GamaGanda

I’ve long thought about the necessity of PS Vita. Its raison d’etre if you’d like. I did so because, in my opinion, it does not bring anything revolutionary to the table, from a hardware point of view. The 3DS has a 3D screen and you don’t need any glasses to experience the 3D effect. The iPhone (first generation) brought us the beauty and simplicity of the touchscreen, which along with the mouse and the click wheel was a revolutionary and disruptive user interface.

PS Vita brings us 2 analog sticks, a capacitive touchscreen on the front of the handheld and a rear touchpad. While touchscreens and touchpads are the norm today, depending on the hardware, two analog sticks is something definitely weird for a newcomer. For those of you who have owned a PSP before, it could very well be the most requested feature on a handheld. The main reason is that having two analog sticks allows you proper control over camera and character movement in the same time, imitating the control you get when using a real controller. This way, it’s possible to play all the modern games, either PS2 ports or PS3 spin-offs. Some say PS Vita is a bit late to the table and considering the competition they could be right. Others are saying the market for dedicated gaming handhelds is dying. This is why I wanted to see if I can forecast the PS Vita demand (and of course its initial sales).

First, lets look at some historical data for the PlayStation hardware and software (million units). It should be noted that Sony’s fiscal year starts on April 1st.

In the first table you’ve got PS hardware and software sales for FY10 and half of FY11, while in the second table you have PS hardware and software sales for the period FY01-FY10.

Now lets mix this with a bit of history. Do you see the 3 mil. PSP units Sony sold during FY04? Actually FY04 ended on March 31th, 2005. The PSP launched in North America on March 24th, 2005 and Sony confirmed that 1 mil. units where pushed for this territory. OK, what about the rest of them? The Japanese launch took place on December 12, 2004. Sony said that 200.000 units were pushed for Japan, but they were sold in just two days. It just follows that those 2 mil. units (the difference between the result and the 1 mil. units pushed to North America) was sold in Japan in a little over three months. Interesting to note is also that every new PSP owner bought around 2 games (3 mil. units sold with 5.9 mil. games averages around 2 or 1.97 if you’re picky). Remember this. It’s important.

So that was 2005. Back then there was no iOS and iPhones or iPads, no Android and the concept of the smartphone didn’t really include gaming. And there was no financial crisis either, so demand and/or consumption was not as low as it is today. I’d say that back then it was an ideal market for dedicated gaming handhelds.

Now lets look at some comparative PSP and NDS sales and see how they both performed.

The PSP started slow, with just 3 mil. units sold, but as I’ve said, it just covers the last quarter of FY04. As you can see, demand was very strong for this handheld, as its sales for the next year show us. It peaked to 14.1 mil. units the next year and it should have leveled if it weren’t for the launch of the PS3 in 2006 (and hence all the aggressive publicity which turned consumers’ attention away from the PSP during that year). Starting with fiscal 2009, sales begin to slow down and this year (FY11), for the period April – September, Sony sold just 3.5 mil. units, which is still acceptable considering the summer vacation and certainly better than last year (when they sold 2.6 mil. during the first two quarters).

Nintendo uses a different labeling system for their fiscal years, FY05 being the April 2004 – March 2005 time frame (in Sony’s case this is FY04). The NDS launched in North America on November 21st, 2004 with a totally different price point than the PSP, 150 USD (while the PSP was launched a few months later with a 250 USD price point). On the other hand, Nintendo managed to launch the handheld in all the major regions until their fiscal year ended, hence the 5.27 mil. units sold. I can also tell you that Nintendo sold 10.49 mil. units of NDS software in FY05, which confirms the average of 2 games per handheld owner.

This however did not happen this year when the 3DS was launched. The 3DS was available late March 2011, before their FY11 closed (on March 31st, 2011). During those few days, Nintendo managed to sell 3.61 mil. hardware units and 9.43 mil. software units (2.6 games per new 3DS owner). Almost 4 mil. of those software units were sold in the Americas and a bit over 2 mil. (2.18 mil. to be exact) were sold in Japan. Given the high initial price point of the hardware, it’s curious to see the upward trend of the number of average games bought for a dedicated gaming handheld. Since games are the lifeblood of these devices, an increase in this initial demand cannot foretell the death of this market. On the other hand, I think it’s wrong to compare sales of games that sell for around 1USD or 5USD (like those in Apple’s Appstore) with games that are offering a totally different experience, targeting another market segment and hence having a price point of 40USD (like all the 3DS games, as well as the new upcoming PS Vita ones).

Now let’s look at some software sales for these timeframes. First the PSP.

And now the NDS.

Since the dedicated gaming devices are not smartphones that you change every year or at least each two years with a new plan, I estimated that adding the numbers for the last 3 years, together with the numbers from the first half of the current year (not showing in the graphs), should give us a rough estimate of the current functional devices.

The NDS, from what you can see in the graph, sold 75.8 mil. units during the last three years. Add to this 2.6 mil. sold this year (April-September 2011) and you’ll have 78.4 mil. units. The software sold during the last three years amounted to 469.9 mil. units. Add 29 mil. units for the current half of fiscal year and you’ll have a total of 498.9 mil. units. This is 6.36 games per owner during 3 and half years. Further more, this means that every NDS owner bought an average of 1.82 games per year. Doesn’t it sound familiar? If you remember, I’ve concluded already that, when the PSP launched, every new PSP owner got 1.97 games.

But that was long ago. As I’ve already showed you, every 3DS owner at launch bought an average of 2.6 games. That’s quite a difference from the average 2 games new owners bought when the PSP launched or during the last years of the NDS. It’s a 30% percent difference and this shows me that new and original hardware features can drive game sales up, even if the iPods, iPhones and iPads have disrupted the gaming industry as we know it. It still shows that growth is possible in the dedicated gaming handheld space, but it’s closely tied to innovation and risk (on both hardware and software fronts).

