Sony Tries Again, Misses

Sony is still looking for some good news.

Once again Sony has written to developers and managed to tell them not much. I can understand why Sony would not want to make a blanket, public statement to the effect of "developers, we'll cover all your losses." They don't want to create more liability, and possibly have developers inflating what they might have lost. So Sony is probably telling developers, quietly, that they'll make good on the losses in some fashion.

However, Sony loses out by not making a public statement, because developers who might be considering creating PSN titles are certainly not as interested now as they might have been a month ago.

Sony's probably hoping that all the bad press will blow over soon, but while PSN is back up in most place the online store still isn't operating. Which means developers are still not able to sell anything, and they're probably wondering when they will make money from the PS3 again.

At least Sony's got some free games going out to the fans, who will probably not remember the outage too much in a month or two. Developers have longer memories, especially when large sums of money are involved. I still think some public declaration of future loss indemnification would be a good idea for Sony... or perhaps Microsoft will try that.

Sony Offers Identity Theft Protection

It's been a busy week for Sony, as the scramble continues to deal with the enormous hacker intrusion and the consequences to Sony's brand. A major development this week has been a public letter from Sony CEO Howard Stringer. The gist of the matter: Howard Stringer apologizes. Finally. Why on earth it took two weeks for Sony's CEO to make a public statement can only be attributed to the Japanese culture, I suppose, where admitting a problem is the very last thing you want to do. All very well and good in Japan, I suppose, but Sony is an international company, and they need to handle their international customers, too.

Meanwhile, Sony has offered a free identity protection service for 12 months through Debix, Inc. for PSN users in the United States. Users in other territories will hopefully be offered similar deals. Hey, you'll get priority access to licensed private investigators! I bet you never thought you'd get that with your PSN membership.

Meanwhile, the return of PSN has been delayed for some indefinite period. we're now at 19 days and counting, with no specific start date being mentioned yet. Just to rub salt in Sony's wounds, apparently, the hackers responsible for the attack (who have been lying low) posted personal info from 2500 PSN customers to a dormant Sony web site. Sony did manage to notice and shut down the site, but it is one more embarrassment to add to the list. 

Sony's considering offering a reward for information leading to the arrest of the hackers. Hey, maybe you can win a free game! The identity of the hackers remains a mystery, at least publicly, though some Anonymous veterans have stated in interviews they believe that members of the group were in fact responsible, despite denials.

So the wounds continue to ooze, and Sony's efforts to stop the bleeding have so far proven too feeble. Maybe it's time for Kevin Butler, Sony's faux VP they use for PR purposes, to go on the record about the situation. At least we can get some laughs that way. Sony needs some dramatic victory to really turn the PR situation around... maybe they should call Seal Team Six.

Sony Tries Distraction

Sony, being busy dodging requests from Congress to appear at hearings, has at least sent some answers to Congressional questions about their security breach. In a classic move, Sony attempts to dangle a shiny object in front of observers to see if they can deflect attention away from the real problem.

The shiny object is this: Kazuo Hirai noted in a letter to Congress that "that the intruders had planted a file on one of our Sony Online Entertainment servers named 'Anonymous' with the words 'We are Legion." So now we're all supposed to focus on how Sony is just the poor victim of those nasty hackers.

The real problem, of course, is Sony's poor security and why a hacker was able to break in, regardless of who exactly the hacker is. Sure, chase down the hacker(s) and throw them in jail; hanging's too good for them. But why was Sony's security so weak, and what steps are they taking to ensure this won't happen again, why should we believe them, and what are they going to do for their customers and developers?

I understand why Sony would like to focus on the hackers, but let's keep our attention on the core problems. Sony needs to deal with its issues at the same time as they look for the bad guys. It's called multitasking, and Sony should be capable of that.

