Sony Overtakes Nintendo

For the first time in nearly a decade, Sony (NYSE: SNE  ) sold more video game consoles than Nintendo (NASDAQOTH: NTDOY  ) . According to Japan's Nikkei business news website, Sony sold 18.7 million video game systems in 2013, compared to Nintendo's sales of 16.3 million.

To some extent, the gap in sales is a testament to the success of Sony's recently released PlayStation 4. But it also serves to highlight Nintendo's continued struggles.

Gaming is more important to Sony than ever before
Sony's PlayStation division is just a small part of its larger business, but it's more important to the Japanese giant than ever before. The company's other electronics businesses have been increasingly pressured by low-cost competitors: Sony exited the PC business earlier this year, and put its money-losing TV division into a separate, wholly owned subsidiary (perhaps to be spun off at a later date).

Sony's struggles in electronics have largely been the byproduct of low-cost competition, mostly from China and Korea, which exploits the fact that Sony's TVs are several times more expensive than the typical budget set.

But video game systems are far more complex; it's one market where Sony cannot be so easily undercut. This segment also benefits from Sony's extensive entertainment assets: In addition to the exclusive games developed by its in-house studios, Sony plans to give PlayStation owners access to original TV programming later this year.

Sony CEO Kaz Hirai was previously in charge of the PlayStation business, and he has discussed plans to use the PlayStation's large base of consoles to sell digital services such as Sony's Music Unlimited subscription service, PlayStation Now, and an upcoming Internet-based cable TV alternative.

Nintendo's core business is shrinking
While Sony's PlayStation business is growing, Nintendo's dedicated console business is shrinking. The failure of Nintendo's most recent living-room video game console, the Wii U, has been well documented: sales have fallen far short of Nintendo's projections, and third-party video game publishers have largely abandoned the system.

Far more insidious is the gradual decline of Nintendo's handheld video game console business. Since it released the original Game Boy in 1989, Nintendo has had a virtually monopoly on the space -- competitors, including Sony's PlayStation Portable and PlayStation Vita, have had little impact.

But Nintendo's current handheld console, the 3DS, in 2013 sold fewer units (12.24 million) than in 2012 (13.95 million). This is particularly notable given that the 3DS, was only released three years ago -- its predecessor, Nintendo's DS, saw sales growth well into its fourth year.

Nintendo's handhelds have generally been far more successful than its living-room efforts. While the company's previous console, the Wii, sold more than 100 million units,the DS sold 150 million units.

Barring a dramatic increase in demand, it seems unlikely that Nintendo's 3DS will sell even half as well as the DS -- three years after its release, the 3DS has sold less than one-third as many units (43 million) as the DS.

Gaming giants headed in different directions
To be fair, 2013 is just one year, but Nintendo and Sony appear to be headed in vastly different directions. Sony's PlayStation 4 has been the top-selling video game console in the United States for five-straight months; if this momentum continues, it wouldn't be surprising to see Sony's consoles outsell Nintendo's yet again.

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  • Report this Comment On June 18, 2014, at 10:36 AM, Facer5 wrote:

    Interesting article. I'm surprised it mentioned how other divisions of Sony are struggling and why.

    Well, now it's all a matter of waiting a few minutes for the Nintendo fanboys arrive and exhibit major hurt and throw MK8's amazing numbers at the author, or how the U sold more than the PS4 in only Japan when this game was released or the classic "Sony is broke LoL and Nintendo has a cash hoard to last them a gazillion years!" They really are that predictable.

    And in doing so, they will miss the point of the article completely.

  • Report this Comment On June 18, 2014, at 2:32 PM, Megel wrote:

    Another blatantly biased article from Mr. Mattera.

    I've had a PS4 since launch night and I just bought a Wii U last weekend; so I'm definitely not a "fanboy" of any one console. I find this guy's crappy journalism to laughable at best.

    He delves deep into Sony's current situation and what they've got coming in the future, which is great. However, he completely glosses over the fact that the Wii U has seen a major increase in sales over the past few weeks, in some markets (such as the UK) up to a 666% increase.

    Every few days he puts out another article in which he makes sure to throw statements about how the Wii U is a complete failure and Nintendo is in serious trouble. It's like he researches what he reports about Sony and only focuses on the negative for Nintendo. I'm no journalist but I've known since middle school that they're supposed to present the facts to the reader and not heavily slant their articles with obvious bias.

  • Report this Comment On June 18, 2014, at 4:38 PM, thejmurphy wrote:


  • Report this Comment On June 29, 2014, at 1:39 PM, mitch079 wrote:

    I assume this is based on Japan's fiscal year from April 1 to March 30, but you wouldn't know that based on Sam's "reporting and analysis". If you go by vgchartz numbers for the calendar year 2013, Nintendo outsold Sony 20.34 million to 18.69 million. For the calendar year 2014, through June 14th, Sony has outsold Nintendo by 2.64 million consoles.

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Sam Mattera

Sam has a love of all things finance. He writes about tech stocks and consumer goods.

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