Digital game sales are growing in the U.S., but those small gains weren't nearly enough to make up for plummeting software sales at retail during the first three months of the year.
The NPD Group's new "Q1 2012 Games Market Dynamics: U.S." report shows that console and PC game sales across retail, digital, and used/rental revenues reached almost $3.4 billion in the first quarter of the year, compared to more than $3.8 million during the same period in 2011.
Physical game sales make up the bulk of that $500+ million deficit -- some forecast that physical software revenues are performing so poorly this year, they could hit a six-year low in 2012. This category generated $1.4 billion during Q1 2012, down from $2 billion year-over-year.
Sales for digital content (full games, DLC, subscriptions, mobile games, social games) are growing, but not by nearly enough to offset that drop. Digital game revenues grew by 10 percent during the first three months of the year to $1.38 billion.
NPD did not publish sales for the specific digital sales format last year, but it said that combined revenues for used/rental games and digital content reached $1.85 billion in Q1 2011. During the same period this year, those two categories generated $1.9 billion (used/rental sales fell by 5 percent).
The firm also published data for three of the biggest European markets -- the UK, France, and Germany -- showing that used/rental sales in those countries came out to $300 million, while digital format sales brought in $959 million in sales during Q1 2012.
I had my theory that digital was just a scapegoat for retail. Looks like this helps confirm it.
We grew up in an age of physical media, and people have a powerful nostalgia for it. It'll probably be the next generation of people (Generation Z?) that really adopt cloud gaming and pure digital distribution over the boxed copy. They'll grow up with Steam, the App Store, Netflix, etc, and so won't hold any sentimental value for physical goods.
So, what I'm trying to say, right now, physical goods matter. Most people still buy their goods from local brick and mortar stores. And there are a lot of factors killing the games industry.
I think the biggest factors are anti-consumer policies. Things like DRM, online passes, DLC pay walls (like all the DLC characters in fighting games), shorter games at higher prices, and other ways publishers try to kill used game sales. By hurting the value reselling games have, what that means is there is less money in the economy, which means people are going to buy less. Publishers constantly try to push consumers around to see just how much they can get away with, and I'm thinking consumers have had enough. So they left the hobby.
You need to treat your customers with respect, and right now, I don't think most major publishers do that.
Anti-consumer policies are definitely a cause. I skipped purchasing 3 games in the last year because of intrusive DRM, and 2 because of cutting content for DLC. It adds up pretty quick when you spread that over the gaming community as a whole.
DRM and the like dont help, but lets be real, the world has been in a recession for years now. I dont care what some economic textbook definition is, when people have less household income than previous years, its gonna be discretionary income that gets hit.
That's true, but people do "need" (I use that term loosely) entertainment. I think that's one of the reasons a lot of people thought video games were recession proof, that there use to be a perception of quantity of entertainment hour per dollar with games.
Like movies are now $10 for 2 hours? That's $5 an hour.
Games last gen were $50 for 20 hours. So that's $2.50 an hour.
Games are now $60 for 10 hours. So that's $6 an hour.
I know its some what debatable if games really were on average 20 hours last gen, but I'm going off what I recall my experiences use to be.
Basically, it looks like we're getting less bang for our buck now. And I know there is also a debate about quality vs quantity in here as well. But quality is so subjective it'd be impossible to really measure.
Also, even if the statistics are accurate I'd be much more interested in the distribution of that money. For example if it's 20 million instead of 40 million total but it's going into 100 developers pockets instead of Bobby Kotick's.
That signals a healthier economy overall. It might not be the case but it'd be interesting to know.
"For example if it's 20 million instead of 40 million total but it's going into 100 developers pockets instead of Bobby Kotick's."
Sure, it the 100 developers are able to come up with several million dollar to finance their game, they may end up with 20 millions in revenues. Otherwise, it's more likely these 100 developers will each do 10 small iOs titles until the iOS bubble bursts. And those 100 iOS titles won't make 20 million combined, that's for sure.
I think there are a number of individual or small developers who've made more at this point. Like has DragonVale grossed over 100 million or what? If not they've got to be close. Not to mention the hundreds that have grossed over a million...
Also, NPD doesn't account for things like AdMob etc...
There's more money in games now than there's ever been, there's just no easy way to measure it anymore, might as well be attempting to calculate the Internet's sales.
In simple terms, the game has changed. Customers aren't paying $60 a title to a select few, instead they're playing for free or cheap and spreading the money around to a multitude of developers from all around the globe. It's a much healthier more diverse eco system.
The majority of customers is looking for big budget games, that can only be financed by a big publisher. It's comparable to movies, even if my favourite movie of 2012 so far is The Turin Horse by Béla Tarr, I am aware of the fact, that the money is made with The Avengers.
The data lack one major factor and thats the shift towards devices outside of NPDs statistics, namely mobiles.
Its surely simple to say it does not offset it if you forget
1. the billions flowing towards Google and Apple AppStores, but if you take them into account one has to start realizing that the reason the data got worse is just that people now finally have an alternative to the 'monopolized' control over the games market, no longer publishers which impacts the sales figures of bad games which in previous days might still have sold but are now just ignored in the favor of another $3 game on your iPad or whatever.
