Latin America is now the second fastest growing gaming region in the world just behind Asia Pacific but ahead of North America and Western Europe. This year we expect revenue generated by home console software sales to exceed $1.2 billion and account for around 30% of total revenue generated by video games software in the region. Console hardware revenues are expected to exceed $3 billion this year across Sony, Microsoft and Nintendo.
Looking back to 2014 we can see that Latin America was the third largest market for console hardware revenues with total sales amounting to $2.8 billion, just behind North America and Western Europe who saw revenues of $5.1 billion and $4.7 billion respectively. In Latin America the Xbox One was the best selling next generation console in 2014 through official sales channels.
As noted in my last report, Sony generated approximately $8 billion in sales from gaming hardware worldwide in 2014 and we believe that Latin America accounted for approximately 16% of that total. Microsoft generated approximately $5.3 billion in gaming hardware revenue and saw a larger 20% share from Latin America. Latin America remains a big market for Microsoft and is where they have done well traditionally with the Xbox 360 last generation.
In Latin America there are three key gaming markets, Mexico, Brazil and Argentina. Mexico is by far the leading market for official console hardware and software sales thanks to much laxer laws on taxation of gaming products compared to Brazil and Argentina. Mexico entered the North American trade agreement in 2003 which allowed imports of console hardware and software with little to no import duties allowing for the price of entry for official consoles to be lowered. Microsoft started to target this market very strongly and with the price advantage over the PS3 led to Mexico becoming one of the top 5 markets for Xbox and allowed the 360 to have a huge lead over the PS3.
In Brazil and Argentina there are still taxes in place on the sale of gaming goods in the country. Microsoft started production of the Xbox 360 inside Brazil in an attempt to reduce the price of the console by 40% and drive adoption of Xbox products in the country. This move has allowed Microsoft to not only gain a significant price advantage over Sony but allowed the Xbox 360 to take 85% market share last gen. At launch the PS4 cost approximately $1,800 in Brazil compared to the locally manufactured $1,000 Xbox One. It’s no wonder that Sony have started manufacturing consoles in Brazil this year.
The infographic below is one that many have seen before and helps demonstrate why the PlayStation 4 is so much more expensive than the Xbox One in Brazil (and Argentina). This month has seen the PS4’s price drop in the country but it is still more expensive than the Xbox One.
In 2014 it’s estimated that around 600,000 Xbox One’s and PlayStation 4’s were sold through to end users in Mexico, Brazil and Argentina with around 75% of those sales attributed to the Xbox One. The overwhelming majority of sales came from Mexico where pricing for the consoles is lower and much more affordable, this is reflected in the chart below which shows total revenue generated by each market. In Brazil the Xbox One also sold the most consoles whilst in Argentina the PS4 took the lead in 2014. This is because the Xbox One did not officially launch in the country until December 3rd 2014 and therefore only had one month of sales compared to the 12 months the PS4 had.
It is very important to note that this chart only covers official sales in the countries/regions mentioned and does not account for grey imports. The grey market in Latin America is very large and sales from other regions may actually see a final sale in one of the above regions. That’s why the number of PS4’s sold in Brazil may actually be much higher when taking the grey market into account and the number of Xbox Ones may be much higher in Argentina as well.
There is growing demand for games consoles in Latin America and the Xbox One is expected to extend its lead through official sales channels off the back of the previous success that was the Xbox 360 and due to the pricing advantage the console has. Latin America represents a great opportunity for Microsoft and it means that Sony will need to aggressively market the PS4 in Mexico to have any hope of regaining the market there whilst also focusing on reducing the price further in Brazil now that they are manufacturing consoles in the country.
Microsoft have done well to target this emerging market and have come out on top as the leader in Latin America.. However they still have a long way to go in developed markets such as Western Europe and the USA and emerging markets such as the Middle East and Asia where the PlayStation 4 still leads. The PlayStation 4 remains the cumulative sales leader worldwide and has sold in 25.3 million units worldwide as of June 30th 2015, almost double that of the Xbox One.*Authors note – The grey market plays an integral part in Brazil and Argentina. As this article only talks about official sales it is good to keep in mind that sales via the grey market will account for a healthy percentage of sales in these countries. Data is in this article is sourced from NPD, GfK, Newzoo, Euromonitor as well as estimates and analysis from myself.