« | Home | »

Numbers are fun!

posted on November 20th, 2006 by pat

In the course of doing my job, I managed to stumble across some information about the stocks of video game companies. Turns out a Bloomberg terminal is a worthwhile investment (when I am not paying for it) after all. Basically, I am now able to put numbers (which will not be precise, since there may be some intellectual property rights at issue) next to musings such as “It seems the DS is selling a lot of unit,” or “What happened to the PSP, are there any games?” Please beware the frequent use of parenthetical statements (such as this one: DS = original DS + DS Lite).

Something that needs to be understood about the way traditional financial statistics apply to the video game industry (and entertainment media generally) is that there is a “round peg, square hole” problem. Most statistics (total sales for example) are calculated on a Year over Year basis. If Nintendo sold 100 games in October 2005 and 110 games last month that represents 10% growth in YoY sales. The obvious problem here is that not only are the lives of consoles cyclical (you would expect to see more games sold during the peak of a console’s popularity than just before a new generation of systems debuts) but any specific company’s total sales will be strongly influenced by idiosyncrasies such as what was released in a given month. Squenix sales look terrific YoY because Final Fantasy XII just flew off the shelves while there was no comparable release in 2005. Since this is the case, it makes more sense to me to compare systems rather than companies, at least for now. My justification for this is that the fact that there will be multiple releases for each system each month, so this problem should be smoothed a bit. It’s still not perfect, but hopefully we can still draw a few conclusions.

Pat and Jay pouring over the numbers.

That said, let’s go back to those two musings I pose above. How well does the DS do? Does it dominate the handheld market the way a few of us on this site seem to want to believe? I think the answers to these questions are “Very well” and “Yes.” Let’s start with the US. Consider the fact that the PSP sold about 150,000 units last month (basically no YoY change, and about where sales have been every month with the exception of launch and December). The Nintendo DS also sold about 150,000 units in Oct 2005, but then showed 160% YoY increase last month. In Japan the PSP sold about 150,000 units last month while the DS sold (wait for it…) Over 800,000 units. That is in no way an aberration, either. While the number is slightly higher than the few immediately preceding months, there are several months in which unit sales topped a million. In fairness, Dec 2005 saw US sales of both the DS and the PSP exceed a million, the only month so far either has done so.

Now let’s talk software. In the United States, the statistics are proportionally very similar. Basically if you multiply everything from the above paragraph by 2.5 you arrive at software sales. Japan tells a slightly different story. The PSP sold 200,000 games last month, which again, represents basically no change from the previous year. That ratio (2 games: 1.5 systems) does seem low, but keep in mind the previous months matter a lot more to systems than to games, so it is essentially meaningless. How does that compare to software sales of the DS in Japan you may ask? The DS sold over 4 million games in Japan last month. This is more than double the software sales from Sept, while hardware sales were very similar. The reason for this seems far simpler than it should be – Pokemon. A key difference between sales in the US and sales in Japan is that US sales show a small spike in November, with a larger spike in December, which is intuitive since that is the holiday season. In Japan, while there are increases each December, the spikes happen around releases more than the holidays. And no release makes for a bigger spike than a Pocket Monster release.

Besides the eerie consistency of PSP sales, there are a few observations we can make in the battle of the handhelds this generation. The DS and PSP seemed to start off on equal footing on this side of the pond, but recently the DS has started to outsell Sony’s offering handily (I love puns). In Japan, it seems DS was stronger out of the gate and never looked back. An interesting academic question to ponder may be how the race would have gone if Nintendo did not have Pokemon in its corner. Does the DS library out do the PSP hardware without those games? I don’t know the answer, but I do know it does not matter; we are nearing the time when we can call this race over.

(Note – If anyone wants to hear about industry issues like this, let me know. Pose questions if you want to and I can try to figure them out. A few caveats though. One – I’m not that smart, so I am not capable of answering any and all questions, and I can’t even promise to try, but I’ll try to try. Two – There is a chance I am not allowed to do this and have just set myself up for a date with legal counsel. So if anyone finds this interesting let me know, and I’ll see what I can do.)

3 Comments

  1. jay said on November 21, 2006:

    This report will be fascinating next month. Even if everyone else hates this article, I demand you type up at least the next one. And then also every month following.

  2. Matt said on November 21, 2006:

    This was a very cool article. Thumbs up. Even though it’s thick with numbers, which my brain cannot compute on a large scale anymore, I still try with all my heart because it’s about video games. What kinds of questions can I ask, something based on what you provided, or something different, like how much money does Nintendo stand to make on the Virtual Console?

  3. pat said on November 27, 2006:

    stand to make is difficult, but basically sales trends, for companies or systems is very possible.  i can see how much hardware and software is sold each month, either by system or by publisher. so what the numbers seem to be most useful for is putting a magnitude next to a guess.  we all know some games outsell others, but by how much? that kind of stuff is easiest, but anything that happened in the recent past should be possible.

Leave a Reply