2. the 'success' of the game publishers fuck up steps against the second hand market. You can not sell any pc game anymore as nobody beside you can use it, DLCs on platforms are bound to your hardware / account (consoles, pcs) and so on.
GameStop surely would be the one who could confirm this and a pretty precise number on what was lost on the second hand market due to growing efforts of killing it.
Gone are the day where the customer had any right, at least Steam leaves us with a tad of rights unlike Origin which has an EULA that just shows the same rotten wording their services have had as track for years (shutting down servers cause there was no large enough buzz for the game / on the server anymore and alike)
They same thing happened in other media too: digital creates the conditions for inevitable large drops in price, and there never have been any guarantees that the substantially increased volume which that brings would cover the previous physical market.
The thing is, however, that much of that slimming occurs in the publishing layer. Great developers will always have a market.
I could not find exact figures for 2011, but according to their 10-K statement Apple had $4.1 Billion in revenue from their iTunes app store in 2010 (all types of content, including apps).
Just apps from Google and Apple accounted for ~$2.2 Billion in 2010 (according to Wikipedia). I am guessing from explosive user growth and spending trends the past 18 months that combined Apple and Google now bring in >$5 Billion on their app stores combined. And games account for a significant portion of that revenue.
How anyone could state that the digital app market (which was not in existence before July, 2008 and is all growth since then) combined with the not-insignificant social game market do not account for the decline in retail games is beyond me.
NPD has long since lost their relevance since they can not forecast digital sales in any reliable and relevant way.
Your numbers are only showing how relevant retail sales and the NPD still are, because you don't put your numbers in perspective. First of all, you compare yearly iTunes revenues (not iTunes App store revenues) to quarterly retail revenues.
For comparsion: According to the NPD the total revenues for new physical retail games in were 2011 9.3 billion US$
http://www.g4tv.com/thefeed/blog/post/719867/video-game-sales-down -2-in-2011-acc ording-to-npd-analysis/
Keep in mind, these numbers are US only, even if I assume the US market is 50% of the worldwide market (which is much likely to high), the total global revenues for new physical retail games were 18 billion US$ in 2011.
On the other hand, there are numbers for the iTunes App Store revenues, that only count Apps and not music, books, movies, etc. The latest number Apple published, that I found is from July 2011 and it's 3.6 billion US$ in revenue since the launch of the App Store.
http://9to5mac.com/2011/07/07/apple-issues-app-store-stats-15b-dow nloads-425000- apps-nearly-3-6b-revenue/
This means during 3 years, the iTunes App Store generated about 20% of the revenues new retail games generated in 2011 alone. These 3.6 billion US$ aren't only for games, but even if assume 3 billion US$ are for games and even if I assume the Google Play store would have brought in similar revenues (which is clearly not the case), it would mean 6 billion in 36 vs. 18 billion in 12 months, which means retail revenues are 9 times of what digital revenues for the App Store and Google Play are, or in other words, for every dollar spend on iOS and Android, nine dollars are spend in retail.
Leaves the Ad market, but today, MS, a big player in the online Ad market revealed a 6 billion US$ writeoff for it's internet Ad business, I would say, a rather black day for online ad marketing, that will have consequences for the whole business.
I wonder how much influence the free-to-play games have on the numbers. If more and more gamers invest their available time for gaming away from the classical revenue channels, this might add to the "problem". Its quite likely that more gamers will pay less per played hour than before.
I would argue in some games, they're spending far far more. (e.g. hundreds of dollars in League of Legends.) But dollars per hour isn't that important a metric, anyways. Skyrim and Diablo didn't crush the industry.
More important, IMO, is that consumers have a set amount of entertainment dollars to spend, and every month there are increasingly more untrackable ways to spend them.
Dollars don't just "disappear" (worldwide recessions aside). If they're not spending it on NPD tracked items, they're spending it on some other entertainment.
I wonder how many sales they can't track. Minecraft alone is selling more than 10k copies a day (at 20€, I guess it's $25 then) which sums up to roughly $100 million a year.
Can they track any game on Steam not released by a big publisher - i.e. all the indie games? Right now there's an unusual low number of indie games in the charts but many times half the games in the top 20 on Steam are indie games so I guess that's easily more than $100 million a year (probably much more).
WE have fewer releases now than a few years ago so one would expect retail sales to follow suit.
But at the same time I haven't heard news of any big AAA franchise cancellations.
Much of the decline in sales is probably attributable to much lower shovel ware sales from the Wii side. Then combine that with Nintendo looking forward for the Wii U and having released all their big titles on the Wii already.
As Wii sales dropped so did the new software sales. But I don't think Nintendo is unhappy with the sales of most of their Wii software. I think the sales numbers, when taken over the entire generation, are something to be happy about.
Don't let the latest news cloud the bigger picture.
We might be getting fewer new original AAA titles, but that would be a byproduct of increased budgets and companies not willing to take the risk rather than everyone playing Angry Birds on their phones and iPads.
