Market Insight

PS4 and Xbox One Console Forecasts: Neck and neck at launch

November 12, 2013

Piers Harding-Rolls Piers Harding-Rolls Director – Research and Analysis Director, Games, IHS Markit

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PS4 and Xbox One Console Forecasts: Neck and neck at launch

During November both Sony and Microsoft will release their new consoles onto the market. With the determination of both companies not to give either a head start, the simultaneous launch of both PS4 and Xbox One results in a more complex forecasting environment. Below, the games research team at IHS details its thinking behind its latest outlook for sales of the consoles.

Key factors shaping IHS forecasts

  • Microsoft has a bigger community of gamers at the end of the Xbox 360 cycle: The installed base of Xbox 360 users is significantly bigger than the original Xbox generation and this factor alone means IHS expects significantly stronger launch sales for Xbox One compared to the last generation. In 2005, Xbox 360 launched at the end of the year with sales of 1.2 million.
  • Gamers more likely to stick with their online console communities: Consumers are more engaged with connected communities through their consoles than ever before and as such IHS believes it will take a significant amount of effort for a group of friends to switch platform during the cycle change. On this basis, IHS expects there to only be a small amount of defections between Sony and Microsoft and in assessing geographical performance we believe history is a strong indicator of forward adoption.   
  • Sony is more competitive on pricing this time round: Back in 2006/2007 PS3 launched at an eye-watering price point of $599/€599/£425, making it at least $200 more expensive than Xbox 360 at launch. This time round Sony has the pricing edge, which IHS believes will strengthen its sales potential in both North America and the UK - geographies dominated by Xbox 360 during the current generation.  
  • No 2013 PS4 launch for Japan: Sony's decision to push the PS4 launch into 2014 reflects two major factors: Sony's strategic priority is to compete with Microsoft in its strongest sales territories - Microsoft has limited penetration of the Japanese market with the Xbox 360 - and Japan's obsession with handheld consoles and smartphones makes it less of a priority.
  • Slow Wii U sales will benefit Sony and Microsoft: When Nintendo's Wii launched in 2006 is sold a supply constrained 3.2 million units in its opening weeks. In contrast, it has taken Wii U until the end of September 2013, almost a year after launch, to match these launch numbers. This reduced competitive threat from Nintendo can only aid Sony and Microsoft's launch efforts.
  • Manufacturing yields suggests more inventory in play: Inventory volume and management remains a decisive factor in the launch months of any console. While each console is customised, both rely more heavily on standard components and this suggests that the amount of inventory in channel for the launch period will improve on the last generation.
  • Positioning and exclusives will sway consumers: Sony's PS4 positioning since its announcement has been heavily centred on the gamer, while Microsoft has attempted to implement a mixed and broader entertainment and gaming message. This different approach will influence the choice of some early adopters. The strength of exclusives will also be key to consumer adoption; at this time IHS believes that Xbox One's exclusives are more formidable for a wider set of gamers, especially in the opening launch period.        

Launch forecast: Geography versus inventory

While competing head-to-head, Sony and Microsoft have taken two distinct strategic approaches to their respective launches:

  • Sony is attempting a wider geographical launch, especially in its core market of Europe, which is likely to put more pressure on its inventory management capabilities.
  • In contrast, Microsoft has dropped its ambition to match Sony's geographical spread and is now launching in 13 territories but with the opportunity to provide deeper inventory into those core markets during the launch period. 

IHS forecasts that Sony will sell-through 2.4 million PS4 consoles by the end of 2013, with Microsoft managing a similar amount of 2.2 million Xbox One consoles. IHS expects existing geographical brand allegiance to continue with Xbox One outselling PS4 in North America, and PS4 outselling Xbox One across Europe combined.

Five year forecast: Outlook favours Sony

IHS believes that Sony's wider geographical brand allegiance - especially across continental Europe and Japan - will be decisive in allowing PS4 to outsell Xbox One on a global basis by the end of 2017. We also believe that both Sony and Microsoft will continue to benefit from Nintendo's Wii U weak sales, with some past Wii users adopting the latest consoles instead of upgrading to Wii U. 

IHS forecasts that Sony will sell-through 49 million PS4 consoles by the end of 2017, with Microsoft managing a smaller, but still significant amount of 38 million Xbox One consoles in the same time frame.

 

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