Nintendo increases 2007 fiscal year expectations, yet again

[Julius Seeker]

<a href="http://wii.ign.com/articles/847/847394p1.html">Link to article</a>

In short:

Official sales by the end of December 2007 for Wii reached 20,130,000 units.

Hardware sales expectations for the year have been increased to 18.5 million (from 17.5).
Software sales expectations for the year have been increased to 115 million (from 97 million).
DS hardware sales for the year have been increased to 29.5 million from 28 million
DS annual software sales expectations have increased to 179 million from 165 million.

Nintendo also increased its profit forcast to 4.34 billion USD (double last year's, which was a highly successful year for Nintendo), and increased the company's total sales forcast to 15.38 billion USD.

These are the highest recorded sales and profit levels Nintendo has had in the history of the company.


<a href="http://wii.ign.com/articles/847/847472p1.html">In addition</a>
According to NPD Wii had the highest tie-in rate for software per system in December despite having a smaller userbase than Xbox 360 in North America:
Wii = 8.11
360 = 7.76
PS3 = 5.04

[Zeus]

I think the tie-in ratio is helped by the smaller userbase......

I'd like to see the yearly figures for tie-in ratio. I thought the 360 was the best by far as it should have been. They did have the most number of great games after all.

[Julius Seeker]

Here's the break down:

Americas 8.85 million as of December 31, 2007
Japan 4.99 million as of December 31, 2007
Europe 6.3 million as of December 31, 2007
Worldwide 20.13 million as of December 31, 2007

[Zeus]

Lifetime tie ratio:

Wii = 4.64
PS3 = 4.26
360 = 7.00

http://wii.ign.com/articles/847/847472p1.html

[Julius Seeker]

Lifetime tie ratio:

Wii = 4.64
PS3 = 4.26
360 = 7.00

http://wii.ign.com/articles/847/847472p1.html

This is mostly as expected considering Xbox 360 already had in the region of 6 million systems on the market (released almost a year prior) by the time Wii and PS3 were released. What is surprising is that Wii with a smaller userbase managed to sell more software in December even while selling more hardware units in December than the 360.

[Zeus]

Again, larger userbase = generally lower tie ratio.

Essentially, the Wii's tie ratio was only better in December where it outsold the 360 by about 100,000 units. It was a bit surprising that the sold more software units than the 360 that month considering the overall quality of the Xmas lineup was FAR better on the 360. Overall, the 360 generally kicked its ass otherwise with lifetime tie ratio of almost 2.4 greater and an additional almost 2 million hardware units sold. Although with better titles to (hopefully) come out this year for the Wii and the 360 likely having it's best Xmas season already pass that may change.

But the type of gamer generally who buys the 360 is more likely to buy more software than the one who buys a Wii considering the expanded userbase of the Wii (I doubt my father-in-law is going to buy as many games for his Wii as my cousin does for his 360). Absolute figures will likely start favouring the Wii as its userbase increases (is anyone not expecting the Wii to pass the 360 in the US this year?) but the tie ratio may favour the 360 for the foreseeable future with maybe the PS3 eventually overtaking it.

[Julius Seeker]

Again, larger userbase = generally lower tie ratio.

It's not that simple,

Total Userbase/Monthly hardware sales = X (potential tie in ratio)

The higher the total userbase and the lower the monthly hardware sales, the higher the X factor should be (IE: 10/1 = X = 10, or 10/2 = X = 5, or 20/1 = X = 20) . So considering this, the Xbox 360 had a higher potential to have a higher tie in rate for the month.

Going for total time period:
If gamers by X number of games every quarter
Userbase = the number used multiplied by 1 million
Taking numbers, for example (in millions)
Then total games sold for Xbox 360 would be something along the lines of would be X + 2X + 3X + 6X + 6.5X + 7X + 8X + 10.5X = 44X total games sold

The Wii userbase would be something like 1.5X + 3X + 5X + 8.8X = 18.3X games sold

Of course this is ignoring other factors such as holiday sales boosts, games bought upon system purchase and such, but you get the general picture, the longer a user has owned a system, the more likely they are to have bought games. Given these numbers 44X/10.5 = 4.1X and 18.3X/8.8 = 2.1, the Xbox 360 should have a tie in ratio roughly double that of Wii for total lifespan.

[Zeus]

That's way too complicated. I'm an accountant, I ain't good with them there numbers....

