In the lead up to holiday 2010, there was some speculation about whether the motion-based video game bubble had burst. Nintendo (PINK: NTDOY) and its Wii saw steep declines in 2010, and Sony (NYSE: SNE) and Microsoft (NASDAQ: MSFT) were late with their respective Wii killers.
It was difficult to gauge, then, the pre-release hype surrounding the Microsoft Kinect, a hands-free controller for the Xbox 360 ,and the Sony PlayStation 3 wand controller known simply as the Move. Were consumers going to get moving themselves despite a beleaguered video game market?
Microsoft and Sony stock owners both have reason to breathe a sigh of relief as sales have proven strong. MSFT maintained great momentum with Kinect through the Thanksgiving week. As of yesterday, Microsoft had sold 2.5 million units worldwide. MSFT announced the Kinect’s impressive sales in a press release yesterday, confirming that just 25 days after the hands-free gaming device hit shelves, they are already halfway toward their stated goal of selling 5 million Kinects before the end of calendar 2010. The sales numbers also indicate that Microsoft isn’t suffering from the supply constraints some predicted for the company this fall. Kinect sold 1 million units in its first ten days on the market, and while Microsoft undoubtedly benefitted from a well-publicized launch for Kinect and the Black Friday advertising blitz from video game retailers like Best Buy (NYSE: BBY), Amazon (NASDAQ: AMZN), GameStop (NASDAQ: GME), and Walmart (NYSE: WMT), their momentum should hold until Christmas.
Sony’s Playstation Move, meanwhile, is performing admirably, though not quite as well as Kinect despite larger overall sales numbers. The Japanese electronics giant announced today that its wand controller, recently lauded by Popular Science‘s “Best of What’s New 2010″ feature for its accuracy, has sold 4.1 million units since its international launch in mid-September. Sony’s press release claims 41.6 million Playstation 3s sold worldwide since 2006, meaning the Move is now in the hands of one out of every ten console owners. This is an impressive attachment rate for a new peripheral that isn’t essential for most software.
It is difficult to judge, however, the revenue generated by Move sales for Sony. Unlike the Kinect, which is a single item available as a standalone product or bundled with the Xbox 360 console, the Playstation Move is available in multiple retail configurations since it is dependent on multiple pieces of hardware. In addition to a package that bundles the device with the requisite Playstation Eye camera, there are also standalone Move controllers as well as Playstation 3 and Move bundles. The number of Move controllers in the wild will help Sony drive Move software adoption, but it makes it difficult to judge if the device is driving console sales, something Sony desperately needs considering the success of Microsoft’s redesigned Xbox 360 across the back half of 2010.
Sony faces another significant hurdle this fall, namely the absence of marquee titles aimed at enthusiast gamers. With the exception of driving simulator Gran Turismo 5, released last week after delays spanning nearly three years, Sony does not have any new first-party software to cater to core fans drawn by action titles in the vein of Activision Blizzard (NASDAQ: ATVI) Call of Duty. Microsoft, meanwhile, is enjoying brisk sales for both the September-released Halo: Reach and October’s Fable III. Though core games like these don’t sell in as great numbers as more family-friendly fare like the games developed for Kinect and Move, they tend to generate more revenue. Cowan & Company published the results of a recent survey last week, concluding that core games still represent the best investment for game publishers, despite the growing popularity mobile, social, and casual home console gaming. “The results of our Fall 2010 Videogame Survey do not change our view that high-quality games for the core gamer remain the best investment for videogame publishers despite changes to the structure of the videogame industry.”
Investors lamenting Microsoft’s refusal to split the video game division away from the flat core company should find a more fuel for their arguments following the holiday season. Sony shareholders, meanwhile, should be patient considering the company’s habit of playing the long game and having it payoff. Share price has grown steadily since July lows and it up 27% today, trading at around $35.40 as of this writing. Now would be a good time to buy in anticipation of a steady holiday fueled by Gran Turismo 5 and low-cost legacy software.
As of this writing, Anthony Agnello did not own a position in any of the stocks named here.