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U.S. retail video game declines continue in February
U.S. retail video game declines continue in February
March 8, 2012 | By Frank Cifaldi




Video game revenues at retailers in the United States dropped 20 percent in February, continuing the industry's consistent declines.

As usual, software was the biggest deterimental factor, with $485.7 million in sales representing a 24 percent decline from February 2011, according to date from the NPD Group.

The number one selling game for the month was Activision's Call of Duty: Modern Warfare 3. The month also saw the debut of one new IP: EA and 38 Studios' RPG Kingdoms of Amalur: Reckoning, which came in at number four.

The top selling console was Microsoft's Xbox 360, which Microsoft says sold 426,000 consoles. Of the three current home consoles, the 360 has been the number-one seller for 14 consecutive months.

Sony's new PS Vita console debuted during the Group's reporting period, though it was only on shelves for four days. Thanks to interest from its debut, overall hardware sales -- while down 18 percent from last year -- was up 87 percent from January's performance.

Note that these declines are specific to physical retail sales. The NPD Group is currently working with EEDAR to generate quarterly reports on game sales through other methods, including used games, rentals and digital sales. The Group estimates these other methods accounted for an additional $550 to $600 million in sales.


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Comments


Colin Rowsell
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Without digital and other methods factored in, the software numbers seem increasingly problematic. $485 million might be a drop from the previous year, but the (monthly? quarterly? yearly?) $550-600 million extra could completely change the picture and the headline.

Joe Zachery
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Everyone else has released their numbers except Sony.
Estimates from Neogafers put last month numbers something like this using the numbers we do know.
Xbox 360 - 426K (-20.4%)
PlayStation 3 - 360K (-11%) (PR Math)
Nintendo 3DS - 262K
Nintendo Wii - 228K (-50%)
PlayStation Vita - 225K (PR Math)
Nintendo DS - 135K

William Johnson
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So...I'm going to propose its all the anti-consumer policies that are bringing the industry down. Its just that its finally catching up to the industry.

For example the ubiquitous use of online passes (there are other reasons too, but that's probably the largest one right now). By using online passes, publishes have hurt the value of their games, so they trade in for less. Now, since the consumer is getting less money per game when trading in, they can't buy as many new titles. So, since consumers have less money, they don't buy as many games.

I'm calling it, and basically saying that publishers have brought this upon themselves. Basic principles of economics would say when an increase in price or a decrease in funds will have a ripple effect on the supply and demand curve. Then the market settles in to equilibrium and basically the same amount of money is being spent, but less games (supplies) are being bought, because technically, there is less money in the system now.

With that said, no publisher will pull online passes. Because the publisher that pulls their pass first will increase the value of their games, sure, but that doesn't guaranty that the consumer will spend the money from trading in a higher valued game to that publisher's next game. This is the prisoner's dilemma. Its better for the industry if everyone gets rid of online passes, but if one publisher doesn't remove online passes, they profit from the other publishers' higher valued games. So publishers would rather have everyone suffer to keep everyone even and losing together.

This is really basic stuff. I assume publishers must have known this would happen. The only reason I could see as to why it'd have been implemented in the first place is because larger publishers think that they'd be able to wipe out smaller publishers when the market falls in to its new equilibrium. And pure anecdotal evidence, THQ's current state isn't looking too hot right now...so I wonder if my theory is correct...

This could be all hyperbole though.

Andrew Chen
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Or perhaps value is being transferred to other mediums.
NPD did estimate that $550-600 million of closely-related (to game industry) sales revenue remains unreported (or inaccurately reported), but the trend over the last several years has reflected strong growth particularly in the digital sector and notably counter to "traditional" sales of physical media.
Appreciated your analysis BTW :)

[User Banned]
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This user violated Gamasutra’s Comment Guidelines and has been banned.

