NPD: Behind the Numbers, September 2010
October 18, 2010 Page 1 of 4
At the beginning of 2010 just about everyone following the video game retail market figured that this year couldn't be nearly as dismal as 2009. After all, during 2009 the software revenue reported by the U.S. retail tracking NPD Group had fallen 10% from the 2008 – the industry had surely put the worst of its declines behind it.
Now, with three complete quarters of 2010 in the past, software sales have contracted another 8.4% and there are few reasons to think the trend will reverse itself before the year is out.
There are bright spots among the general gloom. The Xbox 360 and PlayStation 3 are having their best years ever, which has to please their respective manufacturers. The biggest launch of the year, Halo: Reach, shot directly to the top of the year-to-date software sales chart after consumers snapped up over 3 million copies during launch.
Below we'll first go over the general revenue and units figures and then dig into some larger trends. First up, we'll show just how well Microsoft appears to be executing its business plan for the Xbox 360, including how it can reach 6.5 million systems during 2010 – a new record for the platform.
Next we'll look over what's known about the launch of Sony's new Move system for the PlayStation 3, including exclusive sales figures for Sports Champions, a first-party launch title.
Finally, we'll examine the software sales chart and reveal the top 10 titles so far in 2010, with a comparison to the standings from the first quarter.
Industry At a Glance
According to the September 2010 retail sales estimates released by the NPD Group last week, total consumer retail spending on new video game hardware, software, and accessories (excluding PC software) totaled $1.177 billion, down 8% from the same month in 2009.
With the declines in demand for the Nintendo Wii and DS, as well as the collapse of the PlayStation 2 and PlayStation Portable markets, the hardware segment is responsible for much of the decline in revenue in 2010. Hardware revenue is down 13% or $475 million, and unit sales are down at an equal rate.
In the software segment the industry appears poised to truly fall further behind this year. Already year-to-date revenue is down around $450 million and we estimate that total unit sales are down about 10% (approximately 140 million in 2009, compared to 125 million in 2010).
However, at this point in 2009 the industry still hadn't had its biggest release: Call of Duty: Modern Warfare 2. While it is possible that cumulative sales of several titles will drive industry revenue to similar levels this year, we are dubious about that prospect.
The top-line figures for the industry as of September 2010, as provided by the NPD Group, are shown below.
The NPD Group is now clearly labeling their media releases to indicate that the figures include only retail sales. On Friday they provided their estimates of extra-retail sales, including mobile games, downloadable content, and casual games, along with other segments. We will have more to say on this report in a future analysis.
For the time being, our current discussion will focus primarily on the retail data provided by the NPD Group. We will revise our our expectation for the full-year figures, down from $19.5 to $18.5 billion. If this year's trend of -8% growth continues through the end of 2010, our current prediction will have still been too optimistic, since prolonged contraction at that level will force calendar 2010 revenue to the level seen in 2007.
The figure below shows how closely current revenue levels resemble 2007 more than 2008 or 2009.
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