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NPD: Behind the Numbers, December 2010
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NPD: Behind the Numbers, December 2010

January 17, 2011 Article Start Page 1 of 5 Next

[Gamasutra analyst Matt Matthews examines December 2010's U.S. video game retail sales data from NPD Group, and looks to 2010 events like the launch of Kinect, contraction of retail software sales and the rise of digital models to see what 2011 may have in store.]

On Thursday the NPD Group released its estimates for retail video game sales in December 2010. It also released estimates for consumer spending on all video game content, including social games, digital distribution, and used games.

Not only were retail sales of hardware and software down for the year, but even with the additional revenue from the extra-retail sources, the full market size remained constant from 2009 to 2010.

Below we will look back at 2010 and pick out the big trends and then look forward to 2011. In the new year the industry faces several big questions:

  • The launch of Xbox Kinect has changed the balance in the console market. What will we consider the new status quo a year hence? Where will Nintendo take the Wii as its sales pace slows?

  • Retail software sales have slowed significantly. Where is the contraction and where is the growth? What are the factors driving the decline?

  • The NPD Group estimates that total consumer spending on games in 2010 was essentially flat from 2009 – even when extra-retail sources like digital distribution and social games are considered. What do these new figures tell us?

Read on for complete details.

The Year In Numbers, Tables, and Graphs

After a good run in October and November, during which the industry posted gains in software and in accessories, the final totals for the industry were below expectations in December.

Few new games were launched in December, but some notable titles like Disney's Epic Mickey for the Wii and Activision Blizzard's World of Warcraft: Cataclysm for the PC, did well.

Moreover, Activision Blizzard's Call of Duty: Black Ops and Ubisoft's Assassin's Creed: Brotherhood and Just Dance 2 all continued to have strong sales in their second month. Despite this, software sales were down for the month both in units and in revenue.

Only the accessory segment – where both Microsoft's Kinect and Sony's Move peripherals are counted – showed growth in December and for the full year. As expected, there was also significant growth in points and money cards for services like Xbox Live and the PlayStation Network.

According to NPD Group analyst Anita Frazier, these cards “grew the most in unit volume” of any accessory, relative to sales in 2009. She went on to call this a “retail reflection” of the growth of extra-retail distribution channels.

Below we have collected the December 2010 and full year figures for retail sales in 2009 and 2010.

The NPD Group also released its 2010 estimates for total consumer spending on video game content, through retail and other sources. They put the value of the market for video game content at $15.6-15.4 billion; this represents $5.5-5.3 billion of additional revenue on top of the $9.35 billion in software sales shown in the table above.

Last month we described how the industry might have reached $19 billion by moving $1 billion in accessories and showing growth in the software segment. Neither of those events came to pass, so the industry ended the year at $18.5 billion. The figure below puts the December and full-year results in context with the past few years.

To put the last couple of years into context, we have gathered the retail sales data from 1997 to the present in the figure below. While the scale is different, we do note that total sales contracted from 2002 to 2004 in a gross manner not unlike the contraction of 2008 to 2010.

Should the retail video game market contract any further in 2011, then it will probably be the longest such contraction in the last 20 years of the video game market. Moreover, the industry will have reset to a level lower than the beginning of the huge growth experienced between 2006 and 2007.

Article Start Page 1 of 5 Next

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Leon T
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I do enjoy reading these , but I also keep wondering why the lack of software support for the Wii is not mentioned when talking about the software decline of the Wii. How does a console keep software sales yoy if less software is being made for it.

It also leads one to think why a console that was selling as much and sometimes more software than the 360 is losing so much support. The Wii can't reach the software levels of the PS2 because as stated that PS2 had a lot of software support. Unless Nintendo releases another Wii Sports or Wii Fit like seller it just will not happen.

Ian Uniacke
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I agree with this. Especially Zelda not coming out in 2010 would have hurt sales.

