger console install base. Furthermore I would also expect that as the population of consoles ages we will see greater numbers of rebuys especially as early 360/PS3 consoles are noisy and unreliable compared to the latest models. I would expect the true number of new console owners will be at an all time low in 2011 even if hardware price cuts cause 2011 to exceed the 2010 sales numbers.

360 did very good in na this year, it did very good everywhere this year. but it wasnt close to topping the wii this year, analysts shoudnt only refer to npd.

... In America.

Too bad it finished in 3rd place Worldwide for the Year, and sold almost 5 Million units less than the Wii.

Well when it comes to Video Game Analyst, do they ever focus outside the US? Do they ever really look at the big picture? Short Term Effects, Long Term Effects.  

(A love it, they present ps3 as dead lasts in most of their information, when it is gaining on the 360). 

Also Add: (I understand this is analysis based on NPD, but truth be told, that is typically the only form of Analysis they really do, even with Financial Report Data.)

True. At least with TheSource here he focuses more on a Worldwide basis of things, even if he usually isn't super duper good with the HD stuff it's nice to see.

Oh well. This thread is about America so I see no need in me being here any longer with my off topic Worldwidey-ness.

They only fell short because they did not ship enough. 2011 is very interesting as the Wii is vulnerable in America. Kinect is taken off everywhere but how many consoles can it continue to sell is the most important question. 

As far as the Wii is concerned, it will sell fine, but as usual the holdays is where they make up the difference.

You could also argue that they focus even less outside of console gaming, less still outside of handheld and console gaming combined and that overall focus is on less than half the gaming market. So geographical constraints to their analysis is probably less important still than the fact that the overall analysis is incomplete and skewed.

You know, I think what I dislike most about gaming "analysts" (whether professional analysts or gaming media people) is that they don't actually perform analyses - they regurgitate some numbers, then describe their pet predictions. Neither of which is an analysis. They don't take those numbers, the sales data, and, for instance, find correlations between game and system sales, nor do they examine connections with, for example, game hype, advertising, or upcoming game lineups.

What ends up happening is that they make bold predictions about what will happen, on the basis that what has happened before will happen again (depending on their preferred system, they always bias in favour of one system), and that the only thing that will influence that is price cuts.

What does the Xbox 360 have coming in 2011 to maintain the sales it saw in 2010? Not in terms of new hardware or price cuts, but software - the things that people buy the hardware to play. They don't even MENTION upcoming 360 titles, despite the fact that such titles are pretty much absolutely essential to making a coherent prediction.

Choice of language can be revealing. Did you notice that, rather than saying that the 360 sold nearly as well as the Wii, the phrasing was that the 360 nearly outsold the Wii? And without making mention of the Wii having a weaker year, either.

Put simply, I'm disgusted by the utter failure of all these so-called "analysts" to actually analyse anything. It means that, rather than actually forming reasonable predictions and informing the public properly, they spread their personal biases, drive fanboy hysteria (both positive and negative), and make the hardcore all the more elitist because they don't actually understand what they're talking about.