The funny thing is this whole problem with Anonymous arose because Sony decided, in a firmware update, to remove support for Linux on the PS3. Now, this was a feature that perhaps 99.9% of the PS3 owners knew nothing about, nor cared. Some hardcore techheads could buy a PS3 and install Linux on it, and a have a pretty spiffy little computer for their trouble. Yet Sony decides they have to go and eliminate that capability... perhaps because they were worried some hacker might use that to subvert a game or two, or some such thing. All they really managed to do was unleash a series of attacks and incidents... they should have just left well enough alone.

At this point, Sony has to move on and figure out how to restore their reputation. Their appearance at E3 should show how they intend to deal with their PR problems; we'll see if they make some good moves.

Sony Shoots Self In Other Foot

Maybe Sony could hire him for security.

Just when things seem darkest... maybe they're about to get worse. Sony's had a bad couple of weeks with the PlayStation Network problem, where they've had to shut down the service (still down after two weeks) and admit that over 77 million user accounts were compromised, and possibly credit information was taken, but they can't really be sure. Oh, hey, we're sorry that some really nasty bad guys did this to you, and we plan to offer you a whole free month of PlayStation Plus!

Now Sony has admitted that the PSN break-in isn't their only problem. Sony Online Entertainment (SOE) has admitted that 24.6 million accounts have been compromised, and over 12,000 credit card numbers stolen. The hits just keep on coming, don't they? Sony has admitted that this happened around the same time PSN was hacked, though why Sony didn't figure this all out until now is a damn good question.

Hey, Sony, there's an old Washington D.C. adage about PR, and it's one you should take to heart right now. It's called the Rule of Holes: When you find yourself in a hole, STOP DIGGING.

Sony's problems just went from bad to worse. Their PR response has been inadequate, and questions keep multiplying among users and the press, which is always a good sign that your PR efforts haven't been thorough enough. It seems inevitable at this point that Sony will still be dealing with the fallout at E3, given that the FBI is now involved, Congressional hearings are being scheduled, and there seems to be no end to the bad news from Sony.

Some analysts are speculating Sony may offer a PS3 price cut sooner rather than later to help their image get on track... Too soon, I think. It might be interpreted as "we'll sell the PS3 for less because it's not secure" which is not quite the message you want to send right now.

So what should Sony be doing? A more forthright presentation replete with data and sincere apologies would be good. Especially noting exactly how Sony screwed up on its security, which shouldn't cause any danger to Sony because they've plugged that hole, right? I hope so. Explain why moving your servers to an undiscolsed location is part of the fix... this kind of implies that there was a physical breach of security, not just a hacker coming in over the data lines. What really happened? What does Sony really know about what data was accessed?

At this point I'm starting to see that Sony's gaming brand could be negatively affected. And it's not going to stop there; Microsoft and Nintendo have to be ready to state just how this won't be happening to them, and how tight their security is. Sony has the highest hurdle to climb here, though. They should think about some dramatic move to restore their reputation...

Sony Still Losing Hit Points

Ouch.

Sony is still reeling from the hack attack on the PlayStation Network that exposed 77 million customers to possible theft of their personal information. Sony's not sure if any credit card info was taken, but then there's this story: Supposedly 2.2 million credit card numbers are up for sale on some underground message boards, with sellers claiming to have taken them from Sony. Of course, it's not clear if this is just someone trying to capitalize on the publicity or the actual thieves, but it's not good news for Sony either way.

Now we have an Australian man who had $2000 in charges run up on his credit card, and he thinks Sony is the source for the credit card info. Again, bad news for Sony either way... the PR hits just keep accumulating. Sony's PR efforts have been rather lame at best, with a few blog posts and vague reassurances. Many users are pissed that Sony took so long to figure out there might be a credit card problem, and to reveal facts to users about the breach.

I think it's clear Sony is carefully trying to avoid saying anything that might help a lawsuit against it... and lawyers are already filing class action suits against Sony. But Sony has other problems... like preserving its positive brand name, and trying to get a handle on this issue before E3. The nightmare scenario is that Sony spends its E3 press time talking about the breach rather than new products. Some observers have not been kind regarding Sony's efforts so far, like this one. I think Sony is going to have to step up its efforts in a major way in order to avoid worse effects down the line.

