The data below comes from the publishing and digital sales results for Activision Blizzard, Electronic Arts, Ubisoft, Take-Two, and THQ. It has all been collected, or in a very few cases estimated, from statements made in the public quarterly statements of each publisher. You can visit their investor relations websites (linked above) to peruse the figures yourself.
Keep in mind that these publishers aren't the entire market. For example, I've not included any Japanese publishers, and there is probably a lot of revenue flowing through channels like Apple's and Google's App Stores, and distributors like Steam that isn't counted here.
For the sake of comparison, the data shown below will be referred to as fiscal year 2011, which ran from 1 April 2010 through 31 March 2011, and fiscal year 2012, which ran from 1 April 2011 to 31 March 2012. I'll refer to these periods as FY2011 and FY2012, respectively.
So, how big of a piece of the video game market do these publishers represent? In FY2011 these companies reported global revenues of $11.4 billion. In FY2012, that revenue had decreased 3.8 percent, to $11.0 billion.
Now, let's break it out and see how much of that revenue was digital and how much was retail. Here is a picture of the retail revenue from each year, subdivided by publisher.
That's a total of $8.7 billion in revenue in FY2011, falling to $8.1 billion in FY2012, or a contraction of 7.8 percent. For the sake of comparison, total software sales in the U.S. during the same periods showed a contraction of 9.4 percent, from $9.1 billion to $8.3 billion.
In terms of digital revenue, the picture is slightly more rosy. However, there are some interesting differences from retail. Here is the graph:
The first thing you'll notice is that Activision Blizzard and Electronic Arts dominate the digital sales among this group of publishers. They accounted for $2.5 billion out of the $2.7 billion total in FY2011 and then $2.6 billion out of the $2.9 billion total in FY2012.
Also notable is that Activision Blizzard's digital revenue decreased 13.9 percent from FY2011 to FY2012, mostly due to very sharp decreases in digital revenue in the last two quarters (from 1 October 2011 to 31 March 2012).
Before moving on, I want to note that in FY2011 the revenue reported here was 77 percent from retail sources and 23 percent from digital. That shifted slightly to 73 percent retail and 27 percent digital in FY2012.
Now, let's look at each publisher individually. I want to give a picture of how much each publisher is taking in from digital sources compared to its retail sales. First up is Activision Blizzard, which has seen its mix of retail and digital revenue remain basically fixed from FY2011 to FY2012.
Essentially what has happened here is that Activision Blizzard's retail and digital revenues both fell from year to year, but declined in such a way that the ratio stayed fixed. With the shrinking tail of Call of Duty sales, and the launch of Diablo III during May, it's quite likely that this mix will tilt more toward digital in the coming quarters.
Electronic Arts has been extremely aggressive on digital growth, and their revenue mix, pictured below, reflects that strategy.
Electronic Arts saw its retail revenue fall a mere 2 percent in the last fiscal year, while its digital revenue grew 47 percent year-over-year from $833 million to $1.23 billion. That gave the company a healthy 9.7 percent year-over-year growth across both segments. Moreover, I'd point out that over 30 percent of Electronic Arts' revenue now comes from digital sources. Ideally, that digital revenue carries a higher profit margin, which should help make up for weaknesses in packaged software sales.
Next up is Ubisoft, which has more than doubled its digital sales in the last year.
As the graph above shows, Ubisoft managed to hold its retail sales relatively flat from year to year, but grew its digital revenue at a rate of 115 percent. However, because digital revenue now accounts for a small fraction of the company's sales, its total revenue grew only 3 percent for the year.
Take-Two, by comparison, barely grew its digital revenue in the past year, as the figure below demonstrates:
Take-Two's retail revenues dropped by a stark 30 percent from FY2011 to FY2012, and unlike Ubisoft, it didn't have dramatic growth in its digital segment to help make up for that decline. In fact, Take-Two's digital revenues only grew by a meager 4 percent. It would be extremely interesting to know how much the release of Grand Theft Auto III for Apple and Android devices contributed to the company's $105 million in digital sales.
Finally, THQ saw its digital revenue increase by 68 percent from FY2011 to FY2012, from $35 million to $59 million.
The figures above, I believe, help illuminate just how varied the digital picture can be. Some companies, like Take-Two, are barely growing their digital revenue while others are growing extraordinarily quickly, like Ubisoft and Electronic Arts. The net growth across all five of these publishers is right around 10 percent, year-over-year.