Last don't forget the effect used games has on the market especially later in the lifecycle when the variety and quantity of used games is at its largest and the used game prices are at their cheapest. So the consumer can choose between a new $60 unproven game or many $10ish proven games that could very well be better.
Realize the used game market has also only become more efficient than last generation. There are more outlets for used games and the process of getting rid of them is easier than ever.
"But at the same time I haven't heard news of any big AAA franchise cancellations. "
The industry is more and more relying on fewer and fewer AAA titles, it doesn't need cancellations, it's a fact, that every year fewer titles have a bigger share of the total revenues. Something that has to concern everybody, because concentration on fewer products means sinking revenues in the end.
"Much of the decline in sales is probably attributable to much lower shovel ware sales from the Wii side. Then combine that with Nintendo looking forward for the Wii U and having released all their big titles on the Wii already."
Wrong, look at Matt Matthews well thought analysis to get the picture:
http://www.gamasutra.com/view/news/172518/Analysis_Little_hope_for _shortterm_US_ game_retail_turnaround.php
http://www.gamasutra.com/view/news/172518/Analysis_Little_hope_for _shortterm_US_ game_retail_turnaround.php
http://www.gamasutra.com/view/news/170237/Annual_US_game_retail_co uld_hit_sixyea r_low_in_2012.php
All these articles point out, it's not only the problem of Nintendo and Shovelware declining, but of the death of the complete middle market on all systems.
"Realize the used game market has also only become more efficient than last generation. There are more outlets for used games and the process of getting rid of them is easier than ever."
Seems like an unproven assumption to me, do you have any numbers that back this up? If I look at the numbers Gamestop reports, the share of used video game products on the overall revenue is:
2004 27.8%
2005 26.1%
2006 24.8%
2007 22.4%
2008 23.0%
2009 26.4%
2010 26.1%
2011 27.4%
http://phx.corporate-ir.net/phoenix.zhtml?c=130125&p=irol-reportsa nnual
I don't see stronger used video games sales in these numbers and I think Gamestop is an important retailer for used sales.
I think one key issue that might also need to be addressed here is the different costs associated with digital sales. Digital games often have much less cost associated with them, so while they may contribute less overall "revenue", that is not the same as profit. For example, a $50 PC game sold on Steam costs less for everyone involved; that is in fact why games are often cheaper on digital services.
I also feel like last year was a heck of a bull year for AAA titles; I can no longer speak for the "average consumer" but I still have such a pile of quality content to go through that I'm hardly picking up anything new these days.
Again, I'm more concerned about costs. I'd like to see the $30 and $40 category open up again. We have the $1 - $8 mobile game, the $10-$15 XBL/PSN game, and then suddenly $60. Only on PC (Steam) do we have any kind of middle ground. Lets hope for the next round the big three console makers open up the system a bit.
You are right with the costs, but on the other hand, with putting the game on display, with recommending games to customers and with decorating the store with the PR material for free, retail does a lot of marketing for games, that you have to do for yourself, if you go digital only.
This will add costs to your game again that you didn't have when dealing with retail, additional to the bandwidth costs, that shouldn't be underestimated, when it comes to multiple gigabyte downloads of AAA titles.
I think in this point in time, these numbers don't accurately reflect digital momentum. We're stuck in a unique period of consumer apathy toward consoles due to the failure of the Wii to fulfill its original promise. With all these reports of sales being down year-over-year, the Wii is the only console to have dropped off. And those consumers really never moved over to the HD twins, so they dropped off the map almost entirely.
The rise of digital sales hasn't yet been able to fill the gap left by the Wii. But to say that digital isn't flourishing, and couldn't possibly grow to match retail sales in the near future is naive. If the Wii had somehow held onto its sales (albeit as a hypothetical HD dream console), and digital sales stayed the same as they are today, these reports would be gushing about digital sales helping the market to grow.
The point isn't that digital isn't growing fast, just that it hasn't grown fast enough to explain why retail is falling even faster. It implies that the market is shrinking.
A lot of people say, "Well, of course retail is failing, everyone is moving to digital distribution." But if that was the case, we'd see even more money flowing in to digital.
A lot of people like to use used game sales to also explain it away. But if that were the case Gamestop would be making fists full of dollars and laughing all the way to the bank. And they're not, they're actually crazy worried because they are in fact retail and they're losing money.
Basically, these are scapegoats to help give a boogyman to explain away why the market is shrinking.
@Turd Furgeson: I think you're right about the "expanded market" leaving after they lost interest in the Wii and that the market was artificially large during the Wii's best years.
"With all these reports of sales being down year-over-year, the Wii is the only console to have dropped off. And those consumers really never moved over to the HD twins, so they dropped off the map almost entirely."
Wrong, 360 and PS3 are also down YoY
http://www.videogamer.com/news/ps3_sales_down_year-on-year_and_son y_doesnt_repor t_ps_vita_sales.html
http://www.eurogamer.net/articles/2012-04-19-global-xbox-360-sales -down-nearly-5 0-percent-year-on-year
If your theory, that Wii owners moved to HD consoles would be true, these HD consoles wouldn't be down YoY.
