PlayStation 4 faces resurgent rivals in Xbox One, Wii U

Sony might’ve led the console wars for most of 2014, but that could change. Microsoft and Nintendo are showing signs of life.

After the holiday season, when competitors made a series of missteps, Sony looked like it might gain an unassailable lead in the console market over the course of the year with the PlayStation 4. Nintendo was losing money, and Microsoft — which released the Xbox One system around the same time as the PlayStation 4 last fall — lagged behind Sony’s sales, a gulf that widened as the new year progressed.

During the recent holiday season, though, both companies were resurgent, with Nintendo releasing a series of blockbuster games for its Wii U system that underscored the unwavering loyalty of its fan base. And Microsoft, Sony’s most direct competitor in the games market, cut t starting price of the Xbox One at $349, $50 cheaper than the PlayStation 4. The move helped it regain a sales lead in the United States, the product’s most important market.

David Cole, DFC Intelligence analyst:

“It seemed like Microsoft this holiday season had a better message for core gamers than Sony. The price drop is huge — you can’t discount that.”

On November 2nd, with the most important selling season approaching, Microsoft temporarily dropped the starting price of Xbox One, a promotion that ended Saturday.

The discount highlighted a sharp turn in strategy by Microsoft. When the Xbox One was first released, it included the Kinect motion-sensing device, and the package was $499 — $100 more than the PlayStation 4. In June, Microsoft began selling an Xbox One without the Kinect for $399.

The initial high price of the Xbox One was one of several mistakes Microsoft made when it released the console. It also alienated many gamers early on with a plan, abandoned before the console hit shelves, that would have restricted purchases of used games and overemphasized the Xbone as an entertainment box.

Microsoft’s price-cutting finally paid off last month, allowing it to outsell the PS4 in the United States, according to Microsoft, citing data from research firm the NPD Group.

Blake Jorgensen, Electronic Arts chief financial officer

“Clearly, Sony has jumped out to a lead with a great console and, I think, a great pricing strategy. But Microsoft is catching up quickly.”

Sony declined to comment on Microsoft’s improved position in the United States.

Mike Nichols, Microsoft corporate vice president for Xbox marketing:

“We’re proud of the progress we’ve made in 2014 and can’t wait to build on the momentum in the year ahead.”

Sony and Microsoft haven’t said how well their consoles sold in December, but it’s safe to say that the PlayStation 4 still has an overall sales edge on the Xbox One. In mid-November, Microsoft was on the verge of shipping its 10 millionth Xbone, according to the company, while Sony shipped its 13.5 millionth console the month before, according to the company. Granted, both figures represent sales of consoles to retailers, not necessarily sales to the public.

While Sony held firm with the PlayStation 4’s $399 price tag, retailers bundled popular games with the system throughout the holidays to entice more shoppers. Sales of the Xbox One could also suffer if Microsoft decides not to make its price cut permanent.

The United States and the UK continue to be strongholds for Microsoft’s Xbox business, but it’s weaker outside those markets. The company’s games business is especially feeble in Japan, one of the largest gaming markets in the world, where Sony and Nintendo have a homefield advantage.

Nintendo’s fortunes have also improved, though the company hasn’t come close to repeating the success of the original Wii, the motion-sensing console that became a breakout hit during the last generation of gaming hardware. The Wii U, its successor, is centered a touch-screen game controller that has taken a while to catch on with consumers. As of September 30th, the company has sold 7.29 million Wii U consoles, even though it went on sale a year before the Xbox One and PlayStation 4.

Even though its hardware sales are lagging, Nintendo makes the most popular games for its systems, including longtime game franchises like Mario, Zelda and Pokémon. Those games give the company another big source of income. Several of its Wii U titles, including Super Smash Bros. and Mario Kart 8, are big sellers.

After posting a net loss last year, Nintendo is forecasting a profit for its current fiscal year, which ends March 31. The stronger Wii U game sales shows that nintendo can still attract is longtime dedicated fans, including fitness fanatics and seniors, that the company won over with the original Wii.

Also troubling for the company is that children today are increasingly playing games on tablets and smartphones, where Nintendo has no real presence, rather than on Nintendo handhelds, an important business for the company.

Cole:

“That’s the biggest concern with Nintendo is that they lose out on that audience.”

That is also a worry for Microsoft, which partly explains why they paid $2.5 billion last year to acquire Mojang, the developer of Minecraft.

Michael Pachter, Wedbush Securities analyst:

“In my view, Sony will be content with second place if they sell 50 percent more consoles than last cycle while Microsoft won’t be content with second place no matter how many consoles they sell.”

Source: New York Times

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