UK Hardware: Console market plateaus in 2003

Console sales down on 2002 as Sony cleans up again.

Sales of videogames consoles in the UK dropped by 1 per cent by units and 15 per cent by value during 2003 according to ChartTrack's annual hardware figures.

The dip in value is somewhat understandable given the dramatic drop in console prices in general, but it's the drop in units that is most disappointing. On the flip side, the software market has actually increased in value by 7 per cent on the year before, and 15 per cent by value. The hardware figures may have even less impressive were it not for the continued dominance of Sony, which crushed the opposition with another stunning set of figures that helped consolidate its position and ensure that it will be able to ride out the next two Christmases before the eventual early 2006 release of the PlayStation 3.

No.1 dominator

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The PlayStation 2 was by far and away the biggest selling console of 2003 with some 45.6 per cent of the total units sold, (pre fourth gen consoles accounted for just 4.3 per cent of units) but with the Sony machine the highest priced and in its fourth Christmas it had its market share eroded from last year's 47.8 per cent. During the last six weeks of the year, just under one in two consoles sold in the UK was a PS2, demonstrating Sony's vice-like grip on the UK market despite its rivals discounting their machines and bundling top quality games.

As a quick comparison, the PS2 outsold the Microsoft Xbox by almost three to one, and outsold Nintendo's GameCube by almost five to one. Considering the price differences, the technical inferiority and the strength of its rival's first party line-up, this is an incredible result for Sony, and it's almost hard to believe that the company has had such unprecedented success with a machine that had such a painful launch period.

Meanwhile, despite Nintendo's ongoing problems with the GameCube in Europe, it enjoyed phenomenal success with the Game Boy Advance and the remodelled SP, claiming the number two slot in the UK for 2003, capturing an impressive 26.1 per cent of the console market share - up from 2002's 20.1 per cent. The SP constituted 76 per cent of the GBA sales, with stocks of the original, cheaper model almost running out by the end of the year. Over the last six weeks of 2003, total GBA unit sales accounted for 21.3 per cent of the market, although this could have been more were it not for some stock issues which saw sales peak at the beginning of December - unlike all the other formats which peaked in the week before Christmas.

Pear shaped for Cube

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However, Nintendo of Europe will be bitterly disappointed that it couldn't replicate its US success over here, and over the course of 2003 actually managed to sell less GameCubes in 2003 than its launch year, despite the incredibly tempting 79.99 price point. Market share for 2003 was down from 10.4 per cent to just 8.5 per cent and total unit sales fell by a depressing 18.6 per cent, despite the fact that the machine only went on sale in May 2002. Stattos will point to a disastrous spring and summer when retailers almost entirely abandoned the machine, and Nintendo took an age to react to sub four-figure weekly sales. By the last six weeks of the year, things had improved dramatically; with the Cube once again figuring strongly, with 10.5 per cent market share overall on the back of sales that were around 15 to 20 times the level they had been in those long summer days.

Microsoft, meanwhile, will reflect on a year that might have been, having only managed to improve on its 2002 sales by a disappointing 6.6 per cent - and all that despite the launch of the impressive Live service, some of the best games of the year (arguable, admittedly), two price cuts and some incredibly good value bundle deals that almost equated to the machine being given away for free in some of the more aggressive retailers. However, it must be noted that the Xbox was the only main console to increase its sales during the year, so there are some crumbs of comfort for Microsoft.

Although UK sales of the Xbox - crucially - usurped the 50 cheaper Cube by 1.8 to one over the course of 2003, the gulf between it and Sony was almost as vast as the year before, with an embarrassing one to three sales ratio between the Xbox and PS2. During the last six weeks of the year, the Xbox managed to account for a relatively meagre 16.9 per cent of the Christmas market share, but it wasn't until the last two weeks of the year that sales reached the levels that Microsoft would have been hoping for in its forecasts.

Hard times ahead

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With console sales in the UK having seemingly reached a plateau, the next two years ahead could be difficult for retailers, with margins on all four main consoles likely to be eroded to bargain basement levels over the next two years. In all probability, by the end of this year, both the PS2 and Xbox will retail for under 100, while the Cube could be priced around the 50 to 60 mark in an attempt to capture the 'second console' market. Sales in the GBA are likely to remain solid, with a price cut expected by the summer.

Nokia's N-Gage looks increasingly like a failed experiment, while the mid December release of Sony's PSP is likely to only account for a tiny fraction of the overall sales during the year. Nintendo's mooted hardware announcement at E3 could turn out to be significant, but it's clutching at straws to say the least.

With all this taken into account, it looks likely that retailers will continue to concentrate their efforts on stimulating demand in the software market. A return to the aggressive discounting of the summer of 1999 looks like it could be on the cards, and while that's good news for cost conscious consumers, the effect on publishers could be dramatic if they are forced to consistently reduce their trade price to yield to the increasingly powerful major retailers' demands. An interesting year awaits.

Data revised 13.15

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