Analysis: Kinect Could Drive Xbox 360 To 1.7M U.S. Sales This December

Gamasutra analyst Matt Matthews examines Xbox 360's strong performance at U.S. retail in November, a surge that could lead the console to a record 1.7 million sales in the territory this December.
[As part of our monthly in-depth NPD sales analysis, Gamasutra analyst Matt Matthews examines Xbox 360's strong performance at U.S. retail in November, a surge that could lead the console to a record 1.7 million sales in the territory this December."] On 4 November 2010, Microsoft launched Kinect, its camera-based controller-less system for the Xbox 360. Consumers could obtain Kinect either as a standalone package for $150 or bundled with a 4GB or 250GB console ($300 and $400, respectively). Along with the redesigned Xbox 360 S Model (introduced in June) and a reported $500 million promotion budget, the launch of Kinect has been likened to a relaunch of the console itself. In fact, while Xbox 360 hardware sales in the June-October period were up a very strong 63 percent over 2009, Microsoft actually bested that rate in November: sales were up 68 percent over November 2009. Perhaps more importantly for Microsoft, when comparing average weekly rates, November 2010 was the best month the system has ever had. The previous record was 288,000 units per week in December 2008; November's set the new high bar at 344,000 units per week. It seems all but certain that November's record of 1.37 million units will stand until next month, when the December data is released. Just maintaining the rate from November would give Microsoft its first 1.7 million-system Christmas. While Microsoft has been dominating software for most of the year (the Xbox 360 has led in software revenue every month since April), it did exceptionally well in November. Stitching together figures and proportions provided in the comments of Michael Pachter (analyst for Wedbush Securities), Anita Frazier (analyst for the NPD Group), and in Microsoft's own press release, we have what we believe is a reasonable picture of the Xbox 360's strong showing last month. nov-2010-current-gen-marketshare.png We wish to raise a few points about the details in this graph. First, note that the Xbox 360 is handily dominating each segment. In the case of hardware and accessories, this is directly attributable to the launch of Kinect. For example, looking just at the effect of hardware bundle sales, we believe that Microsoft's average price for an Xbox 360 sold in November was around $290, which is more than $40 more than last month's average. Moreover, Wedbush's Pachter commented in his notes to investors that one half of all Xbox 360 systems sold in November were bundled with Kinect. In the software segment, those 4.9 million copies of Call of Duty: Black Ops are the main cause for Microsoft's dominance, but it certainly did not hurt that six of the top 10 best-selling games in November were available on the Xbox 360. (In fact, as has traditionally been the case, the Xbox 360 version was probably the top-seller within each of those tiles.) If we are on the cusp (or even past) the transition from the Wii to Xbox 360 as market leader, then 2011 will be a telling year for the market. Whereas Nintendo has had image problems and some notable failures for third-party software, Microsoft prides itself on its third-party software relations. If Microsoft can make those third-parties successful on Kinect in ways that Nintendo has not on the Wii, then this temporary dominance for the Xbox 360 could continue well through 2011. And, we should note, Microsoft still hasn't played its next big ace: a true price drop. They're long overdue, and we expect to see one sometime in mid-2011, especially if Xbox Kinect sales remain robust through the spring. [For more on U.S. retail video game sales in November -- the first month of year-on-year gain since March -- read the full Gamasutra feature, available now.]

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