Wii Sales Decline 'Runs Deeper' Than Supply Constraints, says Pachter
Following the disappointing February sales data, a number of analysts weighed in on the results. While sales were expected to be down, it seems the final tally was a bit lower than expected. Part of it has to do with continued declines in the music games genre, and another major contributor is the drop-off in Wii sales.
Regarding the Wii, EEDAR's Jesse Divnich noted that shortages continue to plague Nintendo. "Our extensive retail channel checks have all indicated that, in fact, the Nintendo Wii is in short supply. We believe February numbers reflect entirely on the Wii being supply constrained and has little to do with declining demand of the product," he said.
Wedbush Morgan analyst Michael Pachter disagrees, however; he thinks the Wii decline isn't simply a result of shortages. "Nintendos overall performance was well below our expectations, with software down over 30% and Wii hardware units down almost 50%. Nintendo had warned us that February would be a difficult month due to supply constraints, but we believe that the problem runs deeper than that, as sales of staple titles like Wii Fit with Balance Board and Wii Play were well below historical levels," he noted.
Ultimately, Pachter thinks the Wii will need something to jumpstart its business as 2010 goes on. Microsoft and Sony have their upcoming motion controllers, but Nintendo hasn't announced any substantial catalyst. "There is clearly strong demand for the PS3 at the moment due in part to its list of exclusives in early 2010 (Heavy Rain, God of War III, MLB the Show 10, et al) and Blu-ray compatibility. Nintendos Wii, on the other hand, will not see any exciting exclusives until at least May (Super Mario Galaxy 2) and its software attach rate continues to decline," he commented. "Over the last several years, the Wii benefited from being the cheapest console, but it seems that many of its new purchasers are more discriminating about software purchases than in the past, with a consistently declining tie ratio. This is exemplified by Wii Play, which sold barely 50,000 units in February, and Wii Fit, which also came in well below what we had expected. Titles such as these are finally starting to fade, suggesting that the new Wii purchaser is more casual than ever. Unlike the PS3, with multiple high-profile exclusives and the newly-announced Move Controller, and the Xbox 360, with Project Natal, the Wii lacks an important upcoming catalyst."
Overall for the industry, analysts seem to agree that February is probably the low point in 2010, and sales should see a nice rebound in the coming months. "February was the fifth consecutive month of negative y/y comps for U.S. video game software and the 11th negative month out of the last 12. Thankfully, we expect this trend will likely reverse in March, when y/y growth should be driven by a strong software pipeline of core gamer titles (Battlefield Bad Company 2, God of War III, and Final Fantasy XIII in particular) while benefiting from an easy comp (March 2009 software sales were down 17% y/y)," said Ben Schachter of Broadpoint AmTech. "In fact, easier industry comps will persist for the next few months as the effect of holiday 2008 Music-genre releases that continued to sell relatively well into early 2009 rolls off (software sales were down 22%, 17%, 28%, 26%, and 15% for April - August 2009, respectively)."