Anything could happen this year. We all know Sega has several wii games simmering and after the explosive sales of games like JD2 and Epic Mickey maybe they'll decide it's time to bring these games to market. Ubisoft would surely have some more titles up their sleeves too. Well, not to dwell on specifics because what would I know, but all I am really trying to say is that just because we haven't heard about software for 2011 doesn't mean there absolutely couldn't be a good year for wii software.

Michael Wenk
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Well, now I think its pretty clear that once Nintendo drops out the 3DS, they'll announce their next generation system. And no, I really doubt it will be the HD Wii, though I'm sure folks like Mr Jones will say that is all it is, and is too little too late. My guess is NoA will attempt to surprise in some way, but they no longer have any reason to delay the next generation of systems.

eric engen
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i think its pretty obvious why the kinect software sale is what is, first of all i personally believe most units were bought by existing owners looking to: a' experience the new tech and b' get their hobby more accepted by the wife/family by bringing them in and these people needed money for whatever new COD came out etc.. and kinect adventures was just fine by them for the time being, especialy with the high prices these new kinect games demand, i mean hell, those games still sell for like 40-45 bucks in the states and europe is even worse.

i'm pretty sure i remember the wii having the same fate(maybe they still do) of "casuals" being fine with the pack in game for a long while and i think kinect games will experience this even more because these games realy make you brake a sweat and that is some kind of a barrier, i mean i regularly find myself thinking "i dont have the power to play a kinect game right now" so it will take longer for me to get tired of the same game.

lets not forget the folks who bought this for PC hacking purposes which i'm estimating is the 500K range

Omar Drake
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As useful as all of the analysis Mr. Matthews gives us is I think it's still missing a large part of the picture: PC game sales and hardware innovations.

To analyze consoles in a vacuum wherein no other competitors are possibly detracting from sales seem almost fallacious to me, but I suspect it has more to do with the limited information NPD provides. We can't forget that many, many players will choose a PC version of a game over versions available on Xbox 360 or PS3. Considering the increasing acceptance of 64-bit architecture (Win 7) which allows for far greater RAM than any of the consoles offer and the fact that multi-core processors were originally designed to have 8 cores (and then 'dumbed downed' to 2) I think we can see where the growth is really going.

About Kinect: I think Kinect is an awesome innovation in user interface and I would like to see it succeed, BUT as for Kinect sales, it's still way, WAY too early to tell how much of them is being bolstered by the novelty of it. Perhaps my view is too limited, but most Wii owners and players I know and have observed (including the other four people in my own household) use as little movement as possible when motion controls are required and do it from a sitting position if possible. I see Kinect's real hope for sustained sales not so much the 'casual gamers' as the 'non-gamers'.

As I see it, Kinect's appeal is highly divergent from the motivations behind most players' reasons for playing video games to begin with, that is the desire to do something that they themselves could not do otherwise. I play Dragon's Age because I can't go around swinging a sword at monsters, I play Tony Hawk because I'm an uncoordinated schlub, I play Civilization because I am not a god, I play Assassin's Creed because I can't be a vigilante, I play Dawn of War because I am not a Space Marine commander, I play Madden games because I am not a professional athlete, etc. I see Kinect as working slightly differently in that it relies much, much more on the players' own physical skills, not their gaming skills. This i why I said it needs the 'non-gamers' to survive. Lastly, “Remember the gorilla arm!”

Michael Wenk
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I understand what you are saying in motivations of players playing games and the apparent disconnect.

However, what you fail to see is that while you may play a game like madden because you can't really do it in real life, the more real that becomes, the better the experience. This is true of anyone gamer or non gamer. If the Kinect, or Move, or Wii lets you really feel like you're doing it, and doing it well, then it makes for a better experience.

Taking this to its logical conclusion, imagine a game system that makes an uncoordinated person like yourself play basketball on the level of a superstar like Jordan that feels completely real (think holography) and without the work that would require, or the downside (you don't feel tired/sore/X bad effect) , then you have a perfect game.