Is Microsoft's Xbox Still Losing the Console Battle Against the Playstation 4 and the Wii U?

The latest tracking data from NPD Group is in. How did the gaming industry's big console players fare?

Jul 18, 2014 at 4:00PM

The latest sales report from NPD Group has hit the Net, and the results could be highly predictive of how this console cycle plays out. The June North American sales numbers provide what looks to be great insight into the console competition between Sony (NYSE:SNE), Microsoft (NASDAQ:MSFT), and Nintendo (NASDAQOTH:NTDOY), as well as the broader future of the gaming industry. It was a month that saw Microsoft debut a Kinect-less Xbox One SKU, while Nintendo's Wii U enjoyed a momentum boost, thanks to Mario Kart 8.

Were these big factors enough to push sales of either console above Sony's PlayStation 4? How do things look on the software front?

What effect did the Kinect-less Xbox One have on sales?
NPD's sales report states that Microsoft's new console sold approximately 197,000 units in the month of June. This is evidence of a solid start for the new SKU, but it needs to be put into context. The announcement of the Kinect-less unit helped depress May sales of the console to just 77,0000 units.

For the last two months, North American sales of Xbox One stand at approximately 274,000 units, a touch above the 269,000 units that PlayStation 4 sold in the month of June. That's not to say the introduction of the new, less-expensive option was a misstep, or that it won't create sustained benefits for Microsoft, but the move's inability to push Xbox One above the competition may be worrying for the platform holder.

June is typically a slow sales month, and there weren't any big software releases to help push the console, but it's looking like the company may need to implement price cuts across both Xbox One SKUs if it hopes to close the sales gap between it and PS4 in the near future. Software sales on Microsoft's new console also provided cause for concern. Not a single multi-platform title in the top-ten best-selling list sold better on Xbox One than on PlayStation 4. Additionally, Ubisoft's hit game Watch Dogs sold more on Xbox 360 than on Xbox One in June.

Perhaps softening the blow, Microsoft stated that combined software sales across its platforms were better than those of its competitors.

Was it a good month for Nintendo?
Nintendo's Wii U enjoyed a substantial sales bump, thanks to the introduction of its hugely popular Mario Kart 8, good enough to drive the console to 140,000 North American sales. That number represents a more than 233% increase over June sales in 2013. Mario Kart 8 has sold more than 885,000 copies in North America, and the title was the top single SKU game in June. Meanwhile, Nintendo's 3DS handheld saw sales increase 55% over those from May, but its approximately 150,000 unit performance was down nearly 32% from sales in the previous June. 3DS title Tomodachi Life debuted to a stronger-than-expected 175,000 unit performance across retail and digital channels.

While the hardware bump is good news for Wii U, the fact that it wasn't larger is also concerning. There's a very good chance that Mario Kart 8 will be the biggest game released on the platform, and the lack of a larger uptick in Wii U interest speaks to the state of the console. That said, the game should enjoy great sales legs. Whether this also crosses over to a sustained and meaningful increase in hardware sales will be the point to watch.

Sony wins June
With approximately 269,000 PlayStation 4s sold in the month, Sony received, by far, the best news from NPD's June data. The fact that the console continued to outperform Xbox One and Wii U in a month that saw milestone events for both of those platforms is telling.

Sony's new console also showed dominance on the software front. Thus far, the system appears to be the go-to option for multi-platform titles. This is particularly significant, considering that PlayStation 4's sales lead over Xbox One is somewhere in the neighborhood of 660,000 units, a meaningful, but not especially large sum, given PS4's larger global sales lead.

What do June's sales mean for the broader gaming industry?
This year's June sales were up approximately 26% over those from June 2013. This growth was driven by a 106% increase in hardware sales. Retail software sales, on the other hand, were down 3% year over year. This decrease can be partially explained by the rise in digital distribution, but declining game sales in the dedicated segment has been a persistent industry trend. While console makers and third-party publishers have avenues for growth, the uncertain software market is a serious problem for retailers like GameStop.

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Keith Noonan has no position in any stocks mentioned. The Motley Fool owns shares of GameStop and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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