Stickiness is such a slippery concept. A sticky bun is delicious, but a sticky situation is hopeless. Sticky Fingers was a great Rolling Stones album, but otherwise, sticky fingers make you a kleptomaniac.
In business, though, there's nothing ambiguous about it: Sticky sales are just great.
Stick it to me!
Take Nintendo (OTC BB: NTDOY.PK), for example. The Wii is the leading video-game console, with an installed base of 35 million units in the U.S. alone, and more than 67 million worldwide. That's way ahead of Microsoft's
But that is most definitely not the whole story of Nintendo's success. Software accounts for nearly double the dollar sales of gaming hardware, and Nintendo has made darn sure that every Wii sold will inspire a whole bunch of game purchases -- directly from Nintendo.
Of the 10 biggest-selling video games of 2010, six were made for Nintendo's Wii or DS platforms and published by Nintendo itself, including the top 3. Activision Blizzard
I'm a stickler for sales
You may have heard of Apple
So when Microsoft announces that 10 million units of its Kinect controller have sold to date, I'm suitably impressed by the quick uptake but not blown over until software sales follow suit. Microsoft cheerfully said that 10 million standalone Kinect games have been sold worldwide as well, meaning about one game per Kinect controller. Not terrible, given that the product's been available since only November. But not great, either.
And when Microsoft presents a list of upcoming attractions for the platform, Mr. Softy's own game-publishing arm makes just a token appearance in the Avatar Kinect social-entertainment app. No, it's not really a game. For that, Microsoft leans on titles from French powerhouse Ubisoft, indie developer Twisted Pixel Games, and rivals including Take-Two Interactive
You can beat that with a stick
If my company had developed a winning hardware platform, I'd make sure that the software wing of my house piled on, stat. Microsoft is missing a major opportunity here. In general, this lack of opportunistic killer instinct is what keeps Microsoft's gaming operations down to a mere hobby -- and an expensive one at that, with high manufacturing costs.
If Microsoft wants to make real money on the Kinect, it had better sit its gaming-software division down for a serious talk. Hardware-plus-software synergies create the real smash hits in this business, and when was the last time you got more excited over Sony's hardware-based results than those of exclusive software shops such as Activision or Take-Two?
It's not too late to whip this sorry state of affairs into shape, but the real opportunity may have passed with the high-profile Kinect launch and its first holiday season already in the rear-view mirror. Sorry, Ballmer -- you'll just have to settle for a record-breaking launch of expensive hardware followed by a modest uptick in the truly profitable software sales. I guess any success in this sector feels fresh to the Redmondians.
Keep an eye on Kinect and how Microsoft handles it from here on out. Just add Microsoft to your Foolish watchlist, and you'll be all set.
Editor's Note: A previous version of this story stated an out-of-date figure for Xbox 360 sales. The Fool regrets the error.
Fool contributor Anders Bylund holds no position in any of the companies discussed here. Microsoft is a Motley Fool Inside Value recommendation. Take-Two is a Motley Fool Rule Breakers choice. Apple, Activision, and Nintendo are Motley Fool Stock Advisor selections. Motley Fool Options has recommended a bull call spread position on Apple, a synthetic long position on Activision, and a diagonal call position on Microsoft. The Fool has written puts on Apple and owns shares of Activision, Apple, Microsoft, and Take-Two. Motley Fool Alpha owns shares of Activision. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.
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