Take some PR lessons from Sony's experience. If you have a major problem, try to get out in front of the story. Communicate a lot. Avoid the passive voice, own up to the problem, explain how you are dealing with it, and tell the customers what you're going to do for them to make it right. Bad things do happen to good companies; but good companies show they can handle it adroitly. So far, Sony looks more like a deer in the headlights than a calm, confident videogame hero about to solve a problem.

PlayStation Network Hacked, Outage Continues Indefinitely

Caution: Here There Be Hackers.

Sony finally admitted today that a hacker had broken into their network, and had accessed personal data on the subscribers. That would be 70 million subscribers who now are wondering if their credit card data is being sold on the Russian black market, or in some other shadowy corner of the Internet.

Users were wondering why Sony didn't tell them until after a week of an outage that was only supposed to be a very short-term thing. Sony says they didn't know the information database had been compromised until yesterday. I guess when you've got a database that huge, looking in every corner could take a while.

Anyway, the outage will last for some unknown period of time... perhaps another week. Which is a big disappointment to Playstation owners hoping to do some multiplayer online gaming. Or for developers hoping to make some money selling games over PSN. Losing a couple of weeks of sales could be thousands of dollars lost.

I think it's good for Sony to take its time and make sure everything is totally secure, and I'm sure they're going to be reviewing their security and how this whole thing happened in the first place. I wouldn't want to be the person in charge of IT for this network... not a happy time for them and their team.

It does show the value in diversification... like developers having games on more than one platform so their cash flow doesn't go away for a couple of weeks when there's an outage. Or perhaps Sony may have more than one backup or layer of security in the future.

I bet Microsoft is going around checking the locks on Xbox Live this week to make sure they aren't the next target.

PS3 Sales Hit 41 Million

Actually the number shown was low... how often does that happen?

While the Xbox 360 has been consistently at the top of the charts for console sales in the last year, the battle for second place has been interesting. As Wii sales continue their slide, the PS3 has been making up some ground. Sony announced that they have hit 47.9 million PS3's worldwide by the end of 2010. Not a bad sized market.

Better still, 805 of them are connected to the internet and there are 70 million PSN accounts. Sell that digital content, Sony!

The big question in my mind is who makes the next price move: Sony or Microsoft? Which one blinks first? (The Wii doesn't count any more, really... its price drop is inevitable, the only question is whether Nintendo waits past the point where no one cares.) Both companies will try to maintain the price as long as possible... but I bet there might be drop in time for holiday shopping, or at least a pack-in title or two. Bundles with Move or Kinect might get an even better price... it'll be fun to watch the pricing battle!

Camel's Nose In The PSN Tent

Free Realms... it's like an online cosplayer convention, I think.

Here's a news tidbit that I filed away, but haven't gotten a chance to comment on yet... Sony has announced the first free-to-play title for the PS3, Free Realms. This is a family-friendly MMO that's done well on the PC, and now it's bringing the freemium monetization model to the PS3. Of course, this would be much more cool if the Playstation Network (PSN) was actually operational right now, but it's still turned off due to a rather nasty intrusion by a hacker. Sony is having to scour their servers to make sure there's no sneaky little code hiding out ready to steal credit card numbers or hack player scores.

It will be interesting to see just how well MMO's can do on consoles, and how well the virtual goods will sell. I'd think the lack of a keyboard would affect the ability to make friends and communicate, but since everything seems to be moving to voice chat anyway perhaps it's not so much of a bother any more.

I do wonder when Xbox Live will take the leap and allow free-to-play, or MMO's for that matter. They risk being left behind when Apple TV and Google TV make the leap to apps in the family room, as you can bet there will be plenty of companies ready to offer free-to-play games on those platforms.