William Johnson
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So my problem with used games is that they are directly tied to new games sales. You can't have a used market without new games to replenish the stock. I know it may seem like games can get traded in forever, but they actually can't. Games do get scratched and destroyed. And other people just hold on to them forever.

And for some more anecdotal evidence, Gamestop's stock should be through the roof if used sales have eaten away at new game sales.

So that leaves only the other explanation, everyone is going digital. This actually does make some sense. Steam is huge. Apple's App Store is huge. The other digital distributers...are not...but they are there at least.

That does make the most sense to me. Between Steam sales and the App Store's race to the bottom, people would buy more because everything is cheap. If we think back to the ye ol' supply and demand curve, well if supply is infinite, the only thing you can do is change the demand curve. There technically is no equilibrium. So when your on these digital stores, your just trying to find the point where you can maximize profit. And it just so happens, that point is selling at a really low price.

I only have one "maybe" problem, and that is a (somewhat) high barrier of entry to get to these stores. You have to buy the hardware and you have to have internet. Now, some 80% of American's do have internet, but that does leave at least 1/5 of America that'd have a hardtime being marketed to. Though, on the hardware price tag, I do think most consumer's would be able to justify the higher hardware price. If only just because you can do more with an iPad or PC then a home console.

I guess there is one more...less rational, problem too. Some people treat PC gaming like its beyond comprehension and iOS games like they're not games at all. I think this is a grave misconception by some people. But I always seem to see a very loud minority expressing these opinions, which does make me wonder just how many there are. And if there are a lot of these people, it'd be very difficult to market to them as well.

I know those two reasons aren't very strong reasons to say digital distribution may not be the problem. But if digital sales were so strong, wouldn't we see more publishers talking about how many copies they sell digitally? Or maybe they want to keep it a secret so that Gamestop and Walmart don't pull their games?

But digital distribution is the most logical reason for falling sales of physical games. I guess there is actually one more reason, people aren't gamers anymore and moved on to other mediums for their entertainment. But gaming provides such a better dollar to hour-of-entertainment then other mediums, that I slightly question it.

Hm...this turned out a lot longer then I was expecting it to... and maybe a little less coherent... I'd delete it out of embarrassment...but I just wasted so much time typing it... eh...someone might find it an entertaining read...

Bob Johnson
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End of cycle. Or at least on the tail end of the cycle.

Andrew Chen
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Good point, wrt console sales the cows are steadily drying up and cyclical-ity (did I just make up this word?) likely effects these sales results.
Dramatically falling software sales, year-over-year, would be cause for attention tho.

[User Banned]
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This user violated Gamasutra’s Comment Guidelines and has been banned.

Bob Johnson
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@Christian

No one said the first whiff of a hardware sales decline is the end of the cycle. :)

No one said we will see all sales higher next generation than this generation.

No one said we will instantly see sales higher either.

But pretty obvious that we are in a transition to next gen platforms. It started with the handhelds. The Wii 2 is coming this year. The 360 may follow next year. Then the PS3.

And of course the old systems are past the traditional shelf life of 5 years.

Smells like end of cycle to me or the start of it for some.

Bob Johnson
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@Christian

Exactly we have systems that are over 5 years old and sales have been declining since 2010. Notice how those systems with declining sales have been replaced or are being replaced this year? :)

Bob Johnson
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@Christian

I am not sure the PS3 saw a drop in sales worldwide last year. :)

But it doesn't take a rocket scientist to take the age of the system, and its place in the market along with sales that are far from spectacular to see that a PS4 will be here in 2 years.

Bob Johnson
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@Christian

Exactly. Could really be end of cycle for them. :)

Jakub Majewski
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Without digital sales, these numbers are meaningless. Imagine the film industry panicking over falling VHS sales, without analyzing DVD sales...

Tom Baird
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But the 550-600 million is a an estimate, without having the proper values for major digital vendors. If 485.7 is a 24% decline 485.7 + (550-600) is a smashing success. Even if digital stayed the same year over year, that lowers the decline to ~10% ish. Now we need to know how much Digital/Used increased year over year and just maybe we even saw a software sales increase.