A quote directly from the IGN article:

"According to the software data tracking service, consumers purchased 8.11 games for every Wii console sold in December"

Thus, we can safely deduce that by their (and really the only) definition:

Tie ratio = Units of software sold / Units of hardware sold

It's really not that tough, man. You increase the denominator (Units of Hardware) and unless you increase the numerator (units of software) by an equal proportional amount, you get a decrease in the result of the formula (in this particular case, it's presented as a ratio).

So, if you have a small, hardcore userbase, the tie ratio is expected to be higher than a widespread large userbase. I am going by the relatively safe assumption that the 360 userbase is generally more "hardcore" than the Wii's (hence my comment about my father-in-law and his Wii vs my cousin and his 360). Considering how Nintendo is lauding their efforts in expanding the video gaming industry and all of the articles we see supporting this claim, there is substantial empirical evidence behind this assumption.

So it's expected that the 360's tie ratio would be substantially higher than that of the Wii's due to the demographic of its userbase. The historical data (lifetime tie ratio) supports this claim as well.

It seems that December is likely just an anomoly, but we'll see what it's like in 2008. The expected rise of the PS3 might factor in as well.

[Julius Seeker]

The longer a system is around, the higher its atachment rate is going to be as well.

[Zeus]

The longer a system is around, the higher its atachment rate is going to be as well.

Generally, yes. But not this early in the life

[Julius Seeker]

The longer a system is around, the higher its atachment rate is going to be as well.

Generally, yes. But not this early in the life

Explain,

[SineSwiper]

NEEEEEERRRRRRDDDDDDSSSSS!!!!!!!

(Two hours, and I can't find that animated GIF...)

[Julius Seeker]

You're a programmer who owns an Xbox, considers himself a hardcore techno fan, and has a site called Resonatorsoft =P

[Zeus]

The longer a system is around, the higher its atachment rate is going to be as well.

Generally, yes. But not this early in the life

Explain,

It all has to do with the selling curve of the system. They generally hit peak sales when, year 3 or so? Then, while the hardware sales slow down, software sales are still increasing due to an increased userbase. You generally do not get the software sale curve increasing at the same proportion as the hardware sale curve early on. But over time and once the hardware sales start to decline, then yes, you would expect attach rate to increase.

Until the next gen comes out at which point you expect the attach rate to start decreasing as well as software sales will also start to decrease

[Julius Seeker]

Generally, yes. But not this early in the life

Explain,

They generally hit peak sales when, year 3 or so?

This is Xbox 360's third year =)

The Xbox 1080, or whatever they're going to call it, may be out in less than two years. The original Xbox only had a 4 year lifespan.

[SineSwiper]

The original Xbox was also very late to the party. Console systems have a lifespan of at least 5 years, if not a few years more:

NES - 1983
SNES - 1990
PSX - Late 1995
PS2 - 2000-2001
Xbox 360 - 2005

I'll wait until 2010 before reaching any decisions.

[Zeus]

Explain,

They generally hit peak sales when, year 3 or so?

This is Xbox 360's third year =)

The Xbox 1080, or whatever they're going to call it, may be out in less than two years. The original Xbox only had a 4 year lifespan.

The Xbox has just started its third year, so we would expect it to hit its peak sales performance at some point this year. The PS3 should really pick up and close the gap a bit later in the year when they finally hit the breaking point for selling price ($299) and there's actually something to play other than a couple of top-quality exclusives and (mostly) inferior multiplatform games or ports (really, only Burnout Paradise has been considered better on the PS3 than the 360).

The Wii is the wildcard here. If I'm not mistaken, its sales are slightly outpacing the PS2, but that's with constant shortages since release. Hell, you still can't find one in stores. Had there been no supply constraint it would be far head I would think. But how long can it go for? It's very inferior technologically but it doesn't seem to matter based on its library and targeted demographic. I'm curious if it will peak sales wise in 2008 then drop or if it keeps going strong beyond that. It'll be hard to tell before June or see, we'll need to see the trends for the year and the expected lineup for the year.

This is likely the last year of decent PS2 titles as well. There's still some strong niche stuff for this year but it'll be almost nothing by next year. Although we may see more Madden and other titles still come for it (likely Wii titles not dependent on the Wiimote ported) as it's still pretty damned strong.

[Zeus]

Recent figures and explanation from Next Gen

http://www.next-gen.biz/index.php?optio ... 4&Itemid=2