This industry is in deep trouble, the downturn we are expecting is the biggest crash since 1983. I can't recall a year, when during the first 5 months of the year every month was down between 25 and 40 percent.
"...retail is falling even faster... the market is shrinking"
Yes, the market is shrinking due to the former Wii audience no longer playing console games. Virtually every PS3 and X360 player is still playing, but the fall of the Wii (which previously held the market up) is the only reason less people are playing console games.
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@Christian Keichel
Read my quote once more... "...those consumers really NEVER moved over to the HD twins..."
I effectively said that former Wii players just stopped playing. I never said they all moved on to the HD consoles. The PS3 and X360 have been on the market so long that consumer apathy may be catching up with them. Here is a link that works:
http://www.vgchartz.com/article/250231/2012-year-on-year-sales-and -market-share- update-to-june-23th/
HD console sales are slightly down, and that's most likely due to the fact they've been on the market for 6-7 years already. And certainly the mobile/social gaming sectors have pulled a few people away from home console gaming.
But to reiterate, the main reason digital sales haven't been able to balance the low retail sales is due to the Wii's unmatched drop in sales over the past 2 years. If the Wii had been designed as a more powerful, HD-capable machine, the market would have grown by now in my opinion.
The PS3 and XB360 haven't exactly hit market saturation. So I honestly don't think you can really just chock it up to their longer shelf life. And it also doesn't help explain the drastic drop in game sales. If there are so many PS3 and XB360's on the market, and that's the reason new hardware isn't selling, then why isn't new software selling?
@Turd
Sorry for misreading your statement.
The HD consoles aren't "slightly down", but, at least in the case of the 360, they are down massive.
Your VGChartz link reveals again the weakness of the VGChartz site, when it comes to numbers. As far as I understand the chart, they claim Microsoft sold 3.3 million 360s so far in 2012, on 31 march MS reported 1.4 million XBox360 sales (down from 2.7 million units in 2011), 48$ drop.
I find it unlikely, that they have sold 1.9 million units from 1 April to to 30 June, because it would mean, they effectively sold around 30% more consoles, then in Q1 and reduce their YoY drop from 48% to 21%, what games should have driven this surge?
"But to reiterate, the main reason digital sales haven't been able to balance the low retail sales is due to the Wii's unmatched drop in sales over the past 2 years. If the Wii had been designed as a more powerful, HD-capable machine, the market would have grown by now in my opinion. "
A Wii HD would have had an higher launch price, hindering sales (as we saw with the other consoles), and these lower sales would have come at the price of not reaching the audience, the Wii reached, because those customers didn't saw HD as an advantage.
In fact, due to it's design, the Wii helped the overall market to grow, when it comes to the install user base, this generation is bigger, then the last generation and it's quite possible, that at least a big fraction of the existing Wii owners are waiting for the Wii-U. The Wii has expanded the market during this generation, but it couldn't compensate the shrinking core gamer market.
The 360 and the PS3 have failed to attract as many customers as the PS2, XBox and Gamecube attracted during last generation.
EDIT: Fixed error in sales comparsion MS vs VGChartz
Contributing factors of low software revenue:
-declining economy, the general public having less money to spend
-more popular and cheaper Indie games
-steep drop-off of Wii sales
-significant periods of low sales in handheld market (namely 3DS)
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@Christian Keichel
If disagree on the Wii HD theory. If they'd simply made the console slightly more powerful and 720p capable, they wouldn't have had to price the system at more than $299. That's still a very attractive deal, especially considering the extreme enthusiasm for motion-based gaming at the time. Sales would no doubt have started out as well, but they also would've continued on to this day with higher 3rd party support, and a more diverse and full game library.
As well, this generation has sold far more than the last. If you remember, the Gamecube and Xbox combined didn't even come close to reaching either of the current HD consoles' sales. And within the same time period the Wii is fairly close to where the PS2 was. The difference between last-gen and current-gen is significant. I estimate total console sales from last gen at nearly 200 million. Sales of current gen consoles are beyond that already. And by the end of these current consoles' lifecycles, they will have outsold the older systems altogether by tens of millions, or maybe a surprising number more (depending on the atypical lifespans of PS3 and X360).
This time you missread my statement, I didn't said this generation is smaller, when it comes to the installed user base, I said:
"In fact, due to it's design, the Wii helped the overall market to grow, when it comes to the install user base, this generation is bigger, then the last generation (...) The 360 and the PS3 have failed to attract as many customers as the PS2, XBox and Gamecube attracted during last generation."
The Wii attracted a totally different user base, then the previous generations, it expanded the market, so it's important to see how the consoles performed, that adressed the sames market then in the previous generation. The PS3 and the 360 adressed the customers, that the PS2,360 and Gamecube adressed and these 2 consoles didn't match the sales of the PS2, XBox and Gamecube.
On Wii, launch price and 3rd party support: Look at the GC, lower price then the competitors, comparable specs (stronger then PS2, slightly wearker then XBox) but almost no 3rd party support. You see, even if Nintendo competes within the specs of the other 2, 3rd Parties are going to ignore them.