If current trends were to continue, these five companies could reach 40-50 percent digital revenue within the next three to five years. Of course, that will depend on many factors, including the launch of new platforms and the fortunes of future software releases. It will be worthwhile to watch the relationships between these publishers and the big retailers like GameStop and Walmart during this period, since they could be increasingly marginalized.
Check back after E3 for more on these publishers, and others. At that time, I hope to break out the figures for each of these companies further, beyond retail and digital and into other segments.
When taking about Ubisoft, you say digital grew 115%, but when talking about Take-Two you switch to percent-units and say the growth was only 4%, when in reality it grew 50%.
So if EVERYTHING was digital would i get a picture of loot rather than the swag presant in borderlands 2 ultimate loot edition? It's going to be much harder to convince gamers to shell out $79,-149 for swag to a game they can play but never hold,touch or see.
Buying journey is one thing but if it had an unlimited sands edition @$99 that would be a hard sell for digital but stamp it on a bd and put it in a box well that's another story.
Yes digital's more convient especially on a handheld where all your games are with you but a ps3/360/wii is tethered to a hdtv and can't just be whiped out like a vita or 3ds because it must still be hooked up in a new location.
If all that came with a playstation,xbox or wii was a wifi/ 4g gamepad which not only had a screen but wireless hdmi then everything would be cloud based and whether at home or on the go you could play everything digitally no hdd storage required....but would gamers accept gamepad as console without a box to tether to a hdtv?!
I think it boils down to Digital games not having Collector's Editions with swag, since they are not collectible entities themselves. I personally wouldn't miss the loss of plastic trinkets and cards, if it means increased exposure for indie titles and more revenue % to the developer. I'm excited for Borderlands 2 the game, I couldn't care less about an "Authentic Marcus Bobblehead".
The whole idea of selling a box of inexpensive trinkets and cards for an extra $20-$90 will not makes the games themselves any better, and while it's a loss for a passionate fan of the IP and game universe, the average gamer won't even notice/care.
There is still room for such deals, they will simply be the exception rather than the norm. It would probably be like the Nine Inch Nails deal a while back in which the tiers started as just a digital download, the digital download plus a physical copy, the same plus more swag, etc. Kind of Like Kickstarter rewards.
The key would be giving the consumer instant access to the digital version and pricing the physical version plus swag to match the true cost of creation plus shipping.
A like didn't feel like enough, so I'm adding a comment: Great Job on the article. This is the type of content I look forward to reading when I visit Gamasutra.
One thing is for sure, an all digital retail space for games will result in lower prices, whether major publishers want it to or not. That is the lesson of Steam and the iPhone. There will be a race to the bottom for pricing. That will be a good thing for gamers. It means they can buy more games.
Another thing that will be true is that all digital will result in the removal of DRM, especially for PC games. Gamers will not support games with DRM if it goes digital, unless such "DRM" is Steam. Anything more egregious than Steam will result in far fewer sales and more public backlash.
Low prices and no DRM is what the future holds. I hope the major publishers are ready for that future. If not, they will fall to the wayside much like the legacy music industry.
"One thing is for sure, an all digital retail space for games will result in lower prices, whether major publishers want it to or not. That is the lesson of Steam and the iPhone."
Will it? Even Steam is more open than the console market (and the iPhone market is even more open). I think the pricing decrease is much more a product of market openness - including greater involvement of the developer in setting prices, greater competition on the service, and smaller pre-release overhead (the revenue % maybe greater in some cases, but even for iOS you're looking at ~$1k overhead for a cheap Mac and iDevice, compared to 10x that and special negotiations to get Sony/MS/Nintendo to even look at you).
Right now Sony, Nintendo, and Microsoft have absolute price discretion on their services; most software still goes through concept approval as well as far more technical certification than iOS or Steam; and dev hardware still costs a ton. Going digital doesn't address any of this. Sony's probably the worst offender here - as it's gone more digital, its generally been overpriced compared to retail and they've implemented even more onerous DRM. You could argue Sony's failure is shown in its current market prospects, but it's not like Microsoft has done much different so far.