Is this going on with PS Vita? Is innovation a word that you can sincerely associate with PS Vita? Unfortunately no. As I’ve said, 2 analog sticks, a touchscreen and a touchpad can hardly be considered innovation. Its raw power will be able to sustain some cool spin-offs from established franchises and indeed, the number of launch titles for PS Vita is quite impressive. With no less than 38 titles for the North American market, it’s one of the longest lists I’ve seen for such a device. The 3DS had 8 launch titles in Japan and 9 in the USA. 38 is more than four times. This is another proof for the lack of innovation with the PS Vita hardware. Even Sony realized it, so they carefully gathered a long list of titles to complement the launch and assure everyone that PS Vita, despite its hardware, has some of the most impressive launch titles ever. This is Sony’s unique selling proposition for the PS Vita. I just hope it will continue to be in the future, or the future of the hardware is already doomed.

For now though, let’s stick to our forecast. So, how many PS Vita units will be sold at launch? Let’s try two approaches to estimate it.

Given that the lifetime sales of the NDS is double of that of the PSP and given the fact that 3DS sold 3.61 mil. before their FY11 closed, we can roughly estimate 1.8 mil. units (worldwide launches combined). The other approach will estimate the number of PS Vita units based on the 3DS sales related to either Nintendo’s last fiscal year NDS sales or Nintendo’s last three fiscal years sales. If we relate the 3DS initial sales of 3.61 mil. units to Nintendo’s last fiscal year, when they sold 17.52 mil. NDS units, then we have a 20.6 ratio. If we relate 3.61 mil. 3DS units to Nintendo’s last three fiscal years sales, then we have a 4,7% ratio. Applying the same ratios to the PSP sales, we get either 1.65 mil. units (when applying the 20.6%) or 1.5 mil. units (when applying the 4.7%).

Basically, we have an estimate between 1.5 mil. and 1.8 mil. units (worldwide launches combined), without considering Sony’s unique selling proposition I was mentioning earlier (the big line-up of titles). Depending on the demand for those titles, many of which are spin-offs for successful PS3 games, the demand for PS Vita could be even higher. Of course, as Amazon already confirmed, demand is higher for the Wi-Fi only version, so this allows new owners to save 50USD or even spend them for one more game. If new PS Vita owners will buy an average of 3 games (which is better than what 3DS owners did, given PS Vita’s launch line-up), then we can estimate software sales at launch between 4.5mil. and 5.4 mil. units.

One more thing before I wrap this up. To those of you expecting PS4, I can tell you that Sony needs 2012 to build PS Vita awareness and establish it as modern mobile gaming platform. They will not draw gamers’ attention from the PS Vita towards PS4 until this happens. This puts PS4′s launch sometime late 2013 or early 2014 and this is the earliest launch window you can hope for. It’s, I think, a fair estimate for the PS4 launch, so no need to start saving right now. There are many more goodies from Sony until then.

Well, this is the end of it. I hope it wasn’t too boring for you and I understand if you’ve skipped a few numbers. I really do hope we’re seeing progress in this market, despite sales being heavily influenced by the iOS and Android devices out there. My take on this is that casual gaming will never be able to replace hardcore gaming and that dedicated mobile gaming devices are still able to deliver the best mobile gaming experiences out there. As we all know, it’s all about the games, so as long as they’ve got games to sell and franchises to develop, we’ll always keep an empty pocket just for their hardware.

PS Vita info - PS Vita will be released in Japan on December 17, 2011and in Europe and North America on February 22, 2012. The Wi-Fi model will be available for 24,980 yen (including tax) in Japan, $249 in US and €249 in Europe, 3G/Wi-Fi model will be available for 29,980 yen (including tax) in Japan, $299 in US and €299 in Europe. In the UK, Sony will charge £229.99 for the Wi-Fi model and £279.99 for the 3G/Wi-Fi model.

UPDATE – First of all, thanks to all of you for taking the time to read this long piece. I’d like to clarify a few things, since I feel that some of you might have misunderstood me.

I don’t intend to compare handhelds to smartphones. Of course, smartphone sales have impacted handheld sales the same way as tablet sales have impacted laptop/netbook sales, BUT there is quite a difference between them, as they target different customers and offer different experiences. Comparing them would be like comparing airplanes to automobiles. They both transport people, but they are very different in how they do it and their target customers are different. This is why, comparing handhelds to smartphones or even tablets (as entertainment providers) is a forced comparison and not entirely fair. Playing Angry Birds and then Fruit Ninja and then Cut the Rope and then many other such games on your iPhone versus playing Uncharted on PS Vita is like having meaningless sex versus a stable relationship where the inner gamer commits to a long-term, fruitful experience.

Then, I’d like to explain a bit this innovation dilemma. I have given examples like the click wheel or the touchscreen, innovations that have disrupted the user experience over time (the mouse also did that back in its day). Mixing all these in a product is NOT the same kind of innovation. They say there two kinds of innovations, evolutionary and revolutionary innovations. The PS Vita might be an evolutionary innovation in terms of features mix, but it is not a revolutionary innovation. I had to specify this because in my article I compared it with revolutionary products (and I did that to prove a point).
The 3DS has the potential to be a revolutionary product due to its 3D screen as it is the first successful use of such a screen in a handheld. Of course, it depends on the software side to enhance this proposition. If this will not happen, this edge the 3DS has will be lost. Compared to it, the PS Vita has no such revolutionary edge. The dual sticks is a constant in the console gaming market for some time now. It was expected to see it on handhelds sometime and that time has come. Nothing revolutionary here as it does not change the user experience. It just moves it from the sofa to your pocket.