Not so fast, Sony. Your two biggest rivals in the game console business, Microsoft and Nintendo, are showing signs of life.
After the last holiday season, when competitors made a series of missteps, Sony looked as if it might gain an unassailable lead in the console market over the course of 2014 with its PlayStation 4. Nintendo was losing money, and Microsoft — which released the Xbox One around the same time as the PS4 last fall — lagged behind Sony’s sales, a gap that grew in 2014.
During the recent holiday season, though, both companies were resurgent, with Nintendo releasing a series of hit games for its Wii U system that underscored the unwavering loyalty of its fan base. And Microsoft, Sony’s most direct competitor in the games market, cut the starting price of the Xbox One to $349, $50 cheaper than the PS4. The move helped it regain a lead in all-important US sales. “It seemed like Microsoft this holiday season had a better message for core gamers,” said David Cole, an analyst at DFC Intelligence, a game-research firm. “The price drop is huge — you can’t discount that.”
On November 2, with the most important selling season approaching, Microsoft temporarily dropped the starting price of Xbox One, a promotion that ended Saturday.
The discount highlighted a sharp turn in strategy by Microsoft. When the Xbox One was first released, it included the Kinect motion-sensing device, and the package was $499 — $100 more than the PS4. In June, Microsoft began selling an Xbox One without the Kinect, for $399.
The initial high price was one of several mistakes analysts believe Microsoft made when it released XBox One. It also alienated many gamers early on with a plan, abandoned before the console hit shelves, that could have restricted purchases of used games and overemphasized the Xbox One’s non-game entertainment features. “Clearly, Sony has jumped out to a lead with a great console and, I think, a great pricing strategy,” Blake Jorgensen, CFO at the game developer Electronic Arts, said at an investor conference in November. “But Microsoft is catching up quickly.”
A Sony official declined to comment on Microsoft’s improved US position. Mike Nichols, corporate vice-president for Xbox Marketing at Microsoft, said, “We’re proud of the progress we’ve made and can’t wait to build on that momentum.”
Sony and Microsoft have not said how well their systems sold in December, but it is a safe bet that the PS4 still has an overall sales edge on Xbox One. In mid-November, Microsoft said it was on the verge of shipping its 10 millionth Xbox One, while the previous month Sony said it had shipped 13.5 million PS4s. Both figures represent sales to retailers, not necessarily systems sold to the public.
While Sony held firm with the price of the PS4, retailers bundled popular games with the system throughout the holidays to entice more shoppers. And sales of the Xbox One could suffer if Microsoft decides not to make its price cut permanent.
The US and UK continue to be strongholds for Xbox, but it is weaker outside those markets. Microsoft’s games business is especially feeble in Japan, one of the largest games markets in the world, where Sony and Nintendo are home-grown favorites.
Nintendo’s fortunes have improved, too, though the company has not come close to repeating the success of the original Wii, the motion-sensing console that became a breakout hit during the last generation of games hardware. The Wii U, its successor, is centered on a touch-screen game controller that has taken a while to catch on with consumers. The company said it had sold 7.29 million Wii U consoles as of September 30, even though it went on sale a year before the latest Microsoft and Sony offerings.
Even though its hardware sales are lagging, Nintendo makes the most popular games for its systems, including long-time game franchises like Mario, Zelda and Pokémon. Those games give the company another big source of income. Several of its Wii U titles, including Super Smash Bros and Mario Kart 8, are big sellers. After posting a net loss last year, Nintendo is forecasting a profit for this fiscal, which ends March 31. Cole, the game-industry analyst, said he believed the stronger sales of newer Wii U games showed that Nintendo could still attract dedicated fans, but not necessarily the wide range of gamers, including fitness fanatics and seniors, that the company won over with the original Wii.
Also troubling for the company is that children today are increasingly playing games on tablets and smartphones, where Nintendo has no real presence, rather than on Nintendo handhelds, an important business for the company.
“That’s the biggest concern with Nintendo is that they lose out on that audience,” Cole said.