Both the Wii and the PS3 launched in the US this past week, but under vastly different circumstances. Is it too early to draw any inferences from the past week’s launch of the two systems? Or, might the past week tell us a bit about the future, especially in regards to the competition for market share between the PS3, Wii and XBox 360.
First, let’s cover the facts.
Most analysts think that the Wii launched with about 400,000 units. As almost anyone who has gone searching for one of these unit knows, they’ve all sold out. Whether you go to BestBuy, Amazon.com, Target, Circuit City, Walmart or any major gaming retailer, the story is the same. We’re sold out. Come back later. The important point here is that 400,000 units for a launch is actually high supply for a system launch. The fact that the system has sold it means that it is in ultra-high demand. Further, each Wii that is sold is making Nintendo a profit. This isn’t the case for either the XBox 360 or the PS3.
The PS3, it is thought, launched with only about 100,000 units (some estimates are lower). That’s ultra-low supply. While the PS3 has sold out, it doesn’t tell us much because there are 100,000 hard core gamers out there. This doesn’t give us any indication of how well the Playstation 3 will reach the critical mass of consumers, a huge question given the $500-$600 retail price. Further, the PS3, unlike the Wii, has faced some pretty signficant system bugs. Sony is working to rectify the situation, but nonetheless, it is clear that they had to rush to market and were not well prepared for launch.
What this leaves us with is a situation where Wii is off to an early start against the PS3 in terms of market share. Many analysts expected this, but still expect the PS3 to regain market share over the next 5 years from both Nintendo and Microsoft. I’m not sure I understand their reasoning. In my view, the PS3 will have to knock off about $200 in cost to become a mass market product. By the time they do that, though, the XBox 360 and Nintendo Wii will have gotten so far ahead, and gained so much momentum, that it will be hard for Sony to catch back up.
At the moment, XBox 360 is clearly in the next generation lead. The hot thing right now, by all indications, is the Nintendo Wii. Everyone’s talking about it. Everyone wants one. The critical question is whether or not the Wii captures a brand new sector of the gaming market that has been neglected by all gaming systems since the original NES: the casual gamer. Remember Duck Hunt? My wife used to play Duck Hunt. By all indications, the Wii is an attempt to bring simple gaming back into the mix, and in doing so, to win the “next-gen” battle not by overpowering Sony and Microsoft and stealing their die-hards, but by winning new gaming converts from the general public. They’ve acheived this with the Gameboys and Nintendo DS. Only time will tell whether they acheive it with the Wii. But so far, so good.
Here’s my next-gen forecast:
XBox 360 holds the lead for 2 more years and is considered a major success
Wii becomes a cultural phenomenon, bringing gaming to people who never used to game. Wii overtakes XBox 360 in 2008-2009 simply by having a wider appeal.
Sony’s PS3 is hugely successful with hard-core gamers who want the most powerful system, but it fails as a mainstream consumer product designed to be the entertainment centerpiece. Sony loses market share and soon realizes that to succeed in gaming, you’ve got to make gaming your number one priority.