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 (Nasdaq: MSFT) Xbox 360 (50 million globally) and Sony (NYSE: SNE) PlayStation 3 (almost 34 million, again worldwide). If that was all, Nintendo would be a happy camper.
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 (Nasdaq: ATVI) could make a case that Call of Duty: Black Ops adds up to the biggest hit of all once you combine its sales across all platforms, but then Activision has no skin in the hardware game and can't claim to have a symbiotic keiretsu going on. Nintendo does.
I'm a stickler for sales
You may have heard of Apple (Nasdaq: AAPL), another proponent of the closed-ecosystem model. Steve Jobs wants a cut every time you buy an iPhone, or the software you want to run on it, or even the media you'll consume there. Nintendo and Apple are philosophical twins, separated at birth. This is how you build a success story.
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 (Nasdaq: TTWO) and THQ (Nasdaq: THQI). Moreover, Avatar is free to Xbox Live Gold pass holders, creating approximately zero dollars in additional sales. Whoop-de-doo.
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.
