Next Gen Sales - Q1 2007 - Zune, Xbox, PS3, Wii, Apple TV
It seems everyone gets their retail sales figures from NPD. Unfortunately, the group only reports around half of retail store sales and only looks at the US market. A clearer snapshot of what's actually being sold to consumers comes from manufacturers themselves, just not as quickly.
Because its data is all from the US, NPD's results tend to favor hardware from companies such as Microsoft and Apple that sell a large percentage of their products to the US market.
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•Microsoft's Zune is exclusively sold in the US
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•Three quarters of Xbox sales have historically sold within the US
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•About half of Apple's Mac sales are in the US
US vs the World
Microsoft's share of the US retail music player market is around 2%, but it doesn't even show up in worldwide sales. Apple's share of PC sales in the US market is above 6%, and around 2% worldwide.
Of course, those markets are not comparable; the PC market is hundreds of millions of $800 PCs, while the music player market is tens of millions of $200 devices.
Market Values
Market share also fails to distinguish the value of different segments in a market. Among music players, SanDisk has an 8-9% share, but it sells a lot of players that are under $150. Microsoft's Zune is priced on the high end of the music player market at $250.
Similarly, while Apple competes across the range of music players with iPods that range from $80-$400, its Mac computers have a higher average selling price than rival PC makers; Apple’s share of the PC market is therefore worth more than the similar share held by Gateway, which sells much cheaper models of PCs.
Enter Apple TV
That's about to change. The new Apple TV works like a set top appliance, but its really a simple Mac running dedicated software. It's also $300, making it the cheapest Mac ever, although Apple is making great pains to differentiate it as a set top box, not a slim PC.
Piper Jaffray analyst Gene Munster targets sales of 2 million Apple TV units by the end of 2007; other analysts have estimates between 0.5 and 1.5 million.
Compared the 3 to 4.5 million Macs Apple has been selling each year since 2000, adding another 1-2 million Apple TV units gives the company a way to dramatically expand its installed base by 20% without cannibalizing sales of its existing Macs.
Last year, Apple sold 5.3 million Macs, and is on course to sell over 6 million this year. Sales of the Apple TV--and later the iPhone--will help subsidize ongoing development of Mac OS X and expand the market for developers proficient in Apple’s Cocoa.
Zune Sales
Apple TV just shipped, and is getting a lot of buzz at the moment for being versatile and open. Expanding the unit's hardware and modifying its software is fairly simple because its is an embedded PC running Mac OS X.
Since Apple is making a hardware profit on the device, it’s not in the same position as Microsoft with the Xbox and Zune. Users were disappointed to find that the Zune was locked down to prevent any unanticipated uses, and even its highly touted wireless capacity was muted to the point of being almost entirely worthless.
The company has been losing money on its hardware in efforts to entrench DirectX and Windows Media as proprietary standards that tie the gaming and media markets to Windows.
Neither serves its intended purpose if users are allowed to install alternative software on the device instead.
Microsoft's sales goal for the Zune is unrealistically optimistic, but still unimpressive compared even to its rival PlaysForSure partners.
Zune sales are unlikely to break a quarter million by the middle of the year, but even if the company could meet its one million goal by June 2007, the Zune still won’t amount to anything worldwide in a market where three million iPods sell every month.
Next Gen Consoles: PS3, Wii, Xbox 360
Meanwhile, despite the scorn dumped upon the beleaguered PlayStation 3, Sony has already shipped over two million units in its first couple months.
Sony, like Microsoft, announces units shipped, not actually sold. This allows both companies to advertise sales numbers based on how many units they can force retailers to accept, not on how many units customers actually buy; both have considerable market power to push excess unsold inventory into the channel.
The Wii sold 3.19 million units by the end of 2006, and is on track to catch up to and outsell the Xbox 360 by this fall.
Even the PS3 looks set to pass the 360 this year; Microsoft recently dropped its June 2007 sales estimate from 15 million to 12 million.
Microsoft had announced the 15 million goal in November 2006 to distract attention away from the other consoles that were just being released. It met its earlier goal of 10 million by the end of 2006 by stuffing the channel with unsold inventory.
That move didn’t help to actually sell units; Microsoft’s SEC filings report that at the beginning of October, the company had only sold 5 million 360s.
That means that half of the world's 360s were sitting in retail shelves this holiday season, and a significant amount still are. That has pressed Microsoft to dramatically slow new shipments until the channel clears out excess inventory.
In comparison, supplies of PS3s are still constrained, and the Wii is impossible to find. We'll get a sharper picture when manufacturers report their first quarter sales for 2007 in about a month. Until then, we'll have to skate by on crumbs from NPD.
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Sunday, March 25, 2007
