Whether you're calling it The Great Video Game Crash of 2009, or just another speed bump on the road to recovery, NPD Group's June 2009 retail games sales were a little unsettling. Only the Nintendo DS and Xbox 360 turned up positive year-over-year numbers, but what about attach rates? Game sales? Online downloads? Games slipping to 2010? Sony's presumed upcoming PlayStation 3 price cut? I spoke with Microsoft Xbox 360 and Live product manager Aaron Greenberg last night to get the lowdown.
Game On: The NPD data's out and it seems you and Nintendo were the only two platforms advancing down the field in hardware sales.
Aaron Greenberg: I think you've really got two stories here. There's the one most people are going to talk about, which is just the month of June, another month of NPD sales and such. It was definitely a good month for us. The Xbox 360 saw system sales grow 9 percent year-over-year with 241,000 systems sold and great performance on the game side. It tends to be a repeat of what we've seen month after month. I mean, June, as we know, is a pretty slow month. For us what's more interesting is that it's a great time to step back and look at the entire half-year's performance. For me that's much more interesting.
So how did we perform over that six month period, how did that compare to the prior year, how are we doing relative to the competition when we match up side by side, and so on. As it turns out, it's a real bright spot for us. In fact the first six months of the year we saw consoles sales grow 20 percent year-over-year, despite the fact that we were the first console to launch this generation. That speaks well of what we offer in terms of content and pricing.
We're also talking Xbox Live performance. There's a lot of stuff that's tracked at retail with NPD, but we wanted to try to give people a sense of how we're performing on Xbox Live, and so for that same time period, January to June, we actually saw paid downloads jump 73 percent year-over-year. We're actually seeing online transactions grow at an even more rapid pace than retail sales.
GO: What's your current attach rate [the number of games sold per Xbox 360] at retail?
AG: Our attach rate was 8.6 in June, compared with 6.8 for PS3 and 6.4 for the Wii.
GO: How about game sales? Growing? Flat? Declining? You had four top 10 charters this month, but you only listed hardware year-over-year figures in your NPD update.
AG: I show that we had more game sales in June than any other platform, over $177 million in software sales. Year-over-year, our software sales were flat, but by comparison, Wii sales in June were down 30 percent and PS3 sales were down 19 percent.
GO: How about downloads? NPD doesn't track them, and you're laying claim to a 73 percent growth figure for the first half of 2009. Is anyone independently verifying that number?
AG: I think at this point...I mean yeah, NPD is only tracking the retail stuff. I don't know what the future will hold for that space. I know that we've been pretty open about wanting to share that sort of information. The fact is that...yeah, it is what it is. It's taking our actual paid downloads for the first half of the year and comparing them to last year. Our Live membership has grown over the same period of time. We're at 20 million now, versus where we were a year ago. We continue to see more people go online, more content arrive, and I think that if you look at all the big DLC packs this year, from Fallout to Fable to the GTA episodes, I think that stuff really helped along with the lower price points.
The other thing we disclosed is, we know we have 20 million Xbox Live members, but to give you a sense of what that includes, it's both our Silver and Gold members. A lot of people are curious about whether those people are really transacting or not. So we've gotten specific and said 17 million of the 20 million users have downloaded content in the last year. That's 85 percent of our total Live members downloading content right now from Xbox Live. That should give you a sense for the level of activity alongside the growth figure.
GO: You say "downloading content," but how much of that content involves pay-for transactions versus free ones?
AG: I don't have that breakdown. I know that our Gold members tend to transact at a higher rate and spend more money, and that makes sense because they're probably more engaged and already paying for the benefits of the Gold experience.
GO: Software sales of $177 million. Is that just retail or combined retail and online?
AG: That's just retail, so that doesn't include any of the online sales, which are obviously becoming more and more a part of our business.
GO: Do you have a number yet that you can share covering Xbox Live online sales?