Retail global is a fraction - rounding error - of what it used to be. I'll use PC Games for example. In CY 2011... there were about ~15m units PC sold at US Retail. (Per NPD) Maybe 30m units PC total at Retail sold globally. Sounds dismal right? Especially when you consider that Digital (Steam) alone is sitting at ~40+ m unique users. If we put the attach rate at 2 games per user.. that alone would be 80 m units global. However; Steam is NOT 3/4 of the Digital market. They might be at best ~50%. On the PC there's: BattleNet, Origins, Impulse, GOG, etc.. a host of smaller guys up to & including G4WLive. (Some day.. even the Torrents might become more legit.. as more F2P Games get moved across their networks) Then... we have F2P.. dwarfing both of those 2 aforementioned. LoL - what... ~30m users? World of Tanks? 20+m? There's a TON of F2P games now ... and even more so when you look at all the SKU's globablly. The F2P story gets even crazier when you include all the SNS games (e.g. Farmville), & Casual Games that are big in other Geo's (e.g. Maple Story, Runescape)
So yeah.. times are a changing.
Retail is pretty much at least 95% Console Games. After all.. the Retailers have a dependency on those 'Secondary' sales. (They can sell that Game actually more than once even... and do). So... yeah... things are likely going to get really ugly for Console Games Sales at the Brick/Mortars over the next ~5-7 years. Especially as the volume & bandwidths increase for Broadband Users globablly.
This will have a huge impact on NPD tracking, GFK Chart Track, & VGChartz - at least in the short term. If luck shines on them... maybe Steam or EA or Blizz or Zynga will open up their books a little more to them. Until then... things are going to get real interesting.
"Especially when you consider that Digital (Steam) alone is sitting at ~40+ m unique users. If we put the attach rate at 2 games per user.. that alone would be 80 m units global."
And from where does the attach rate of 2 games per user per year come from? It is a wild guess, nothing more, the Steam software puts itself into the Windows Autostart, so when the user does nothing, the software logs him in every time he starts his computer. Steam counts these people as "active users" regardless of the number of games they buy. Many retail PC games require a Steam activation, so I find it hardly surprising, that the number of Steam accounts is high.
This is the first year I've spent a significant amount on games I'm pretty sure can't be tracked, by directly buying from / donating to from the creators (via Kickstarter, PayPal or Amazon merchant accounts, and similar things).
I'd like to think this is a trend that's part of the "decline", but that's probably just wishful thinking.
We grew up in an age of physical media, and people have a powerful nostalgia for it. It'll probably be the next generation of people (Generation Z?) that really adopt cloud gaming and pure digital distribution over the boxed copy. They'll grow up with Steam, the App Store, Netflix, etc, and so won't hold any sentimental value for physical goods.
So, what I'm trying to say, right now, physical goods matter. Most people still buy their goods from local brick and mortar stores. And there are a lot of factors killing the games industry.
I think the biggest factors are anti-consumer policies. Things like DRM, online passes, DLC pay walls (like all the DLC characters in fighting games), shorter games at higher prices, and other ways publishers try to kill used game sales. By hurting the value reselling games have, what that means is there is less money in the economy, which means people are going to buy less. Publishers constantly try to push consumers around to see just how much they can get away with, and I'm thinking consumers have had enough. So they left the hobby.
You need to treat your customers with respect, and right now, I don't think most major publishers do that.
That's true, but people do "need" (I use that term loosely) entertainment. I think that's one of the reasons a lot of people thought video games were recession proof, that there use to be a perception of quantity of entertainment hour per dollar with games.
Like movies are now $10 for 2 hours? That's $5 an hour.
Games last gen were $50 for 20 hours. So that's $2.50 an hour.
Games are now $60 for 10 hours. So that's $6 an hour.
I know its some what debatable if games really were on average 20 hours last gen, but I'm going off what I recall my experiences use to be.
Basically, it looks like we're getting less bang for our buck now. And I know there is also a debate about quality vs quantity in here as well. But quality is so subjective it'd be impossible to really measure.
Also, even if the statistics are accurate I'd be much more interested in the distribution of that money. For example if it's 20 million instead of 40 million total but it's going into 100 developers pockets instead of Bobby Kotick's.
That signals a healthier economy overall. It might not be the case but it'd be interesting to know.
Sure, it the 100 developers are able to come up with several million dollar to finance their game, they may end up with 20 millions in revenues. Otherwise, it's more likely these 100 developers will each do 10 small iOs titles until the iOS bubble bursts. And those 100 iOS titles won't make 20 million combined, that's for sure.
Also, NPD doesn't account for things like AdMob etc...
There's more money in games now than there's ever been, there's just no easy way to measure it anymore, might as well be attempting to calculate the Internet's sales.
In simple terms, the game has changed. Customers aren't paying $60 a title to a select few, instead they're playing for free or cheap and spreading the money around to a multitude of developers from all around the globe. It's a much healthier more diverse eco system.