Sony's Getting Real Profits, Virtually

Sony tells us that their virtual world Playstation Home has hit 17 million registered users, and is profitable with 7,000 high-margin virtual goods and 236 games you can play. They are hoping to expand the user base (there are 50 million registered Playstation Network users, and only a third have signed up for Playstation Home) and thus the profitability. The coolness factor is another reason, plus it's something different than what you find on the Xbox 360 or the Wii.

Interestingly, most of the games on Playstation Home are free-to-play, with Sony making their money from the virtual goods. They are planning to try and bring in more indie developers, too. It's a way for Sony to take part in the new business models without messing up their standard business of retail packaged goods. One wonders if this area could grow to swallow up more of the business... it will be interesting to watch. If you're a developer, it's another place to get your game out there (if you've got some virtual goods in your design).

Meanwhile, Sony's got another reason to get a PS3 coming out. Their new Music Unlimited service debuted in the UK today, and is rolling out in the US and other countries next year. For a subscription price you get streaming access to a library of 6 million songs through your PS3 (or a PC or your Bravia TV). Sony's trying to move away from the iTunes model of buying songs, especially since iTunes has such a lead in that area. An interesting idea, but it remains to be seen if users go for it. A lot depends on the subscription price, which hasn't been mentioned yet.

Apple's poised to offer some sort of streaming music service, too, according to the rumor mill. Which could crush Sony's fledgling effort if it launches around the same time, or even if it launches well after it. Still, it's nice to see Sony trying harder, and their PS3 sales are certainly looking up. If the Wii doesn't reduce its price soon, I wouldn't be surprised to see the PS3 pass it up on a regular basis.

Game Sales Up

For the first time since 2008, game sales have actually gone up over the previous year's sales. The NPD figures have arrived (perhaps smuggled out from behind their pay wall by heroic resistance fighters) and reveal that November sales were up 8% over last November... they even made it to the level of Best Sales Month Ever, ringing up $2.99 billion. Software was up 4%, hardware was up 2%, but the big winner was the accessories category, which was up 69%. Thank you, Kinect and Move.

Sales were also helped by Call of Duty: Black Ops, which in one month has become the 7th best-selling game ever with 8.4 million units sold. Sales were so good that overall sales for the year are now down only 5% instead of the 8% it was at last month.

Looking more closely at the data we find some sore spots. Portable hardware and software was down over last year. So Nintendo's troubles continue. The Wii was outsold by the Xbox 360, which is impressive especially when you consider the price differential. (Sales data put the 360 at 1.37 million units, the Wii at 1.27, and the PS3 at 530K.)

The disturbing part is that the joy was not widespread. It's not like sales were up for everything; take away Black Ops and the Kinect and the picture looks pretty dismal. This does not look like a resurgence in the game industry; it looks like a couple of new products did really well. Which doesn't mean that the industry is looking at a good 2011.

Wii Move Kinect! Sales Are In Motion

The big story of the holiday season for the videogame industry is this: Who will win the battle of the motion controllers? Some information from the front has come in from all three combatants, so let's look at the body count and see if we can figure out who's winning.

Nintendo crowed about their sales figures over the Black Friday week (November 21-27): They sold 900,00 DS's and 600,000 Wii's. An impressive amount given the anemic sales of the last few months... Nintendo sold more than two month's worth of Wii's, at their latest rate, in one week. They claim the pretty new colors are the reason... OK, maybe, or maybe it's just the price point and the software bundles.

Wow, who could top those sales numbers? How about Microsoft, announcing that another 1.5 million Kinects have been sold, for a grand total of 2.5 million in 25 days. I guess that $149 price point isn't dimming the enthusiasm... although we don't really know what they could have sold if the price was $99, do we? You have to admit Microsoft's numbers look impressive compared to the Wii, since they've sold roughly 2.5 times what Nintendo has sold in the same period of time, at nearly the same price point... and the Kinect isn't even a complete game system.

