NYT: Math, You’re Doing it Wrong

April 21st, 2008 · 6 Comments

So the New York Times released a piece today with “alarming news” that the Wii is “underperforming” in the software sales business compared to Sony and Microsoft, respectively. They trot out the statistic that the Wii only sells 3.7 games per owner per year to the PS3’s and 360’s 4.7 and 4.6 titles, respectively. Let’s blockquote those so they’re easier to see at a glance:

Wii: 3.7/home/year
360: 4.7/home/year
PS3: 4.6/home/year

While I’m sure the fanboy crowds out there will no doubt trumpet the “pwned!” card for this, where the NYT misses the mark here by a wide margin is by not talking about the installed base of each system. While they do mention that the Wii enjoys a “big” audience, they just don’t say how big. I’m being lazy and I don’t feel like digging up YTD numbers on the hardware units for 2007 (actually I looked just now and I couldn’t find them after a few minutes), so let’s just look at the most recent report from March:

Wii hardware units sold: 721,000
360 hardware units sold: 262,000
PS3 hardware units sold: 257,000

As it turns out, the Wii enjoyed a roughly 2.5-1 hardware sales ratio to MSoft and a 3-1 ratio to Sony. Not only is Nintendo making money on every single hardware unit sold, this changes the software numbers drastically. If we extrapolate out the 3.7 software units per Wii hardware unit from the story, assuming it is true, these are the predicted sofware sales (for the year) just from the hardware units sold in March:

Wii March software to hardware ratio projected: 2,667,700
360 March software to hardware ratio projected: 1,231,400
PS3 March software to hardware ratio projected: 1,182,200

The clear winner in total predicted software sales here, by more than a 2-to-1 (or a 200%) margin, is the Wii. Compared to the previous margin implied if you only look at software units per console, which at best is a 79% margin difference in favor of Microsoft.

This is a pretty unfair and irresponsible characterization of the state of Nintendo and the state of the industry in general by the NYT. In truth, they are outselling the competition, as we can see from the actual software sales during March. Granted, March contains Super Smash Bros Brawl numbers, but according to the NYT, those were horrible, right? So it should just be an “average” month here for Nintendo. Collating the numbers at the Joystiq article for top 10 software sales, we have actual software sales of:

Wii actual March software sales: 3,374,000
360 actual March software sales: 1,832,000
PS3 actual March software sales: 225,000

While the PS3 had an abysmal month, the Wii still held up to almost a 2-to-1 (200%) ratio of software sales vs. their competitor. The math of total software sales holds up under at least a monthly scrutiny, even if it doesn’t hold up for PS3 (4.6 software/unit? I hope they had an awesome X-mas). I’d be even more interested to see if the ratio/math holds up for the YTD numbers (which is where they would have had to have calculated the original X pieces of software/hardware ratio from), as it seems every month save one the Wii is owning the PS3 and 360 in hardware sales. Where the software ratio might break down is the Lifespan to Date numbers for each system, as I think the 360 is still ahead in total installed base numbers of all the current-gen systems.

The bottom line here is that this is a hilariously bad piece of games reporting from the NYT, and quite a spin on the numbers game. They actually state that retailers are having trouble selling or moving Wii software, when the numbers reflect the exact opposite. Nintendo is selling twice the number of software units than the next closest competitor, at least in March. This is plainly obvious from the data.

But what’s truly upsetting is how many major news outlets ate this up without actually stopping to read their own stories or pieces on the actual sales numbers that hit every month. Software ratios mean less when the hardware sales are dominating the bajeesus out of the competition. In fact, without incorporating the totals for both hardware and software sales, I would forward that sofware to hardware ratios mean little to nothing at all. Maybe they were important last gen?

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Tags: business

6 responses so far ↓

1 Liam // Apr 24, 2008 at 5:04 pm

Nice post. I do not own a Wii but those article was definitely lacking the key points that you laid out. I had read the article earlier in the week and found it to not have a basic understanding of the nature of the industry. I love the NY Times but sometimes they have an incorrect take on things because with so many of their articles they attempt to look for a large earth shattering trend that a story represents. Basically they like to hype things up that they are reporting on. I still the paper though and your post was a great rebuttal to the piece.
2 Alex // Apr 27, 2008 at 6:58 am

I agree, excellent rebuttal. Did you, btw, send this post to the NYT? You should, really.
3 Dom // May 15, 2008 at 1:01 am

But surely their point is that each Wii owner buys fewer games than their next-gen counterparts? I liken this article to those last year that showed that 67% of Wii owners don’t actually play their Wii. Arguing that Nintendo sold twice as many consoles is totally missing the point.

I’ll agree that their use of the term “underperforming” is somewhat naive, but I also think that their overall point is a solid one and you haven’t disproved it at all.
4 Joe // May 15, 2008 at 6:26 pm

Umm, selling twice as much as the competition means you’re winning by a 100% margin, not 200%. Also, MS’s “margin difference” (the measurement you used — note the word “difference”) on sales per home is 27%, not 79%. I wouldn’t normally be this picky, but since you’re picking on someone else’s math….
5 spitfire // May 15, 2008 at 7:59 pm

Whoops, yeah, Joe, you’re right.

My math is sound, my late night choice of combining a 2-to-1 (200%) sales ratio and a 100% margin is the error here
6 Tim // May 21, 2008 at 10:23 pm

At this point it should probably stop amazing me as to how often news outlets get their analysis of the numbers wrong or twisted.

I ended up ranting about this when Peter Dille of Sony’s flat out false “If I had an installed base advantage of 3-1, I wouldn’t be crowing too much about a 60-40 sales advantage.” response to the 2-1 sales advantage of Xbox GTA IV compared to PS3 was reported. So many outlets let him just get away with that number.