Its surely simple to say it does not offset it if you forget
1. the billions flowing towards Google and Apple AppStores, but if you take them into account one has to start realizing that the reason the data got worse is just that people now finally have an alternative to the 'monopolized' control over the games market, no longer publishers which impacts the sales figures of bad games which in previous days might still have sold but are now just ignored in the favor of another $3 game on your iPad or whatever.
2. the 'success' of the game publishers fuck up steps against the second hand market. You can not sell any pc game anymore as nobody beside you can use it, DLCs on platforms are bound to your hardware / account (consoles, pcs) and so on.
GameStop surely would be the one who could confirm this and a pretty precise number on what was lost on the second hand market due to growing efforts of killing it.
Gone are the day where the customer had any right, at least Steam leaves us with a tad of rights unlike Origin which has an EULA that just shows the same rotten wording their services have had as track for years (shutting down servers cause there was no large enough buzz for the game / on the server anymore and alike)
They same thing happened in other media too: digital creates the conditions for inevitable large drops in price, and there never have been any guarantees that the substantially increased volume which that brings would cover the previous physical market.
The thing is, however, that much of that slimming occurs in the publishing layer. Great developers will always have a market.
Just apps from Google and Apple accounted for ~$2.2 Billion in 2010 (according to Wikipedia). I am guessing from explosive user growth and spending trends the past 18 months that combined Apple and Google now bring in >$5 Billion on their app stores combined. And games account for a significant portion of that revenue.
How anyone could state that the digital app market (which was not in existence before July, 2008 and is all growth since then) combined with the not-insignificant social game market do not account for the decline in retail games is beyond me.
NPD has long since lost their relevance since they can not forecast digital sales in any reliable and relevant way.
For comparsion: According to the NPD the total revenues for new physical retail games in were 2011 9.3 billion US$
http://www.g4tv.com/thefeed/blog/post/719867/video-game-sales-down -2-in-2011-acc
ording-to-npd-analysis/
Keep in mind, these numbers are US only, even if I assume the US market is 50% of the worldwide market (which is much likely to high), the total global revenues for new physical retail games were 18 billion US$ in 2011.
On the other hand, there are numbers for the iTunes App Store revenues, that only count Apps and not music, books, movies, etc. The latest number Apple published, that I found is from July 2011 and it's 3.6 billion US$ in revenue since the launch of the App Store.
http://9to5mac.com/2011/07/07/apple-issues-app-store-stats-15b-dow nloads-425000-
apps-nearly-3-6b-revenue/
This means during 3 years, the iTunes App Store generated about 20% of the revenues new retail games generated in 2011 alone. These 3.6 billion US$ aren't only for games, but even if assume 3 billion US$ are for games and even if I assume the Google Play store would have brought in similar revenues (which is clearly not the case), it would mean 6 billion in 36 vs. 18 billion in 12 months, which means retail revenues are 9 times of what digital revenues for the App Store and Google Play are, or in other words, for every dollar spend on iOS and Android, nine dollars are spend in retail.
Leaves the Ad market, but today, MS, a big player in the online Ad market revealed a 6 billion US$ writeoff for it's internet Ad business, I would say, a rather black day for online ad marketing, that will have consequences for the whole business.
More important, IMO, is that consumers have a set amount of entertainment dollars to spend, and every month there are increasingly more untrackable ways to spend them.
Dollars don't just "disappear" (worldwide recessions aside). If they're not spending it on NPD tracked items, they're spending it on some other entertainment.
Can they track any game on Steam not released by a big publisher - i.e. all the indie games? Right now there's an unusual low number of indie games in the charts but many times half the games in the top 20 on Steam are indie games so I guess that's easily more than $100 million a year (probably much more).
But at the same time I haven't heard news of any big AAA franchise cancellations.
Much of the decline in sales is probably attributable to much lower shovel ware sales from the Wii side. Then combine that with Nintendo looking forward for the Wii U and having released all their big titles on the Wii already.
As Wii sales dropped so did the new software sales. But I don't think Nintendo is unhappy with the sales of most of their Wii software. I think the sales numbers, when taken over the entire generation, are something to be happy about.
Don't let the latest news cloud the bigger picture.
We might be getting fewer new original AAA titles, but that would be a byproduct of increased budgets and companies not willing to take the risk rather than everyone playing Angry Birds on their phones and iPads.
Last don't forget the effect used games has on the market especially later in the lifecycle when the variety and quantity of used games is at its largest and the used game prices are at their cheapest. So the consumer can choose between a new $60 unproven game or many $10ish proven games that could very well be better.
Realize the used game market has also only become more efficient than last generation. There are more outlets for used games and the process of getting rid of them is easier than ever.
The industry is more and more relying on fewer and fewer AAA titles, it doesn't need cancellations, it's a fact, that every year fewer titles have a bigger share of the total revenues. Something that has to concern everybody, because concentration on fewer products means sinking revenues in the end.
"Much of the decline in sales is probably attributable to much lower shovel ware sales from the Wii side. Then combine that with Nintendo looking forward for the Wii U and having released all their big titles on the Wii already."