Microsoft clearly crushed Nintendo in that time period, so how about Sony? They couldn't resist chiming in with their sales numbers for the Move: 4.1 million Moves sold worldwide so far. OK, they did have an extra week or two of sales over Kinect, and the price tag is roughly 1/3 to 1/2 the Kinect (depending on the configuration)... but it's still a big number. And, once again, this is not a complete game system. Nintendo who?

The big caveat with all the waving of sales numbers in the age-old game of "Mine's bigger!" is that these numbers most likely represent sell-in, not sell-through. Sell-in is much easier for the companies to track, because that number is in their sales software. To get sell-through numbers (that is, what customers have actually purchased and taken home), they have to rely on retailers... a notoriously secretive lot. Still, I don't think there's huge numbers piling up at retailers. But some analysts are wary of the reports of "shortages", sensing an all-too-common manipulation of inventory in order to create the appearance of overwhelming demand. In the hopes of actually creating more demand, because it's scarce, so you have to get it now before it disappears...

It will be educational to see the overall numbers for the 4th quarter, both for consoles and for the add-ons. So far, based on these early numbers, it looks like Microsoft and Sony are crushing Nintendo. New technology beats old tech in new colors, I guess.

The Wanting

If you're looking for another reason to be pessimistic about the holiday sales picture for videogames, here's one: Nielsen's got a survey of kids about what they're looking for for Christmas. Number 1 for kids age 6-12: The iPad. Followed by a computer, and an iPod Touch. At least when you get to the number 4 slot it's a Nintendo DS, and then number 5 is a PS3. But it's kind of interesting how far down the Wii, and the Move, and Kinect are... and the Xbox 360.

The picture for kids age 13+ is also interesting:

A computer is number 1, followed by a TV (high-def, no doubt, not 3D); and then we get into smartphones and the iPad.

You can understand by looking at this survey why handheld videogames are lagging, and why publishers should be concerned about sales of them in the future. If kids are all going to be getting smartphones, it's harder to convince them to carry yet another portable device around to play games. If they have a spiffy smartphone that can play games (and games that are cheap), why have another device? Juggling two pocket devices gets tricky. And you have to have your phone... otherwise, how will you get and send text messages? (Gee, you'd think handheld consoles might be able to do that... what if you added a 3G chipset? The rumored PSP phone might be what you get.)

If you extrapolate this to see what can happen in the family room when you have mobile device app markets available, you can see where the whole industry is headed. The high growth rates are going to continue to be in the non-traditional areas. The old school industry, currently showing negative growth rates for the past two years, isn't likely to jump into high growth rates any time soon. Or ever.

http://www.gamasutra.com/view/news/31673/Nielsen_iPod_Touch_iPad_Outpace_Game_Systems_On_Kids_Want_Lists.php

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...

October Sales Were Scary

They aren't laughing at the sales charts.

Numbers have been shared for the game industry's October sales, despite the best efforts of NPD to put their data behind a paywall. As you might have expected, it's not all that pretty. Total sales dropped 4% over last year, but the real downer is the 26% drop in hardware sales. Software sales were actually up by 6%, and accessories (like Kinect and Move) jumped 18%.

Still, when you consider some of the high-profile software releases lately you can understand why that category rose. What's more disturbing is the huge drop in hardware sales. Nintendo sold just 232,000 units of the Wii console for a third-place finish, a decline of 54%, while the PS3 sold 250,000 units (a drop of 22%, but of course last year they had just dropped the PS3 price at this time). The Xbox 360 was the big winner, with sales of  325,000 units, a gain of 30% over last year.


NPD tried to put a happy face on things by saying that, well, these days not all of the revenue in the game industry is captured by these numbers; there's digital distribution, social games, used games, DLC, etc. True enough, but the key fact is most of the companies dependent on the traditional industry revenue don't see much of this other revenue. Sales continue to be in the dumper, and the happy holidays have not yet materialized. Except maybe for Microsoft, whose Xbox 360 continues to gain due to Halo: Reach and Kinect. I wonder if Microsoft will be able to continue their streak... or if Nintendo will manage to break their losing one.

