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Despite PS4's Success, Video Game Consoles Just Aren't Selling Like They Used To


Blame mobile gaming? Sure, but technology in the latest generation consoles is also uninspiring.


Last Tuesday, Sony (NYSE:SNE) announced that 6 million units of the PlayStation 4, the company's next-generation video game console, had been sold since its release last November. Because Sony had expected to sell 5 million units by the end of March, the news was taken as a good sign. The PS3, released in November 2006, didn't sell 5 million units until late summer 2007. Not only is PS4 an early success in comparison to its predecessor, it's also easily besting its competition from Microsoft (NASDAQ:MSFT), the Xbox One.

The video game-console industry overall is suffering, however. During the month of January 2007, 1.7 million total video games consoles were sold (that includes sales for all systems from Microsoft, Nintendo (OTCMKTS:NTDOY), and Sony), according to the market researcher NPD. That was two months after the launch of the PS3 and Nintendo's Wii, and 13 months after the November 2005 launch of Microsoft's Xbox 360.

Now, let's look at January of this year, two months after the launch of the PlayStation 4 and Xbox One. According to data leaked from NPD subscribers to TechCrunch, only 677,000 total consoles were sold during January 2014 -- over 1 million units less than were sold in January 2007. In fact, total industry sales (including all consoles and games) decreased by 1% year-over-year in January 2014. Given the launch of two brand-new systems, that decrease is troubling.

So why are overall video game sales falling behind? First, Nintendo's Wii U, launched in the fall of 2012, has not sold well. In January 2014, the company's president, Satoru Iwata, announced that the Wii U's sales forecasts for fiscal year 2014 had been cut from 9 million all the way down to 2.8 million. Nintendo's previous console, the Wii, sold 100.9 million units, easily leading that generation for total sales. At this rate, the Wii U won't come close to that number.

This latest generation of consoles is unprecedented, but not in a good way. A veteran game developer who spoke with TechCrunch (and remained anonymous) had this to say:

The PS4/XB1 is the first generation to have technology that is worse than what is already out there. There are 2+ year old GPUs (graphics processing units) that outperform these boxes, and even budget GPUs releasing now in the $150 range outclass these machines. If you buy the highest end GPU on the market now, you have almost 3x the performance of these machines, and we are at the start of the generation. This is unprecedented.

This means that hard-core gamers are moving to PCs where they can take advantage of the latest and best graphics capability, while casual gamers are being drawn away by all the new mobile and Web-based games. As TechCrunch's unnamed source said, "The traditional consoles are caught in a pincer movement."

Moreover, there were qualities of the last generation of video games that appealed to casual gamers in a big way. As Minyanville's own Michael Comeau told me, "The last cycle was artificially big because of the Wii and Guitar Hero, Rock Band, and so forth. There were lots of people who bought that stuff, and after a short period playing, are not buying new hardware." The new generation of consoles, at least at this point, seem to have less mass appeal, and that will make old sales figures tough to beat.

Last May, Comeau wrote that the fundamental problem facing Microsoft and Sony was a drop-off in gamers, not the quality of their consoles. He concluded that the new consoles, which had not yet been released, wouldn't be able to draw back gamers. At least for now, it looks like he was right.

Follow me on Twitter: @JoshWolonick and @Minyanville
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