The estimated part (550-600 million) is larger than the entire retail amount (485.7 million) by a pretty significant margin. Without knowing how much digital changed year over year, we could be looking at a record high, or record low for February, because the estimated unknown element is so much larger than the known. 487.5 million could represent anywhere from 30% to 70% of overall software sales for all we know, rendering any evaluations on these numbers to represent the state of the industry, to be beyond useless and overall dangerous, because false data is worse than no data at all.

Jonathan Murphy
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Of coarse it's down! The economy is bad, people are spending less! Someone make me an analyst!

kevin Koos
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Of coarse it's down! The economy is bad, people are spending less! Someone make me an analyst!

Yeah in 2009 which was close to a record year this applies. In case you havent noticed the economy is a lot better now than it was 3 years ago. Maybe Ipads and such have something to do with this decline.....

Tom Baird
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People keep stating in comments about software sales being down.
There is no evidence for that to be the case.

Retail, packaged software sales are declining, but even as estimates those represent much less than half of the overall software sales. There is evidence of digital sales increasing, but until there are more concrete values with regards to how much it increased by, there is no evidence to show that software sales are either increasing or decreasing. The only software sales claims that can be made from this are about a minority subsection of software sales, and not the software sales as a whole.

k s
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While digital sales are very likely replacing retail sales I think Christian Philippe Guay has a point too. Many of our fellow developers have focused on graphics over gameplay and it is hurting our industry.

Bob Johnson
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Also realize used game sales aren't counted and the longer you get into a console generation the more good used games you have to choose from.

If I waited until today to get a console I wouldn't be buying new titles at $60 a pop.

And the 360, although down 20%, still moved 450k units. That is a pretty good February.

zed zeek
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Hardware Decline? sure less than the last couple of years but
Feb 2008 wii+xbox360+ps3 = 966k
vs
Feb 2012 wii+xbox360+ps3 =1014k

Matt Ployhar
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Given that PC Games can't fall that much further at retail - I'm conjecturing that it's the Console Giant's that have the furthest distance to fall in the Retail Space. <-- As we see more migration to Digital Channels.

It's interesting to say the least. Given that Consoles are seeing now... what already happened to PC's ~7 years ago.... shouldn't we all be running around like chicken little & saying the sky is falling? OMG... Consoles are dying? : )

Harlan Sumgui
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If the trend continues, there is going to be some serious fallout in terms of jobs and corporate structures.

My feeling is that the decline has two major causes:

1)gun shy consumers-- Because 90%+ of retail sales come in the first month after release, companies have pulled out all the stops to drive those sales. Many consumers undoubtedly feel manipulated. For example, game reviews are increasingly being perceived as mere press releases.

2)spectacle has replaced game play. There are countless AAA games that can be described as having spectacular stories, spectacular graphics, and bad gameplay. I think it's a dangerous trend. Too many just want to get through the gameplay as quickly as possible because that is the least enjoyable part of the experience.

Mike Lopez
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Retail is shrinking and there is no doubt about it. Digital distribution is a disruptive technology that has ensured the demise of packaged retail. Mobile/tablet gaming is exploding and with social those new sectors are stealing leisure time and sales from traditional console and PC packaged retail gaming.

No amount of wishful thinking will change those trends. Those that continue to deny the trend will be at risk of being left out in the cold and behind the rest of the market.

If Sony and Microsoft are smart they will release new systems without disc drives and make the leap now. But even if they do that there is too much competition now from mobile/tablet gaming and the consoles will never again experience the runaway success of the PS2 (250M units WW?). I guarantee AAA retail titles will continue to decline as a whole (with only the top titles having any success) and for sure console teams will shrink on average so industry people best look at mobile and social and consider making the jump to help advance gameplay and production values in those areas.


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