FEATURE

In-Depth Analysis of Games and Console Sales

Matt Matthews's picture

By Matt Matthews

August 18, 2008

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The Truth About Third Party Software Sales

Last week Nintendo and Microsoft dueled in press reports over the health of third party software sales on the Wii, Xbox 360, and (to a lesser extent) the PlayStation 3. Let's see if we make the discussion reasonable, occasionally using some estimates of our own.

In the first 20 months after launch:

  • Wii: Third party software accounted for over 56% of Wii software sales, or 33 million units

  • Xbox 360: Third party software accounted for over 82% of Xbox 360 software sales, or 29 million units

  • PlayStation 3: Third party software accounted for over 83% of PS3 software sales, or 20 million units

Nintendo would want third parties to look at their total units while Microsoft would want you to look at its percentage of sales.

Some argue that year-to-date third party sales are more important than lifetime sales. Presumably, including the first year after a system launches may skew the data. We estimate that the YTD situation is this:

  • Wii: Third party software accounted for over 52% of Wii software sales, or 13.4 million units

  • Xbox 360: Third party software accounted for almost 90% of Xbox 360 software sales, or 16.5 million units

We estimate that third party software sales in 2008 are much slower on the PS3 – around 70% of all software sales and around 7 million units. However, we are not aware of any definitive data to help substantiate these estimates.

The lifetime figures for the Wii are important because they do show that the Wii is moving third party software units better than the Xbox 360 did during that same period after its launch. Third parties can find sales on the Wii, but few should expect to compare to Nintendo's own software.

On the other hand, Microsoft's 2008 figures are very impressive, with almost all software sales being made by third parties. This jibes well with the recent report from Game Developer Research that 73% of the console developers surveyed are developing for the Xbox 360.

What Microsoft is downplaying, of course, is that their competitors – both Sony and Nintendo – have very strong first-party and second-party development organizations. While Microsoft has been acquiring developers and nurturing second-party relationships with others, it simply does not yet have the in-house muscle that Sony and Nintendo can muster. For this reason, Microsoft will almost always look better when one measures simply by third party software sales.

kcoopey's picture

July 08 software revenue per console sold in YTD 2008 is the highest on the PS3 and lowest on the Wii. This means Wii sells consoles to people who don't buy a lot of games; and PS3 provides the best opportunity for new IPs and creative games. Higher attach rates also imply that AAA 3rd party software will be developed for PS3/360, while the Wii will get more Nintendo games and low-budget crap from the 3rd parties.
Is there any way to print an entire article in the new page layout?

Philip_Arcan's picture

As console purchase apart from having the amount of cash at hand very much is determined by game preferences (at least that is often the initial incitement which MGS4 is an example of), it would have been interesting to see an elaboration of the correlation between specific game sales and peaks in console sales.

Philip Arcan

NickgamertagO1's picture

Point taken. I did originally buy it for myself for the wealth of innovative games and entertainment that I'd be enjoying but I quickly learned that wasn't the case. My daughter who is 2 likes games, but isn't coordinated enough to use the normal controller, so I got the Wii thinking it be fun for her. Ironically enough she tries to hold my 360 controller when she plays in stead of the Wii remote. She can only play the most simple of the simplest games. I do still believe that a lot of people are buying them just because they are hard to find. They are cheap, but not really when you consider that other than in the rarest of cases, all multiplayer is done same console, you have to buy 3 extra controllers (60 bucks considering remote and nunchuck) with the 360 (and PS3), that's not the case. That's $180 you don't necessarily have to spend on the 360. So as much as it is cheap, these people are dishing out the dough, and considering how well "games" like Wii Fit are selling, I think it really has much less to do with price than anything else. I'll make a somewhat obvious estimation right now, when the 360 drops price to 199 for the core, it will still get smashed by the Wii. I'm almost willing to bet 360 sales won't actually go up that much at all, maybe 50k a month.

Ozzman_79's picture

@ NickgamertagO1

"people are buying the Wii cause of its price, and elmo-level fadism."

To a point, maybe some. But at almost 2 years and over 20 million sold a(including folks like you who bought it more then once), that, to me at least, says much more then a fad. As for price point, that is definitely a factor, and that's exactly the point. It is cheap so people are more liekly to buy it, just like in other electronic devices, cars and a multitude of other things.

NickgamertagO1's picture

I wonder how many people who still own PS2s even play them any more? And I think they are selling so many right now just because of the price, same as Wii. I'm sorry, I have a Wii (had one a long time ago, got rid of it, I never played it, recently bought a new one for my two y/o...TWO year old??? and 8 y/o) and it is not that revolutionary. Ok, so I can do the same thing with my character by swinging this thing that I've been doing for 15 years with a button. The results of swinging around with very little actual representation on screen to my actual movements are not enough to warrant the amount of work it takes. I'm fine with pressing A. When swinging around a controller results in an actual representation of my movements I'll be impressed. Ok, golf and bowling have that to some degree, and that's it. My point, people are buying the Wii cause of its price, and elmo-level fadism. IMHO anyway.

ShamanNY's picture

Im more concerned about new PS2 purchases... My sentiment is that it is the casual, low income, very young demographic. Sony is only selling the PS2 because its very profitablemoney, i fear it is cannabalizing its PS3 sales past an undesired threshhold.

ShamanNY's picture

On the PS2 vs PS3 ownership issue, i think there isnt enough information to arrive to definitive conclusions. Theres is still over 50% PS2 owners unacounted for/that do not own another system. So the valuable data point is which system are they more likely to purchase next.
On the other hand at retail Wii is obviously the cheaper console, and largely considered a non-hardcore experience which I would argue is what the PS2 now delivers and what the XBOX arcade is targeting. So it may be accurate after all, but can we segment that for non-hardcore console owners?
Something that may support the above: Maybe the Sony strategy of continuing to sell PS2 is costing the PS3, how likely are you to buy both a PS2 and a PS3 in the same year? With the PS3 already considered the most expensive system is easier to excuse the addition/diversification of another console manufacturer at a cheaper price, than it is to simply get the sequel for a lot more.

coop's picture

I believe some people are confusing what the study said. I'm pretty sure the scenario posed was, if you currently own a PS2, what other systems do you have? Well I don't think too many PS3 owners currently own a PS2. Most PS3's sold have backwards compatibility, so why would you keep your PS2? I'm not questioning the study, I just think the article failed to really explain the numbers.

lifeat30fps's picture

Given that last fact, it will be interesting to see what EAs reaction is, i.e. do they decide they need to promote better or make games more mass market. I know promoting a football title isn't something they've had to do much at all in the last decade and less in the last few years thanks to the exclusive license.

Brian
www.brianwoods.com