Nintendo's Very Bad Year

Over at Gamasutra, Matt Matthews has analyzed the sales figures for console game software in 2010 versus 2009, and the results are interesting. As you'd expect, the older systems aren't selling much software; the PS2 really slowed down. The PSP was having a hard time selling software, too; perhaps because developers have been pulling back, and anticipation is growing for the PSP2. The DS's software slowdown is harder to explain, especially when you consider that it still sold 4.5 million units this year, making it the best-selling platform, and it's got a huge installed base of over 125 million. Yet software sales still dropped 12%, far more than average. I think it's partly due to the effect of iPhone games and Android games, but there's no way to know for sure.

The big story here is the collapse of the Wii. It's fallen to third place in software sales, despite having a much larger installed base than either of the other two consoles. Clearly Wii owners just aren't buying much software, and the issue is probably made worse by publishers backing off on Wii support (especially for major titles). The Wii's lack of hardware power will probably hurt it more and more in the next few years, as publishers continue to wring out more performance from the Xbox 360 and the PS..

Also, the HD output of the PS3 and the Xbox 360 will be increasingly important, as the adoption of high-def TV sets increases. Wii titles are going to look increasingly dated compared to titles for other consoles. Worse, the Wii's motion control is no longer unique, as both Microsoft and Sony have better solutions. The only thing the Wii has left in its favor is price, and that advantage will continue to erode unless Nintendo takes some drastic pricing action.

Let's also note that Microsoft is having a great year with the Xbox 360, and Sony is doing well, too. They seem to have finally hit their stride, and third-party support for their consoles is strong. They still have the competitive threat from the Apple TV/Google TV juggernaut on the horizon, but otherwise they seem well-positioned for the next year.

If Microsoft and Sony really want to slide the knife in deeper, they'll cut the prices on their motion control hardware next year (after they've gotten all they can from the early adopters who don't mind paying the premium). This will really make life difficult for Nintendo. At this point, only a new console will really rescue their sales. A price cut on the Wii would help, but it's unlikely to bring back big-time support from third-party publishers. Without that, the Wii will continue to sink into obscurity.

Nintendo must be hoping the 3DS is a huge success, because there's nothing in the Wii outlook that makes one optimistic. Nintendo needs to get a new console out there by Christmas 2011 if they hope to be relevant to the market, and they are already behind if they really wanted to do that.

It's going to be an interesting year in the console wars...