Gamasutra should really let you (and other articles) link their twitter account to their profile. I was looking for yours so I could credit you directly (as well as @gamasutra) when tweeting this article, and found a very disturbing Matt Matthews on twitter:
https://twitter.com/#!/mattmatthew
All of this could have been avoided if Gamasutra would just let writers link to their personal twitter feed.
Something i'm suprised the game industry hasn't done yet is digital copy so when you buy a new game like borderlands 2 even @ $59 you'd get a digital copy with your physical game. This would nudge resisant gamers along the digital route getting them to give up holding a box,disc,card etc like a comfortable security blanket.
The question would be do we put it on our hdd or do an ultraviolet approach where as long as i'm logged in as with my gammertag i could access the content from ANY playstation or xbox...or when nintendo catches up nintendo.
Yes i'm aware nintendo wants to mingle digital and retail like sony did with pattapon 2. You'd go to the store buy a gamebox as per the norm but there was no umd just a code to download the game.
Then there's the problem that the united states is 15th @ broadband speed,cost and penitration. In order for this utopian digital era to happen we need more outfit's like sonic.net but everywhere not road runner wideband @$99 a month.
Sonic offers gigabit internet @ $70 a month but only in california that must change because without the internet being everywhere and cheap as air this won't be an absolute but a convience.
I guess its ironic that EA has been making such a heavy push for digital that it might be making everyone else's service better. Ubisoft is starting to drop their draconian DRM, which is good and will built up good will with consumers. THQ drops the terrible Games for Windows Live and goes for Steamworks. And I've never heard any bad things about Take-Two, so I assume they're golden. Too bad they haven't been as rewarded with growth in the digital sector as the others.
Anyway, as long as publishers can offer a good hassle free experience, I don't have a problem with the expansion of the digital market place.
Interesting but doesn't really give the big picture ... I know I sound like a broken record on this, but fact is these are not the major players in digital. Valve is. Riot Games is. World of Tanks is. The e4xplosive growth in digital is in F2P, not downloading map packs over XBL.
Also great comments from everyone. Several others are quite correct in their assessments when you sample beyond the big 5 'Western Hemisphere' Publishers. When you throw in others such as Nexon, Zynga (Perhaps?), Shanda, TenCent, etc you'll get an even bigger ... shall I say 'bias' towards the digital storefront. Frankly speaking.. it's the Asian (Eastern Hemisphere Publishers) that are schooling the West. They've largely went digital (F2P/DLC/etc) a long time ago. I also conjecture that it's one of the big reasons they're flush with cash & have the ability to be purchasing W. Hemisphere Games ISVs. (not the other way around)
Speaking 'personally' - I AM a dinosaur in that I love the physical disc; but am now a convert. STEAM & BattleNet for example - I find to be outstanding services. I love the extra flexiblity & the more extensible they become to other screens - the more I can stay connected as a gamer. However; therein lies the Achilles heel - I don't always have a great connection. So having the option of a local copy, or the ability to play offline becomes imperative. (IMHO) I'm also a fan of the Collector's Editions.... but not everyone can, or is willing, nor should they be, forced into buying those.
Lastly; we should stop & ask ourselves... what are the biggest advantages of switching to digital? The biggest is perhaps 1) Cost Savings. Cost of Goods (COGS) goes way down. DRM costs can go down. 2) Shipping Costs - nada. 3) Global on day 1 - Where there are connections. So.. you can hit a much broader swath of the market that way. Which behooves ISVs to localize their content as much as possible. However; here's the rub... the ISVs save considerable margin.. but all too often none of those savings are being passed on to you (me) the Consumer. This is where I believe we should get some sort of price break. Some do it... some don't. This won't make me many friends with my ISV buds though. : )
Buying journey is one thing but if it had an unlimited sands edition @$99 that would be a hard sell for digital but stamp it on a bd and put it in a box well that's another story.
Yes digital's more convient especially on a handheld where all your games are with you but a ps3/360/wii is tethered to a hdtv and can't just be whiped out like a vita or 3ds because it must still be hooked up in a new location.
If all that came with a playstation,xbox or wii was a wifi/ 4g gamepad which not only had a screen but wireless hdmi then everything would be cloud based and whether at home or on the go you could play everything digitally no hdd storage required....but would gamers accept gamepad as console without a box to tether to a hdtv?!
