The Xbox One can't seem to escape unfavorable comparisons with Sony's (NYSE:SNE) PlayStation 4. Even prior to the official unveiling of Microsoft's (NASDAQ:MSFT) latest console, a controversy involving the system's planned implementation of an anti-used games mechanism and an online connectivity requirement had the company doing damage control and playing catch-up. Now, PlayStation 4's graphical advantage and substantial sales lead generates ongoing stories that the Xbox brand must contend with.
Sony had sold more than 7 million PS4s to consumers as of April 6. By comparison, Microsoft's recent fiscal report has the Xbox One at 5 million units shipped to retailers. The distinction between sold and shipped is particularly relevant in this case, as substantial Xbox One stock has built up in retail channels. Lifetime-to-date sales of the system are somewhere just north of 4 million units. Unless Microsoft implements a price drop sooner than anticipated, Sony's PlayStation 4 will soon double the Xbox One in sales.
Xbox One faces major demand drop-off
At the beginning of January, Microsoft announced that it had sold over 3 million Xbox One consoles to consumers. The company's fiscal report shows 2 million Xbox consoles shipped to retailers in the last quarter, 1.2 million of which were Xbox Ones. The fact that Microsoft is reporting combined sales of its platforms is itself a bit worrisome, but a recent announcement from the company's CFO that manufacturing of the One may slow or temporarily cease gives a clear indication that the console is not moving as quickly as Microsoft had anticipated.
PS4 has huge European momentum lead
In a March 3 blog post, Sony took to the net to celebrate its latest console surpassing 6 million units sold to consumers. A little more than a month later, the company was again announcing good news through the official PlayStation blog, this time cheering the PlayStation 4's passing of the 7 million units sold mark.
While the PS4 has been routinely outperforming the Xbox One in North America, the reported sales gap in the territory is actually less than half a million units. Japan, similarly, accounts for a relatively small portion of PlayStation 4's global sales lead. LTD numbers for Sony's newest console in Japan are just above half a million units, and momentum has slowed dramatically. The real difference maker has been Europe, where Sony's console is outperforming Microsoft's by huge margins.
Sales tracking from NPD Group puts North American sales of the Xbox One at approximately 714,000 units for the months January through March. That would likely put European sales for the period at a little over 300,000. Of the approximately 1 million units that PlayStation 4 sold between March and April, 370,000 units came from the U.S., while sales in Japan accounted for approximately 120,000 units sold. This means that Sony's console sold approximately 500,000 units in Europe and other territories in the span of one month, more than Microsoft managed across an entire quarter.
Where are we now?
Sales of PlayStation 4 have dropped considerably in Japan. The system is on track to sell about 60,000 units in April. Assume that PlayStation 4 sells 350,000 North American units in the month, and that the Xbox One sells 300,000 units in the same time period. If the two platforms maintain their levels of European sales, the PlayStation 4 would be very close to 8 million global sales, while the Xbox One would be sitting at approximately 4.4 million units sold.
If sales continue at roughly the same levels as those from March and April, sales of PlayStation 4 are on track to double those of Xbox One by the middle of July. Beyond its launch window, Sony's console has been selling approximately 1 million units per month. In comparison, Microsoft's system has been posting approximately 400,000 units per month. This trend would have the PS4 nearing 11 million units sold by the end of July, while the Xbox One would be somewhere in the neighborhood of 5.5 million. It's likely that both consoles will see some sales drop-off in the coming months, so those numbers may be a touch optimistic, but present demand suggests that sales decline will hit Xbox One harder. The PS4 could double its rival's sales even sooner.
Has Sony wrapped up market leadership for the generation?
At the beginning of the last hardware cycle, Microsoft officials cited earlier generations and stated that the first console to sell 10 million units would be the one to control the market. While the winner of the last round of the console wars and the value of passing 10 million sales first as an indicator remains debatable, it's clear that the PlayStation 4 will reach that milestone long before Xbox One. Microsoft's ability to shift the momentum depends on the introduction of an effective price reduction and whether or not it can convince consumers that its system offers better games and services than the competition.