Microsoft recently announced that they’ve no intention of debuting their next generation console at this years E3 show in May. Along with Sony, they’ve more or less discouraged any inferences about a next generation console being imminent (that is, coming out this year). Although as far as I can tell they haven’t shot down the idea that the next XBox could be released by Christmas 2013.
After some thought I can’t say I’m exactly surprised at the apparent reluctance of both Sony and Microsoft to get successors to their current systems out the door. Even though it’s been a surprisingly long generation (coming up on 6 and 7 years), there isn’t a huge need for either company to get their new hardware out just yet.
If you look at the monthly hardware sales over the past year or so, you’ll notice that both the PS3 and XBox 360 are still managing to move a surprising number of units. According to NPD, in February 2012 Microsoft sold 426k 360s. That’s a truly impressive number when you consider A) it’s February - traditionally the doldrums of the gaming year and B) once again, we’re talking about a system that’s 7 friggin years old. I can’t imagine who must be buying these things in such numbers this late in their life cycle, but I’ll postulate on that in a bit. The point is, there isn’t really a huge incentive for Microsoft to release a new system if their current one continues to sell like it has been.
Pretty much the same thing can be said for Sony. They managed to sell 360k units in February, a very healthy amount. And in Sony’s case, they’re even more reluctant to move on to the next generation when they only really started making money from this current generation’s hardware a few short years ago. It’s certainly in Sony’s interest to extend this generation for as long as reasonably possible. In short, they’ve invested too much into the PS3 to step back from it just yet.
But things can change, there is one other player that could influence the market in a big way. Nintendo is making the logical decision in releasing the Wii U later this year. The sales of their current generation system, the Wii, have dropped off quite a bit recently. And their recent software sales for the Wii haven’t been that impressive either. To put it bluntly, the Wii is getting quite long in the tooth. Its age and limitations are starting to really show compared to the other two systems. It’s not HD and it’s graphical capabilities aren’t up to par with the other two. It’s definitely the right time for them to release some new hardware.
But what effect will the Wii U have on the current market? Will the 360 and PS3 keep selling like they have been when the Wii U comes out? Or will the Wii U eat into their market shares? And if the Wii U ends up doing very well at the expense of the other two systems, will that force Sony and Microsoft’s hand into pushing the release of their next gen consoles up sooner?
All that depends on the types of people who will be buying the Wii U. I foresee several different potential customers:
1). The hardcore early adopters. This is a group of people who will probably buy just about any new game console that comes out at launch. Money generally isn’t as much of an object for them (although they may balk at prices in excess of $600, but there’s no way the Wii U will cost anywhere near that). They have to be the first kid on their block to have the new toy (although most aren’t kids, they’re generally in the male 18-34 demo). What’s more, these people have been waiting 6 years for a new video game console, so they’ll be champing at the bit for something new and interesting. There’s probably not a ton of these people, perhaps a million or so worldwide?
2). The diehard Nintendophiles. This group will buy just about any new Nintendo system. These guys are a big reason why the 3DS was able to sell a million units at its launch despite it having a less than stellar launch lineup and pricetag. There may be some overlap with this group and the first group, but it’s hard to say how much of an overlap. My guess is there’s may be over a million of these characters worldwide.
After this point, it gets more difficult to define the groups due to the unknown quantities of the Wii U’s launch price and the launch and near launch game lineup.
3). More casual Nintendo fans and general gamers. Given the Wii sales numbers, this group is potentially enormous. The problem here is that this group tends to be much more focused on specific game series, usually games in one or more of Nintendo’s mega selling flagship properties: specifically Super Mario Bros. , Zelda, Smash Bros., Metroid, Pokemon, Mario Kart ect. And by all reports the Wii U isn’t going to have any launch titles in these series. In fact, it doesn’t look likely that any games in these flagship series will appear on the Wii U for perhaps a year or more. This means that people in this group may tend to wait to buy a Wii U, unless the launch price is unexpectedly low (unlikely) or there’s some other compelling reason yet to be revealed for them to want to buy one right away. That’s not to say that no people in this group will purchase a Wii U at or around launch day, just that only a fraction of them will. But it’ll be a fraction of millions and millions.
So far my suspicion is that the launch price of the Wii U will either be $249 or $299. I say this because if you look at historic launch prices of Nintendo systems you’ll notice that they’re always very competitively priced for their time and hardware levels. Going way back to the original NES, the launch prices of all their systems have been $199, until the Wii which launched at $249. And after the wild success of the original Wii at $249, there’s no way that Nintendo will price their next system anywhere above $300. But the hardware in the system itself will be a bit pricey. Based on comments and leaks I’m guessing the Wii U will most likely have a multicore POWER7 CPU and a AMD Southern Islands derivative GPU (several generations beyond what’s in the 360), and the touchscreen controller will most likey cost at least $45-50 to manufacture. So they’ll price it as high as they reasonably can without breaking the $300 barrier.
If my educated guesses on the hardware for the Wii U are correct, it will mean the Wii U will have a pretty solid leg up on the 360 and PS3 in terms of raw graphical processing power. If my guesses on the price are correct, it will launch at a price that is very competitive with the 360 ($199 and $299) and PS3 ($249). Of course it’s also very likely that both Sony and Microsoft will drop the prices of their systems in response the Wii U since they currently both have some headroom on their Bill of Materials. So if you’re planning on buying either one of those systems, you may consider waiting another few months.
So what will this mean for the 360 and PS3? I’m still wrapping my head around who the heck must be buying this venerable systems in such numbers this late in their life cycle. Given that the Wii has sold something like 90 million units worldwide to the 360s 64 million and the PS3s 60 million, I can only assume the people who are currently buying the HD systems are largely Wii owners who are “graduating” to a 360 or PS3. In the case of the 360 perhaps these people are attracted to the Kinect? Honestly I have no idea.
Be that as it may, if it is indeed primarily Wii owners who are currently buying these systems, it might not be good news for Sony and Microsoft that a new, powerful Nintendo system that will be priced quite competitively is coming down the pipe in a few months. This would be the same group of people who gobbled up Wiis buy the barge load a few years back, now a brand new Nintendo system is coming out that has a super neat-o touchscreen controller, is potentially more powerful that 360 and PS3, is priced similarly, and... is a brand new Nintendo system with all that entails (Mario! Zelda! Pokemon!). Suddenly that new 360 with Kinect may not seem so super cool for Christmas 2012. The Wii U could easily end up being a hot gift item.
But this is all speculation of course. There are still a lot of reasons why people may not be enamoured with the Wii U, the most important of which is lack of strong launch titles. If the Wii U launched with a brand new Super Mario Galaxy game I have zero doubt it would’ve been a huge hit this holiday season, but as I’ve said before, that’s not going to happen. Of course plenty of other systems have had pretty dismal launch lineups over the years and still managed to do remarkably well. The PS2 is the most successful video game console of all time and it launched with a then virtually unknown snow boarding game.
Either way, I still believe that the Wii U is going to be a lot more successful than a lot of people suspect. It’s new, it’s interesting, and it’s Nintendo. It’s been a very long time since there was a brand new video game console on the market.