Nintendo can try to say Wii sales will be fine, but the numbers don't bear that out. And while they are looking forward to the 3DS reviving handheld sales, meanwhile DS software sales sank 32%. Not something to make third-party publishers happy with Nintendo. Of the three manufacturers, Nintendo seems most in need of newer hardware, yet is the one most consistently saying they aren't even considering it. Maybe Nintendo wants to get back into playing cards...

Kinect, Move Both Selling Well

The two big gaming hardware introductions for the holidays, Microsoft's Kinect and Sony's Move, are both selling well out of the gate. Microsoft has boasted of selling more than 1 million Kinects in 10 days, and they expect to exceed their enhanced target of 5 million units through the holiday season. They also noted it would be launching in Asia in a few days, though anyone who knows how poorly the Xbox 360 has done in Japan would know not to expect too many sales for Kinect from there.

Sony, not to be outdone, has also stated that Move has sold more than 1 million units in North America and 1.5 million in Latin America, though they haven't provided recent updates for those figures. Of course, the Move is only $49 compared to the Kinect's $149... though of course you really want to get a couple of Moves to equal what the Kinect gives you.

Both motion control packages seem to be doing well, and probably will continue to do so during the holidays. The big loser in all of this is Nintendo, as Microsoft and Sony have just taken away one of the Wii's major selling points as the only console with motion control. Both Microsoft and Sony now offer better motion control solutions than Nintendo, though Nintendo still has them on price.

But I think this changes much of the argument over which console to get. When the Wii was first introduced, I think part of why it did so well was because it was a great family-oriented console, as well as being $200 to $300 cheaper than what Sony and Microsoft were selling. Now, all three consoles have a nice array of family-friendly, easy to play titles (Kinect being even easier with no controllers whatsoever), and the price differential is down to $150 or even $100 (not if you count the motion control bundles, true). So the kids can argue more successfully for the Xbox 360 or PS3 with all the cool games they really want... because the family can play games on them too. (And if you want a Blu-ray player, the PS3 becomes an even better deal.)

Is it a coincidence that Wii sales are off 60% over last year? Yet Nintendo seems to be content to rearrange the deck chairs rather than changing course. I think Santa's gonna bring them a lump of coal for Christmas.

Holiday Fables Told Anew By Nintendo

This will save Nintendo's holiday sales? Ho ho ho!

It's that magical time of the year when fairy tales are told and wishes are magically fulfilled. Which is really the spirit of Nintendo of America president Reggie Fils-Aime's remarks to investors. Money quote: "The holidays are more important to Nintendo than to other manufacturers," he said. "We have a distinct edge when it comes to gift-giving, and it's no doubt because of the familiarity and recognition of both our brand and key franchises." He added, "The Nintendo difference continues to attract new consumers. ... For us at Nintendo, it's full speed ahead."

Yes, he'd like us to recall the golden years of past Nintendo holiday sales... not the harsh reality of this year, when sales are off more than 40% for the Wii. It gets worse: Industry analyst Michael Pachter is predicting a 60% drop in Wii sales for October, and the rest of the holiday season doesn't look much cheerier. Ouch is too mild a word... is there a word for when you take a sword blow to the intestines, or somewhat lower?

Oh, but Nintendo has a solution for the holidays: "From a Nintendo perspective, we have two red bundles in the marketplace that we didn't have last year." Right, of course, how could consumers resist buying a red Wii? I already feel this urge to replace my anemic white Wii with a spiffy new red one. That is, if I could find out where it's been gathering dust in the house while the 360 gets all the action.

I do plan to dust off the Wii and fire it up when Epic Mickey comes out, just so I can see what Warren's been up to. I have no doubt it'll be awesome. I also have no doubt that Nintendo's gonna get stomped this holiday season by people rushing to buy 360's and PS3's. For October sales Pachter expects the Wii to drop 60% to just 205,000 units sold, while Xbox 360 is forecast to grow 58% to 395,000 units sold. Sony's PS3 is expected to dip 17% to 265,000 units. I see no reason for the general pattern to change for the rest of the holiday season.

