UK Hardware: Console market plateaus in 2003

Sales of videogames consoles in the UK edged downwards by 1 per cent during 2003 according to ChartTrack's annual hardware figures - a fairly significant slowdown in growth, which may well represent the peak of the current generation.

The hardware figures follow the news that the software market grew in value terms by some 7 per cent during 2003 (around 15 per cent in unit terms), so the market as a whole is certainly still very healthy in the UK.

The figure for hardware value would certainly be worse 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.

The PlayStation 2 was by far and away the biggest selling fourth generation console of 2003, with some 47.5 per cent of the total units sold - but the fourth Christmas for the Sony machine, which remains the highest priced console on the market, saw its market share eroded from last year's 52.7 per cent.

During the last six weeks of the year, a fraction over 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 over five to one. Considering the price differences, the technical inferiority of the PS2 and the strength of its rivals' first party line-ups, 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 difficult launch period.

Meanwhile, despite Nintendo's ongoing problems with the GameCube in the UK, it enjoyed phenomenal success with the Game Boy Advance and the remodelled SP, claiming the number two slot in the UK for 2003, with 27.3 per cent of the console market share - up from 2002's 20.3 per cent.

The SP constituted 77 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 21.7 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.

However, Nintendo UK will be bitterly disappointed that it couldn't replicate the success of the Cube in the US (and indeed in some other European territories) over here, and over the course of 2003 actually managed to sell less GameCubes than in its launch year, despite the incredibly tempting £79.99 price point. Market share for 2003 was down to just 8.9 per cent from 11.9 per cent (2002) and total unit sales fell by a depressing 18.7 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 10.9 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.

It's important to note that these figures are for the UK alone, with performance in the rest of Europe generally considered to have been significantly more positive, especially in the weeks leading up to Christmas. Nintendo has an especially hard time in the UK, for some reason, and the market cannot be treated as representative of Europe as a whole by any means.

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, arguably some of the best games of the year, 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.

Although UK sales of the Xbox - crucially - usurped the £50 cheaper Cube by 82 per cent 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 17.3 per cent of the Christmas market share, and 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.

With console sales in the UK having seemingly reached a plateau, the next two years ahead will see margins on all four main consoles likely to be eroded to bargain basement levels as the market focuses increasingly on software rather than hardware. 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 anticipated mid December release of Sony's PSP is likely to only account for a tiny fraction of the overall sales during the coming year. Nintendo's mooted hardware announcement at E3 could turn out to be significant, but that's clutching at straws to say the least, since not only do we not know what this hardware will be, but we don't know whether it'll even launch in Europe in 2004.

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.

Additional reporting by Rob Fahey