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No, the Console Market Is Not in Crisis. Not Yet, Anyway.

A broader look at the data shows that Nintendo is down, but others are doing fine.

Hitchhiker's Guide to the Galaxy

On Sunday, an article came out that made the mobile guys very happy: “The Console Market Is In Crisis,” the headline proclaimed.

I know the article made the mobile guys happy because two smarties among them, in the span of two hours yesterday, earnestly told me so. Consoles are over, they said. The day of the gaming tablet is nigh!

But that’s not what’s going on.

The story in question was based on North American retail data from the NPD Group, showing that overall console sales fell from 2 million in January 2007 to 700,000 in January 2014. While that data point may be correct, the conclusion drawn from it is way off the mark.

January 2007 was not, as the article claims, the month “after the last generation of flagship consoles launched back in the 2006 holiday season.” Last generation’s Xbox 360 first launched in the 2005 holiday season, while the first Wii and PlayStation 3 launched in late 2006.

The Wii is a complicating factor because, as everyone and their literal grandma knows, lots of people bought Wiis who had never been “console gamers” before, and might not be anymore — but more on that later. For the sake of argument, and since the original thesis was that all consoles were facing a crunch, let’s take Nintendo’s consoles out of the math. Let’s just look at two flagship transitions: Xbox 360 to Xbox One, and PlayStation 3 to PlayStation 4.

And for each, let’s look at not just a month, but their first three months on the U.S. market, from a mid-November debut through January of the following year.

The Xbox 360 racked up 326,000 U.S. sales in November 2005, 281,000 in December 2005 and 250,000 in January 2006, for a total of 857,000. The Xbox One, meanwhile, sold 909,132 units in November 2013, 908,000 in December 2013 and a rumored 134,000 in January 2014, for a total of 1.95 million.

How about PlayStation? The PlayStation 3 scored 197,000 U.S. sales in November 2006, 490,700 in December 2006 and 244,000 in the U.S. in January 2007, for a total of about 931,700. Specific numbers for its successor, the PlayStation 4, have been more tightly locked down online but we know that it outsold the Xbox in November, lost in December and moved a rumored 280,000 in January. Given that it’s currently outselling the Xbox One worldwide by about 6 million to 4 million, let’s guesstimate the total was also at least 2 million.

Now, let’s bring Nintendo back into it: The first Wii sold about 1.5 million consoles in its first three months in the U.S., while the Wii U sold 425,000 consoles in November 2012, 460,000 in December and 57,000 in January, for a total of 942,000. For those of you playing along at home, that’s a contraction.

Last generation, console sales were consistently spiky, with long, low plateaus in between the holiday seasons, and it took a few years for devices’ best season to arrive as more games come down the pipeline. If anything, the rush of early adopters this time around, perhaps spurred by the unprecedented length of the last console generation, is what’s odd. Most gamers take the plunge when that game comes out for that platform.

Is it possible that, as soon as this year, we’ll start to see signs that the console guys are in trouble? Sure! Here’s what that would look like: A prolonged slide of hardware sales, unbuoyed by the arrival of big software like this month’s Titanfall on Xbox One and Infamous: Second Son on PlayStation 4.

Can we conclude that that’s going to happen based on one month of (wrongly contextualized) data? Nope.

At the risk of sounding trite, Nintendo is a good example of what can go wrong. After winning big with casual gamers on the Wii, the company bet that those gamers would turn up again for the Wii U. Even looking globally, they haven’t — and that’s in spite of a decent string of critically-acclaimed exclusives like Pikmin 3 and Super Mario 3D World.

Poor hardware sales beget software anxiety. Not long after Nintendo slashed its forecasts for annual hardware sales, its longtime ally Ubisoft indicated that it would join a cadre of other third-party developers in backing off of the Wii U. Ubisoft delayed the Wii U version, and only the Wii U version, of its hugely anticipated game Watch Dogs, ostensibly to take better advantage of the hardware. It’s hard to believe, though, that an important reason wasn’t that a year-old Wii U accounted for only 2 percent of Ubisoft’s software sales in the holiday quarter, a decrease from the previous year’s 5 percent and far below the quarterly debuts of the Xbox One at 9 percent and the PlayStation 4 at 14 percent.

But enough about stuff that’s actually happened, and back to the speculation. The February NPD numbers, expected to be released tomorrow, may tell us which way the wind is blowing. A “crisis” for Microsoft and Sony would have to stem from their core audiences abandoning them en masse, i.e. gamers who bought earlier consoles opting instead for alternative platforms like tablets and PCs.

But the strength of early console sales from those two suggests that that scenario isn’t happening. At least, not yet.

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