Earnings Roundup For The Big Three

Sometimes it can be hard to sort out what's going on at the Big Three console manufacturers when their PR machines are churning out clouds of smoke. Fortunately, every once in a while we get financial reports that slip a few facts in there. Let's look at what's being reported. (I'm only going to cover revenue for the games divisions of Sony and Microsoft, but for both of those companies it's usually true that if the games division is doing well, the whole company is doing well.)

Microsoft, as you might have expected, had a great quarter with the release of Halo: Reach. The Xbox 360 business went up 33% over the same quarter in 2009. They sold 2.8 million Xbox 360's, about 38% higher than last year. Total revenues for the game section were $1.2 billion, with Halo: Reach accounting for over $350 million of that all by its lonesome. The division made $382 million in profit for the JAS quarter, which was a 46% increase from last year. Looks like a AAA sequel can still rake in the bucks, and doing an Xbox 360 themed around the release certainly didn't hurt. Microsoft expects to do well for Christmas, too with the Kinect poised to enter the market. They expect a 30% boost over last year's sales for the entire Entertainment and Devices division, though some of that is due to Windows Phone 7.

Looks good for Microsoft, but how's Sony doing? It's a mixed report for them. The PlayStation section had overall sales drop by almost 13% over last year, down to $2.12 billion. The PS3, though, had its number of units sold increase 9% over last year due to the PS3 Slim and the Move introduction, with total units sold hitting 3.5 million. Software sales rose from 23.9 million units to 35.3 million units. Why did sales overall drop? It's all thanks to the PSP, which saw sales drop by 50% year-over-year (I believe the technical term you see in the financial press is "plummet"). The PSP sold only 1.5 million units in the quarter, matching the 10-year-old PlayStation 2. PSP software saw a 2 million unit drop to 13 million, and PS2 software was almost halved with a drop to 5.6 million units, versus 11.4 million last year. Sony expects the PlayStation division to sell 15 million PlayStation 3s, 8 million PSPs, and 6 million PS2s for the year. Not bad, but not as good as Microsoft.

Looks like Nintendo gets to be the bearer of purely bad news. They lost almost $25 million over the last six months (compare that to the same period last year, when they had a profit of over $75 million; that's a $100 million dollar swing). Nintendo saw DS sales drop 43% over that period, down to 6.69 million units (about 1.1 million per month on the average). Wii sales dropped over 14%, down to 4.97 million units for that six-month period, with Wii software sales dropping a similar amount. DS software sales only dropped 23%, which I guess is cause for celebration compared to all the other numbers.

Some analysts think Nintendo can still pull out a good Christmas, but others (like this one) disagree, and don't see any happy surprises under the tree for Nintendo. Put me in the "Nintendo's gonna get worse before it gets better" camp. Though I'm not sure how much better they're going to get. I'm sure the 3DS will have a good launch, but that still doesn't solve the Wii problem, which probably wouldn't get new hardware until next fall at the earliest. The 3DS may have a rough time maintaining good sales with an impending PSP2 launch, and the continuing successes of the iPhone, iPod Touch, iPad, and Android devices.

It gives you some perspective when you look at the sales numbers from the Big Three and compare them to iPhone numbers (currently selling close to 5 million per month) or Android numbers (6 million per month) or even iPad numbers (currently at 1.3 million per month and rising). When iPads are outselling DS's, and the iPad is at least 5 times the price on average, you know Nintendo has a long-term problem. At least Nintendo is finally acknowledging that Apple is a threat. Of course, that's not the same as actually doing something about it, like opening up the DS to all kinds of software development with little or no bureaucracy.

We'll see where the industry sits once the glow of Kinect and Move introductions has worn off. I expect 2011 to be another lackluster year for software sales on traditional consoles.