The nature of the East

PSP has flip flopped with the DS over the last year to fight for bestselling hardware device, as Japan becomes the land of the handheld. The Wii has been in year-on-year decline since the middle of last year and the PS3 is finding new heart among its faithful home crowd.

The resurgence over the last 18 months of the PSP in Japan just underlines the impact of high quality titles on hardware to such an extent that it was outselling the DS Lite in all of the period of 2008 until the arrival of the DSi in November. This would be unimaginable in Europe but annual sales reveal a tenacity which has lead to an installed base in this region of 14 million units.

As for the PS3, it seems to be the subject of the Alice In Wonderland song: ‘Will you join the dance’. But gamers want the platform to succeed in Japan and should flock back when the price is right.

The combined factors of the introduction of the DSi, a paucity of new desirable Wii software and competition from other platform vendors has seen Wii sales fall since the summer of 2008 (down 61 per cent year-on-year) in Japan.

Interestingly, the Wii has mirrored the same shape lifecycle curve as the N64 and the GameCube, with the peak sales year occurring in the first or second year after launch, with a decline thereafter.

In Europe, the curve has been the same shape for all of these Nintendo consoles which also peaked in their first or second year. The Wii launched in 2006 in Japan and peaked in 2007.

It was launched in the same year in Europe but was still growing sales in 2008. However, year-to-date sales show a decline in some European territories, with the largest Wii market, the UK, occupying a third of Western European unit sales, down by 29 per cent year on year to the end of June. This European fall off is primarily due to strong comparables in the same period of 2008 and stronger competition from Xbox 360 which has become more appealing to the Wii demographic as its base model price is lower than the Wii.

The installed base of the Wii has hit over eight million in Japan – 32 per cent of homes with children. In Western Europe, its stands at 17 million – representing a 25 per cent penetration of homes with children.

The slowdown of sales in Japan has been considered by some observers as a result of a saturation of homes with children, the target demographic but 32 per cent is hardly saturation.

The top ten sellers in Japan in May included six DS titles (which also filled the top five positions), two PSP titles, one PS3 game (Dynasty Warriors 6) and one Wii (Wii Fit). In the next ten best sellers, there were a further four PSP titles, three DS and two Wii (both third party). In the Top 20, 15 games were on portable devices, whilst the Wii took up three of the remaining five. The other two were on PS3 and PS2.

Wii games are not bought in the same numbers by the family demographic as core games are on core gaming platforms. Wii could become a family event pastime where only one or two games are required. Wii Fit has sold over three million units, just
under a third of the Wii installed base.

It would be extremely unfair to suggest that the Wii is in interminable decline. Before the arrival of a Wii 1.5 in the next year, there is a robust roster of titles expected during the remaining half of the year and some way to go on price point reductions in this cycle; oh yes, and don’t forget that despite challenging trends, the Wii is still the best selling TV based console.

What remains unknown is whether the ‘family gamer’ demographic is viable long term – and if it will remain hungry for more of the same software and drive hardware sales?

* Nick Parker is the founding partner of Parker Consulting Ltd, the industry’s foremost advisors in strategic planning, business intelligence and research.

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