Key Points

• Halo 3 cannibalizes sales of other games
• Halo 3 enables Xbox 360 to overcome the Wii
• PS3 exclusives fail to entice sales
• PS3 price cut and cheaper model implications
• Wii will strike back

Halo 3 cannibalizes sales of other games

Halo 3 sales came in at 3.3 million units, far exceeding the prediction market's expectations of 2.9 million units. The most curious result was that all other games severely underperformed the prediction market's expectations, indicating that Halo 3 had a substantial negative effect on other major titles across the board. Games that were especially impacted were the Xbox 360 games Stranglehold, BioShock, and Madden NFL 08. The prediction market had expected Stranglehold sales to reach 249,800 units in September, but actual sales were only 104,200 units. The game did not even make the Top 10.

Halo 3 enables Xbox 360 to overcome the Wii

Despite the negative effects on other Xbox 360 games, Halo 3 enabled Microsoft to lead the home console segment in September, launching the Xbox 360 to sell 525,000 units. For October, the prediction market expects Xbox 360 sales at 366,000 units alongside 1.17 million units of Halo 3. The prediction market does not expect Xbox 360 sales to drop in light of the upcoming PS3 price cut and cheaper model.

PS3 exclusives fail to entice sales

Heavenly Sword and Lair were both exclusive PS3 titles that were expected to drive PS3 sales and reverse the downtrend in sales since the price cut in July. In early September, the prediction market accurately predicted that these titles would not stimulate PS3 hardware sales. NPD reported that the PS3 sold just 119,000 units in September, a three month low for the system since June.

With already low expectations, Heavenly Sword and Lair still managed to underperform at 139,000 and 58,000 units respectively. Sony will release another PS3 exclusive in October, Ratchet & Clank Future: Tools of Destruction. Currently, the prediction market only expects the title to sell 131,000 units in the October retail month, which is still considered well under the expectations for an exclusive title.

PS3 price cut and cheaper model implications

Today, Sony officially announced the new and cheaper 40GB PS3 model and a price reduction on the 80GB model. The prediction market has been anticipating this move since August, which resulted in only a slight change in November's sales expectations. Currently, the prediction market expects sales of 330,000 units in November, up from 300,000 units prior to the official announcement. In terms of how just the 80GB model price cut will affect PS3 October sales, the prediction market only pushed its sales forecast up 3,000 units to 153,000 units. This strategy is not expected to change the PS3's market share at the end of the season, which currently is last among the home consoles.

Wii will strike back

The Wii's monthly sales winning streak finally came to an end thanks to Halo 3. However, in way, the Wii is still victorious. The Wii faced many obstacles in September, including: hardware constraints, strong first party titles on other consoles, no strong releases of its own platform, and announcements of software bundling and price cuts from its competitors. In the face of those barriers, the Wii managed to exceed market expectations by 6.9% with 501,000 units sold.

The Xbox 360's superiority in sales is expected to be short lived with the Wii regaining the top spot for the remaining months in 2007. Currently, the prediction market expects the Nintendo Wii to exceed the other home consoles in October, November, and December at 473,000, 738,000, and 1.97 million units respectively.

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About Jesse Divnich

Jesse Divnich has been working in the video game industry for over 10 years. During that time he has assumed many professional roles including: beta tester, programmer, publisher analyst, and for the last 6 years, a private analyst and consultant for buy-side investment firms. Jesse Divnich has received many awards for his work in the private investment sector as an analyst covering publicly traded video game companies. Currently, Jesse Divnich has switched from the private sector to the public sector as an Analyst for The simExchange where he writes analytical articles on various industry topics.

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