The whole idea of selling a box of inexpensive trinkets and cards for an extra $20-$90 will not makes the games themselves any better, and while it's a loss for a passionate fan of the IP and game universe, the average gamer won't even notice/care.
The key would be giving the consumer instant access to the digital version and pricing the physical version plus swag to match the true cost of creation plus shipping.
Another thing that will be true is that all digital will result in the removal of DRM, especially for PC games. Gamers will not support games with DRM if it goes digital, unless such "DRM" is Steam. Anything more egregious than Steam will result in far fewer sales and more public backlash.
Low prices and no DRM is what the future holds. I hope the major publishers are ready for that future. If not, they will fall to the wayside much like the legacy music industry.
Will it? Even Steam is more open than the console market (and the iPhone market is even more open). I think the pricing decrease is much more a product of market openness - including greater involvement of the developer in setting prices, greater competition on the service, and smaller pre-release overhead (the revenue % maybe greater in some cases, but even for iOS you're looking at ~$1k overhead for a cheap Mac and iDevice, compared to 10x that and special negotiations to get Sony/MS/Nintendo to even look at you).
Right now Sony, Nintendo, and Microsoft have absolute price discretion on their services; most software still goes through concept approval as well as far more technical certification than iOS or Steam; and dev hardware still costs a ton. Going digital doesn't address any of this. Sony's probably the worst offender here - as it's gone more digital, its generally been overpriced compared to retail and they've implemented even more onerous DRM. You could argue Sony's failure is shown in its current market prospects, but it's not like Microsoft has done much different so far.
Gamasutra should really let you (and other articles) link their twitter account to their profile. I was looking for yours so I could credit you directly (as well as @gamasutra) when tweeting this article, and found a very disturbing Matt Matthews on twitter:
https://twitter.com/#!/mattmatthew
All of this could have been avoided if Gamasutra would just let writers link to their personal twitter feed.
The question would be do we put it on our hdd or do an ultraviolet approach where as long as i'm logged in as with my gammertag i could access the content from ANY playstation or xbox...or when nintendo catches up nintendo.
Yes i'm aware nintendo wants to mingle digital and retail like sony did with pattapon 2. You'd go to the store buy a gamebox as per the norm but there was no umd just a code to download the game.
Then there's the problem that the united states is 15th @ broadband speed,cost and penitration. In order for this utopian digital era to happen we need more outfit's like sonic.net but everywhere not road runner wideband @$99 a month.
Sonic offers gigabit internet @ $70 a month but only in california that must change because without the internet being everywhere and cheap as air this won't be an absolute but a convience.
Anyway, as long as publishers can offer a good hassle free experience, I don't have a problem with the expansion of the digital market place.
Also great comments from everyone. Several others are quite correct in their assessments when you sample beyond the big 5 'Western Hemisphere' Publishers. When you throw in others such as Nexon, Zynga (Perhaps?), Shanda, TenCent, etc you'll get an even bigger ... shall I say 'bias' towards the digital storefront. Frankly speaking.. it's the Asian (Eastern Hemisphere Publishers) that are schooling the West. They've largely went digital (F2P/DLC/etc) a long time ago. I also conjecture that it's one of the big reasons they're flush with cash & have the ability to be purchasing W. Hemisphere Games ISVs. (not the other way around)
Speaking 'personally' - I AM a dinosaur in that I love the physical disc; but am now a convert. STEAM & BattleNet for example - I find to be outstanding services. I love the extra flexiblity & the more extensible they become to other screens - the more I can stay connected as a gamer. However; therein lies the Achilles heel - I don't always have a great connection. So having the option of a local copy, or the ability to play offline becomes imperative. (IMHO) I'm also a fan of the Collector's Editions.... but not everyone can, or is willing, nor should they be, forced into buying those.
Lastly; we should stop & ask ourselves... what are the biggest advantages of switching to digital? The biggest is perhaps 1) Cost Savings. Cost of Goods (COGS) goes way down. DRM costs can go down. 2) Shipping Costs - nada. 3) Global on day 1 - Where there are connections. So.. you can hit a much broader swath of the market that way. Which behooves ISVs to localize their content as much as possible. However; here's the rub... the ISVs save considerable margin.. but all too often none of those savings are being passed on to you (me) the Consumer. This is where I believe we should get some sort of price break. Some do it... some don't. This won't make me many friends with my ISV buds though. : )