Perhaps all the jokers on message forums and those posing as analysts should listen.
But Kaufman Bros. analyst Todd Mitchell says that the recent PS3 and Xbox 360 price reductions “did not create a huge surge in demand.” Despite analyst rumblings that Nintendo is now in the toughest spot, facing declining Wii sales and, for the first time, notable price pressure, Mitchell says it’s likely to be the DS and Wii that led U.S. hardware sales for August.
The analyst also notes “misgivings about the performance of key titles,” specifically Madden NFL 10, which the analyst believes is “tracking below plan” — even though he expects its Xbox 360 and PS3 SKUs, respectively, will take the top two spots on August’s software charts.
And although the fourth quarter is expected to show improved results for the game industry once the summer slump is finally in the rear-view, Kaufman thinks that 2009 will show negative comparisons in the end.
“We are now lowering our full-year 2009 outlook for overall industry sales as measured by NPD to $20.2 billion, a decline of 5 percent from $21.3 billion in 2008, from our prior forecast of $20.7 billion, which would have represented a decline of 3 percent,” he says.
Explains Mitchell: “We think video games appear to be entering a deflationary cycle. Underlying growth in the category remains robust, but consumers are spending less on the category per hour of playtime. Weak demand trends are being exacerbated by cautious retailer sentiment and tighter inventory cycles.”
Let us go back in time some…
In 2005, Iwata said this:
“For the future of video game business, we have to expand the market. We need to get back to the basics.”
Thus, Iwata claims, there’s a simple problem: “If we can’t expand the market, all we can do is wait for the market to die”, and Nintendo formulated a strategy to help the company deal with this perceived problem. This strategy consists of three main strands – to re-engage people who have stopped playing, to actually attract new gamers, and to create new products that appeal to everyone, even though many people feel that games are too difficult, but novice-only products won’t satisfy the core gaming fanbase.”
What we are witnessing is the slow motion collapse of the Core Market. Remember, Nintendo is also in the Core Market so they, too, are being affected. However, they clearly saw this day coming.
Madden sales are down. What is more reliable than Madden?
More and more of the top sales chart is being dominated by ‘Expanded Market’ type games. These are the future of gaming.
We have a choice. We can either assume Nintendo is stupid and doesn’t know what they are doing, despite that they are the only true surviving console company in the market (and still are quite profitable) and assume that they are ‘doomed’ somehow, someway, in the near future, or we can actually look at Nintendo seriously and their business strategies seriously.
Those in the “Game Industry” call me a ‘chicken little’. Chicken Little was the guy who thought the sky is constantly falling. Rather, I am saying the ocean is flooding and the Old World of gaming will be no more. A decade from now, gaming will be nothing like what we perceive it today. Just look at how much has changed in the last three years. The Expanded Audience will become the New Core. The old Core will be joining the void with their predecessors. We’re in the midst of a Great Shift.
Much of the problem with ‘analysis’ lately is people underestimate the Macro-Economic situation. There are cycles for everything. Major worldwide depressions seem to be a cycle of every seventy to eighty years. With retirement pensions and government elderly programs (Social Security, Medicare, etc.) all going bankrupt, this was extremely easy to predict (it is listed even in the ‘Blue Ocean articles’ that were written in 2007).
“But stocks are up, Malstrom! It is turning around!” Stocks traditionally go up when companies lay people off.
With population decline, everything will be dropping. Nations like Japan are not going to get out of their depression until they turn population trends around. The population decline in Europe is quite ghastly.
I’ve been pleasantly surprised that this analyst and Anita Fraizer did not call for more ‘price cuts’ for the Wii. For the first time I’ve been observing this “industry”, there seems to be some acknowledgment of the Wii, and that it may be up to something beyond “gimmick controller” and “targeting new demographics”. Iwata outlined the big picture as far back in 2004 and 2005.
The big picture is that the Core Market is destined to collapse. Unless gaming can be re-created in value or expanded in new ways, gaming will die with it. The mission of the Wii was not to expand gaming so much as to fight the overall downward trend gaming has been on. From Nintendo’s perspective, if gaming dies, so do they. Sony and Microsoft truly don’t matter to Nintendo. To Nintendo, it is do or die for gaming.
As for Sony and Microsoft, they are circling the drain. After cutting prices, where do they go from here? They have to build the value of their systems up, or they run the risk of being wiped from this market just as every console company not named Nintendo.