Why Gamers Dumped the Xbox 360 and Wii for Sony’s PS4

A Nielsen survey reveals that nearly a third of PS4 owners previously owned an Xbox 360 or Wii. Why did so many gamers switch over?

Aug 28, 2014 at 11:03AM

For a while, Sony (NYSE:SNE) was confused about the PS4's massive success. When asked why Sony sold 10 million units so quickly -- hitting that milestone faster than any previous PlayStation -- Sony executive Shuhei Yoshida told Eurogamer that the company didn't "completely understand" why sales were so strong.

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Source: Sony

However, a recent Nielsen survey provided to Re/code solved that mystery with sobering news for Microsoft (NASDAQ:MSFT) and Nintendo (NASDAQOTH:NTDOY) -- the PS4 had converted a huge number of Xbox 360 and Wii owners. A whopping 31% previously owned either the 360 or Wii instead of a PS3. The survey, which polled 1,200 American "active gamers" between the ages of 7 to 54, was conducted between February and April.

That certainly helps explain why the PS4 has outsold the Xbox One and Wii U, which have respectively sold 5 million 6.7 million units. Let's take a closer look at the major mistakes Microsoft and Nintendo made, and if either company can still bounce back and catch up to Sony.

Microsoft failed to learn from Sony's mistakes
Microsoft's biggest mistake was the price of the Xbox One. Due to the bundled Kinect, the console launched at $499, $100 more than the PS4. Microsoft believed that the Xbox One would be an all-in-one media center for the living room, powered by the Kinect's voice and gesture controls.

Unfortunately, customers didn't love the Kinect. Microsoft also inexplicably locked media services like Hulu and Netflix behind an Xbox Live Gold paywall, which crippled its use as a media consumption device. Eventually Microsoft tossed out the Kinect, lowered the price by $100, and removed the paywall -- but it was too little, too late.

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Source: Microsoft

Microsoft also didn't learn from Sony's prior mistakes. Back in 2006, the PS3 stumbled during its launch due to its high price tag of $499 (20GB version). By comparison, the 20GB Xbox 360 launched a year earlier at $399. Four quarters after their initial launches, the PS3 sold 5.6 million units, compared to 5.9 million Xbox 360s. PS3 sales eventually accelerated, but only after Sony lowered the price and launched new units.

Since even Sony had trouble selling a higher priced console -- despite its prior success with the PS2, the best-selling console in history -- it made no sense for Microsoft to launch the Xbox One at a higher price than the PS4.

Microsoft could have atoned for those mistakes with better exclusive games. Unfortunately, gamers still have to wait more than a year until Halo 5: Guardians arrives. Three of the 10 best-selling Xbox 360 games were Halo titles, and the earlier release of the game might've helped boost sales of the next generation console.

Nintendo's mix of bad marketing and design
Nintendo's original Wii was the best-selling seventh-generation console, selling 101 million units by the time it was discontinued in most markets last October.

But instead of capitalizing on that lead, Nintendo named its successor the Wii U -- a name that befuddled retailers and consumers alike. If Nintendo had simply called the new console the Wii 2, it probably would have sold wonderfully back in November 2012. Instead, retailers mislabeled and tossed the Wii and Wii U together, while customers thought that the Wii U was just a tablet peripheral for the original Wii.

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Source: Nintendo

For gamers who knew that the Wii U was Nintendo's new console, the form factor of a second screen GamePad was confusing. While the feature was useful when someone else wanted to watch TV, many developers failed to take full advantage of the GamePad -- a problem which Shigeru Miyamoto tried to address during E3.

Unfortunately, cross-platform developers didn't want to develop games designed for the Wii U's GamePad when they could simply port one title with similar controls across Sony, Microsoft, and PC platforms. That problem, combined with the notion that the Wii U had weaker hardware and lacked a mature gaming audience, caused third party allies like Ubisoft and Activision Blizzard to announce that they wouldn't launch any more mature games -- like Assassin's Creed and Call of Duty: Advanced Warfare -- for the Wii U.

Foolish final thoughts
Sony didn't sell that many PS4s because it was smarter -- it only did so because its competitors fell flat on their faces.

Microsoft foolishly believed that it could sell an expensive media machine to gamers to spread the Windows ecosystem to living rooms across the world. Nintendo forgot to tell the world that the Wii U was a brand new console, and when it did, it confused retailers and gamers. It's certainly not too late for Microsoft and Nintendo to bounce back, but both companies are now at a clear disadvantage if so many former customers chose the PS4 over the Xbox One and Wii U.

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Leo Sun has no position in any stocks mentioned. The Motley Fool owns shares of 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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