Wrong, look at Matt Matthews well thought analysis to get the picture:
http://www.gamasutra.com/view/news/172518/Analysis_Little_hope_for _shortterm_US_
game_retail_turnaround.php
http://www.gamasutra.com/view/news/172518/Analysis_Little_hope_for _shortterm_US_
game_retail_turnaround.php
http://www.gamasutra.com/view/news/170237/Annual_US_game_retail_co uld_hit_sixyea
r_low_in_2012.php
All these articles point out, it's not only the problem of Nintendo and Shovelware declining, but of the death of the complete middle market on all systems.
"Realize the used game market has also only become more efficient than last generation. There are more outlets for used games and the process of getting rid of them is easier than ever."
Seems like an unproven assumption to me, do you have any numbers that back this up? If I look at the numbers Gamestop reports, the share of used video game products on the overall revenue is:
2004 27.8%
2005 26.1%
2006 24.8%
2007 22.4%
2008 23.0%
2009 26.4%
2010 26.1%
2011 27.4%
http://phx.corporate-ir.net/phoenix.zhtml?c=130125&p=irol-reportsa nnual
I don't see stronger used video games sales in these numbers and I think Gamestop is an important retailer for used sales.
I also feel like last year was a heck of a bull year for AAA titles; I can no longer speak for the "average consumer" but I still have such a pile of quality content to go through that I'm hardly picking up anything new these days.
Again, I'm more concerned about costs. I'd like to see the $30 and $40 category open up again. We have the $1 - $8 mobile game, the $10-$15 XBL/PSN game, and then suddenly $60. Only on PC (Steam) do we have any kind of middle ground. Lets hope for the next round the big three console makers open up the system a bit.
This will add costs to your game again that you didn't have when dealing with retail, additional to the bandwidth costs, that shouldn't be underestimated, when it comes to multiple gigabyte downloads of AAA titles.
The rise of digital sales hasn't yet been able to fill the gap left by the Wii. But to say that digital isn't flourishing, and couldn't possibly grow to match retail sales in the near future is naive. If the Wii had somehow held onto its sales (albeit as a hypothetical HD dream console), and digital sales stayed the same as they are today, these reports would be gushing about digital sales helping the market to grow.
A lot of people say, "Well, of course retail is failing, everyone is moving to digital distribution." But if that was the case, we'd see even more money flowing in to digital.
A lot of people like to use used game sales to also explain it away. But if that were the case Gamestop would be making fists full of dollars and laughing all the way to the bank. And they're not, they're actually crazy worried because they are in fact retail and they're losing money.
Basically, these are scapegoats to help give a boogyman to explain away why the market is shrinking.
Wrong, 360 and PS3 are also down YoY
http://www.videogamer.com/news/ps3_sales_down_year-on-year_and_son y_doesnt_repor
t_ps_vita_sales.html
http://www.eurogamer.net/articles/2012-04-19-global-xbox-360-sales -down-nearly-5
0-percent-year-on-year
If your theory, that Wii owners moved to HD consoles would be true, these HD consoles wouldn't be down YoY.
This industry is in deep trouble, the downturn we are expecting is the biggest crash since 1983. I can't recall a year, when during the first 5 months of the year every month was down between 25 and 40 percent.
"...retail is falling even faster... the market is shrinking"
Yes, the market is shrinking due to the former Wii audience no longer playing console games. Virtually every PS3 and X360 player is still playing, but the fall of the Wii (which previously held the market up) is the only reason less people are playing console games.
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@Christian Keichel
Read my quote once more... "...those consumers really NEVER moved over to the HD twins..."
I effectively said that former Wii players just stopped playing. I never said they all moved on to the HD consoles. The PS3 and X360 have been on the market so long that consumer apathy may be catching up with them. Here is a link that works:
http://www.vgchartz.com/article/250231/2012-year-on-year-sales-and -market-share-
update-to-june-23th/
HD console sales are slightly down, and that's most likely due to the fact they've been on the market for 6-7 years already. And certainly the mobile/social gaming sectors have pulled a few people away from home console gaming.
But to reiterate, the main reason digital sales haven't been able to balance the low retail sales is due to the Wii's unmatched drop in sales over the past 2 years. If the Wii had been designed as a more powerful, HD-capable machine, the market would have grown by now in my opinion.
The PS3 and XB360 haven't exactly hit market saturation. So I honestly don't think you can really just chock it up to their longer shelf life. And it also doesn't help explain the drastic drop in game sales. If there are so many PS3 and XB360's on the market, and that's the reason new hardware isn't selling, then why isn't new software selling?
Sorry for misreading your statement.
The HD consoles aren't "slightly down", but, at least in the case of the 360, they are down massive.
Your VGChartz link reveals again the weakness of the VGChartz site, when it comes to numbers. As far as I understand the chart, they claim Microsoft sold 3.3 million 360s so far in 2012, on 31 march MS reported 1.4 million XBox360 sales (down from 2.7 million units in 2011), 48$ drop.
I find it unlikely, that they have sold 1.9 million units from 1 April to to 30 June, because it would mean, they effectively sold around 30% more consoles, then in Q1 and reduce their YoY drop from 48% to 21%, what games should have driven this surge?