AG: We're not able to disclose the revenue associated with that, except to say that paid downloads have grown 73 percent year-over-year. We've publicly disclosed more than a billion dollars in Xbox Live sales since the Xbox 360 launched in November 2005, and we actually did that a year ago. It's a significant business, and if you look at third party publishers, they're reporting their earnings and you can see it's a big part of their financials too. Without giving you an exact number, I can say it's definitely not loose change. This is a substantial part of our business and our partners' business.
GO: What are your plans for divulging that information going forward? I mean at some point don't you have to?
AG: Yeah, that's a great question. I mean I think, there's some…
GO: I'm thinking in terms of shareholders and such.
AG: Sure, as it becomes a bigger part of our business...I'm not sure specifically what the requirements are, but I know that there have been some sensitivities with our partners around number disclosure. We have to be careful with them.
There's two schools here, really. There's one school that believes in full disclosure, that we should talk very openly about this, and personally I'm a fan of that. I think that just like NPD data's reported for retail, we should be very open about what's happening online. But it's not just us. We've got a lot of partners selling stuff, and so we're trying to be sensitive to their needs as well. Some people are more conservative or cautious about bragging about online revenue and that kind of thing for a variety of reasons.
It's the same thing the music industry went through, and all entertainment industries make this transition. We're going through it now, and I think we'll get to the point where people are more comfortable with it. We're definitely at the point where it's growing and outpacing the retail space, but we're not quite able yet to get into as much detail as we'd like.
GO: Let's talk the big stuff coming in the second half of 2009. You're listing Halo 3: ODST, Forza Motorsport 3, Left 4 Dead 2, and Splinter Cell Conviction. What I'm wondering, in the context of majors like BioShock 2 slipping from 2009 to 2010, is whether you're concerned about more stuff bumping and killing momentum?
AG: What's interesting is that a lot of people look back at last holiday, and I think if there's anything we learned, it was that it felt like this big crunch with so many triple-A games releasing in such a short period of time. I think finding the balance, figuring out what makes sense to load into the holiday, which is obviously, seasonally the big buying season, that's the key. How can you deliver some of those blockbusters outside the holiday zone? I think we're still trying to find the right balance.
That said, if only look at big exclusive titles this holiday, we're loaded up. There's Forza 3, Halo 3: ODST, Splinter Cell, Left 4 Dead 2, Shadow Complex, and that's just exclusives. Just this holiday. Then you add Call of Duty and The Beatles: Rock Band and all the other blockbuster games on top of that. Right now, the holidays look like they're jam-packed. We feel great about the lineup we have from the games standpoint. Then you add all the stuff we're doing with online and Facebook and Twitter and movies and I think we're in good shape.
But yeah, I'm sure there'll be more stuff that'll slip. That's the nature of the business. Even with a few more things moving around, I don't think it'll impact our performance.
GO: Analysts, publishers, and the press all seems to be aligning against Sony in the great should-they-or-shouldn't-they debate about dropping the PS3's price point. The latest estimates suggest it'll finally happen sometime this fall. Is the Xbox 360 competitive at its current price point with a price-reduced PS3?
AG: First, we've been expecting this price drop for a long time. We obviously don't know when it'll happen, but it seems like it almost has to happen before the end of the year. I do think as we look back at the key ingredients of our success, we believe that price is only one. We'd attribute our success to having the biggest and broadest games lineup. If you want great games and you're only going to buy one system, you have to get the Xbox 360, because we have all the big games.
It's also what we've done with online, with Xbox Live, building the online community, the entertainment offerings, and the way we're really pushing the envelope I believe with all the new innovations we announced at E3. That's just this holiday. Then you start to think about Natal, and where we're going with the platform in terms of making it more appealing to more people.
At the end of the day, we'll continue to compete with Sony whether they drop the PS3's price or not. We're at $199 today, and we'll continue to add great experiences at an affordable price. That's our strategy, and we think we'll fare well, even if Sony does make a move.
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