Friday, December 19, 2008

Holiday Videogame Sales Meltdown Part 2: Microsoft Reaches for the Masses

On last Thursday, the NPD Group divulged its report chronicling retail U.S. videogame hardware and software sales during the month of November 2008. Considering the nation's overwhelmingly bleak financial landscape of late, the fact that total game sales managed a 10 percent year-over-year gain during this crucial holiday shopping month seems encouraging, but closer inspection of the figures reveals that not every publisher has reason to celebrate. In this second of three parts we look at how Microsoft fared. [Part 1: Nintendo | Part 3: Sony (coming Friday)]

Microsoft reaches for the masses
Nintendo's Wii handily trounced the Xbox 360, yet Microsoft's box still made a strong showing with 836,000 consoles sold during the four-week period. This represents a year-on-year increase of 8.6 percent. The new, cheaper-than-Wii $199 Arcade hardware bundle, aggressive holiday freebie incentives (Arcade units come with Sega Superstar Tennis while the pricier Pro and Elite models ship alongside Kung Fun Panda and Lego Indiana Jones), and a massive advertising campaign focusing on casual, family-focused entertainment all likely helped spur the increase. It's clear that the recent move to a sub-$200 price point has had an impact: Wedbush Morgan Securities analyst Michael Pachter commented that the Xbox 360's average sale price (ASP) during November was $270, which is lower than the previous months' figure, indicating the increasing ratio of the less expensive Arcade sku to the total number of 360s sold.

Despite Microsoft's strong push to market the 360 to a broader audience, the console's best-selling software remains firmly in the hardcore camp. Microsoft's phenomenal Epic Games-developed shooter Gears of War 2 edged out Activision's Call of Duty: World at War for the top spot on the charts, selling an impressive 1.56 million copies in 22 days. (If you factor in CoD World at War's PlayStation 3 sales, however, it could be viewed as the best-selling title for the month.) Valve's multiplayer zombie shooter Left 4 Dead (published by EA) also managed to sneak into the top 10 with 410,000 copies sold. It's a strong debut for an original intellectual property, seemingly fueled by passionate critical praise and strong word of mouth. After debuting to impressive sales on the October chart with only a few days on store shelves during the reporting period, Bethesda's Fallout 3 and Microsoft's Fable II hung on to remain in the top 20 for November. While these hardcore shooters and role-playing offerings continue to find a healthy audience, Microsoft's casual-focused first-party titles for the fall -- Lips, You're in the Movies, and Scene It? Box Office Smash -- failed to register.

Microsoft's risky decision to wage its battle on two fronts appears to be working somewhat though. At its new price point, the entry-level console costs roughly half that of what Sony's PlayStation 3 sells for, making it far more appealing to cash-strapped consumers feeling the economic crunch. The fact that Xbox 360 sales more than doubled the PS3's tally during November proves that Sony's prohibitively high pricing continues to stand in the way of mass-market adoption. At the same time, it's wise for Microsoft to go after the seemingly limitless Wii audience by broadening its stable of casual, kid-friendly fare. But unless Microsoft can create more compelling family software (Rare's recent Viva Pinata: Trouble in Paradise and Banjo-Kazooie: Nuts & Bolts failed to make the top 20 chart), it's doubtful that the Xbox 360 will woo many consumers seeking Wiis. Also, one must consider the fact that both the Wii and PS3 have greater potential for future price cuts, while the 360 has already sliced its asking price down to the "magical" $199.99 number. With Wiis still fetching a premium on eBay during the holidays, Nintendo has little incentive to consider a lower asking price for the foreseeable future.

The post-NPD spin from Microsoft's Senior VP Dan Mattrick wisely focused on the sizable gap between the Xbox 360 and PlayStation 3, pointing out that the 360 outsold the PS3 and PS2 combined for the month of November. But he was careful to also brandish the all-important family buzzword in order to keep the fight against Wii alive. "We've created the optimal line-up of experiences this holiday season for families seeking lasting entertainment value, particularly during rough economic times in the U.S. and abroad," said Mattrick. "We have the largest library of games, TV and movie content and the most expansive and rewarding social experiences. We're confident Xbox 360 will continue to drive record sales around the world this holiday and beyond."

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