"But to reiterate, the main reason digital sales haven't been able to balance the low retail sales is due to the Wii's unmatched drop in sales over the past 2 years. If the Wii had been designed as a more powerful, HD-capable machine, the market would have grown by now in my opinion. "
A Wii HD would have had an higher launch price, hindering sales (as we saw with the other consoles), and these lower sales would have come at the price of not reaching the audience, the Wii reached, because those customers didn't saw HD as an advantage.
In fact, due to it's design, the Wii helped the overall market to grow, when it comes to the install user base, this generation is bigger, then the last generation and it's quite possible, that at least a big fraction of the existing Wii owners are waiting for the Wii-U. The Wii has expanded the market during this generation, but it couldn't compensate the shrinking core gamer market.
The 360 and the PS3 have failed to attract as many customers as the PS2, XBox and Gamecube attracted during last generation.
EDIT: Fixed error in sales comparsion MS vs VGChartz
Contributing factors of low software revenue:
-declining economy, the general public having less money to spend
-more popular and cheaper Indie games
-steep drop-off of Wii sales
-significant periods of low sales in handheld market (namely 3DS)
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@Christian Keichel
If disagree on the Wii HD theory. If they'd simply made the console slightly more powerful and 720p capable, they wouldn't have had to price the system at more than $299. That's still a very attractive deal, especially considering the extreme enthusiasm for motion-based gaming at the time. Sales would no doubt have started out as well, but they also would've continued on to this day with higher 3rd party support, and a more diverse and full game library.
As well, this generation has sold far more than the last. If you remember, the Gamecube and Xbox combined didn't even come close to reaching either of the current HD consoles' sales. And within the same time period the Wii is fairly close to where the PS2 was. The difference between last-gen and current-gen is significant. I estimate total console sales from last gen at nearly 200 million. Sales of current gen consoles are beyond that already. And by the end of these current consoles' lifecycles, they will have outsold the older systems altogether by tens of millions, or maybe a surprising number more (depending on the atypical lifespans of PS3 and X360).
This time you missread my statement, I didn't said this generation is smaller, when it comes to the installed user base, I said:
"In fact, due to it's design, the Wii helped the overall market to grow, when it comes to the install user base, this generation is bigger, then the last generation (...) The 360 and the PS3 have failed to attract as many customers as the PS2, XBox and Gamecube attracted during last generation."
The Wii attracted a totally different user base, then the previous generations, it expanded the market, so it's important to see how the consoles performed, that adressed the sames market then in the previous generation. The PS3 and the 360 adressed the customers, that the PS2,360 and Gamecube adressed and these 2 consoles didn't match the sales of the PS2, XBox and Gamecube.
On Wii, launch price and 3rd party support: Look at the GC, lower price then the competitors, comparable specs (stronger then PS2, slightly wearker then XBox) but almost no 3rd party support. You see, even if Nintendo competes within the specs of the other 2, 3rd Parties are going to ignore them.
1) Retail. (R.I.P)
2) Digital.
3) F2P.
Retail global is a fraction - rounding error - of what it used to be. I'll use PC Games for example. In CY 2011... there were about ~15m units PC sold at US Retail. (Per NPD) Maybe 30m units PC total at Retail sold globally. Sounds dismal right? Especially when you consider that Digital (Steam) alone is sitting at ~40+ m unique users. If we put the attach rate at 2 games per user.. that alone would be 80 m units global. However; Steam is NOT 3/4 of the Digital market. They might be at best ~50%. On the PC there's: BattleNet, Origins, Impulse, GOG, etc.. a host of smaller guys up to & including G4WLive. (Some day.. even the Torrents might become more legit.. as more F2P Games get moved across their networks) Then... we have F2P.. dwarfing both of those 2 aforementioned. LoL - what... ~30m users? World of Tanks? 20+m? There's a TON of F2P games now ... and even more so when you look at all the SKU's globablly. The F2P story gets even crazier when you include all the SNS games (e.g. Farmville), & Casual Games that are big in other Geo's (e.g. Maple Story, Runescape)
So yeah.. times are a changing.
Retail is pretty much at least 95% Console Games. After all.. the Retailers have a dependency on those 'Secondary' sales. (They can sell that Game actually more than once even... and do). So... yeah... things are likely going to get really ugly for Console Games Sales at the Brick/Mortars over the next ~5-7 years. Especially as the volume & bandwidths increase for Broadband Users globablly.
This will have a huge impact on NPD tracking, GFK Chart Track, & VGChartz - at least in the short term. If luck shines on them... maybe Steam or EA or Blizz or Zynga will open up their books a little more to them. Until then... things are going to get real interesting.
And from where does the attach rate of 2 games per user per year come from? It is a wild guess, nothing more, the Steam software puts itself into the Windows Autostart, so when the user does nothing, the software logs him in every time he starts his computer. Steam counts these people as "active users" regardless of the number of games they buy. Many retail PC games require a Steam activation, so I find it hardly surprising, that the number of Steam accounts is high.
I'd like to think this is a trend that's part of the "decline", but that's probably just wishful thinking.