360 Leads Software Attachment Rates in Console Race
Gamestop and the Susquehanna Financial Group have revealed the approximate game attachment rates for the Xbox 360, Wii and PS3.
Jason Kraft and Chris Kwak of the Susquehanna Financial Group published their "Video Game Journal" report and revealed that the XBox 360 software attachment rate was five games per system sold. Kraft and Kwak's report describes the large increase from 4:1 at the system's launch as "alarmingly high" and that, "the unusually high attach rate on the 360 is a sign of an increasingly unhealthy console growth rate, and should be worrisome to publishers and investors."
They explain that the majority of 360s sold thus far were purchased by hardcore gamers who are naturally inclined to purchase additional game software. If Microsoft is unable to move systems at a consistent rate, the Susquehanna Financial Group analysts feel that the ratio will continue to grow at a misleading rate while 360 systems sit on store shelves. The report's conclusion on the 360's rates states, "If the Xbox 360 sports an attach rate of ten by holiday 2007, it will probably be because it has failed to gather critical momentum. What does it benefit publishers and investors if ten games are being purchased by a total audience of 10 million 360 owners? It doesn't take effort to see that a console with an attach rate of 8 and an installed base of 50 million is superior to a console with an attach rate of 12 with an installed base of 20 million."
In Gamestop's most recent financial conference call, the company revealed the software per console rate for both the Nintendo Wii and the Playstation 3. Nintendo's Wii sales were led by The Legend of Zelda: Twilight Princess and Red Steel, adding up to a sales rate of three games for each Wii sold. Sony's system lags behind, with an attachment rate of 1.5 games per Playstation 3. Gamestop expects that once the Playstation 3 prices drop back to normal levels following the rampant Ebay auctions, growing software and hardware sales will boost the ratio back to its expected levels.
Susquehanna Financial Group unearthed similarities between the Playstation 3 and 360 launches. "We believe the PS3 could exhibit similar attach rate characteristics versus the 360. There is a chance the PS3 will have an even higher attach rate in its first year. Lest anyone conclude this is just the step-function trend of next-gen consoles, we caution that a high attach rate is likely a symptom of hardware shortages and a limited installed base. This is bad for publishers."