After six straight months of dreadful sales figures, it appears that the retail video game industry in the U.S. has settled into its new reality. Given that memories of the white-hot sales figures of 2008 haven't faded completely, the contraction has certainly been painful.
As we enter the back-half of the year, the key issues from a top-level view are how much has the industry contracted and what can we expect by year's end. I can certainly answer the former, and I'll also elaborate on my view of the latter.
First, the big revenue picture, including all segments of the retail market: hardware, software, and accessories, shown below.
Normally I've shown this kind of figure with full data for previous years, but to emphasize just how weak retail sales are in 2012 I've restricted each year to just the first six months. Seen in this light, sales this year look like they fell off a cliff after the more gradual declines in 2009, 2010, and 2011.
So where does this leave the full market once 2012 is over? Well, if we go back and grab the best back-half of a year ever - sales from July 2008 through December 2008 - and use it as an upper bound for what will happen in the remainder of this year, then the full year of sales would come out to $17.8 billion at retail.
Sure, that would be a bit better than the $17.0 billion total from last year, but worse than the totals in 2007 ($18B), 2008 ($21.4B), 2009 ($19.7B), and 2010 ($18.6B). In short, the industry could deliver a miraculous turnaround for the remainder of this year and it still wouldn't measure up.
Since a miracle clearly isn't in the offing, it's natural to simply compare to last year's figure. If retail video game revenue for the rest of 2012 is basically flat compared to last year, then the final total will end up around $15 billion - making this the worst of the last six years in terms of revenue.
I don't think the industry can pull out a second half that's on par with last year, however, since every month since December 2011 has recorded a 20 percent or greater year-on-year decline. Just in 2012, the market is down 29.7 percent and if that were to continue through this holiday season this will be the weakest year for the video game industry since 2005.
That's effectively a worst case scenario, and would reset the industry to levels it last knew in the very first months of the Nintendo DS and before the Xbox 360 launched.
A picture helps here, so here are total retail video game revenues for the U.S. in each of the last seven years along with the three scenarios (miracle, flat, and worst case) I've outlined above.
But the total of retail revenue is actually three different segments, and each is subject to somewhat different factors. Hardware revenue is affected not just by how many units sell, but also by how they're priced. So a price cut could move more systems, but it would also cut into the total revenue as well.
Currently the software market appears to be heavily driven by new releases, but that hasn't always been the case. During the Wii's heyday titles like Wii Play and Wii Fit and Mario Kart Wii could shift as many units in a summer month as the top-selling new releases have in some months of 2012. The foundation of lower level catalog software sales appears to be much lower today.
And the accessory segment - the most opaque of the segments, because the NPD Group releases so little information about it - has been driven by popular peripherals from time to time. Wii remotes used to be extremely popular, and during its first few months the Kinect sensor add-on for the Xbox 360 appeared to be pumping up accessory revenue. Now the leading items are Skylanders action figures and points/money cards for Microsoft's Xbox Live and Sony's PlayStation Network.
So let's break it out further, looking at each segment, starting with hardware.
First, just in terms of raw hardware numbers, the picture is quite similar to the revenue figures you see above. As the Wii and Nintendo DS burned brightly throughout 2007, 2008, and 2009 hardware sales for consoles and handhelds saw tremendous gains.
While the Xbox 360 has continued to grow its sales, especially in 2011, these sales haven't been enough to bend the effect of the terminal trajectory the Wii is following. Moreover, the introduction of two new handhelds - the Nintendo 3DS and PlayStation Vita (PSV) - did little to lift the market for dedicated handheld hardware.
As Michael Pachter, analyst for Wedbush Securities, recently observed about May 2012 sales: "Over the last 11 years, console unit sales have averaged over 600,000 units in May, and over the last five years, unit sales have averaged over 700,000 units." That was the weakest May since before the PS2 launched in 2000. June was somewhat better, I believe, but still not good.
The underlying problem here is pricing, I believe. One of the counter-intuitive trends in the past few years has been the unusual pricing models that hardware manufacturers have pursued. For example, the Nintendo DS launched at $150 and then dropped to $130 (prior to the launch of the DS Lite model) but then the introduction of the DSi and DSi XL models pushed the average price for the platform up above $150 again.
Something similar happened with the introduction of Kinect for the Xbox 360, where the average price of the system went from a low of around $250 to well over $300 as the Kinect models were pushed heavily.
On top of these de facto price increases, each manufacturer of hardware has been reluctant to cut their respective entry-level prices. As of this writing, the lowest priced (non-contract) Xbox 360 is still $200, the Wii is still $150, and the PS3 still can't be bought for under $250. I'd also posit that the PSP lingered too long at $170, when it should have been below $150.
Of course, consumers had to agree to purchase those systems, so I'm not faulting the hardware manufacturers for pursuing winning pricing strategies. Rather, I'd argue that pricing for hardware in general has been much higher this generation and that has to have limited the market for these devices. Despite these impediments, the installed base on paper is much larger than at the same point last generation. (See this column from last month on that score.)
Now, at the tail end of a generation, the hardware players continue to maintain what I believe are unrealistically high prices. So far in 2012 the average price for the Wii has been right around $148, the PS3 around $269, and the Xbox 360 around $285. Combined, consoles are averaging $250 this year while handhelds are averaging around $180.
While I don't have complete data from last year, I think the figure for consoles has come down around $25 per system while the handheld price has actually gone up. Remember that at this point last year, only the languishing Nintendo 3DS had an entry-level price above $170. Across systems of all types, the average price last year was $228 and this year's its just $224.
Prices have to come down before the situation is going to change, and that's true for just about every system. I'll speak more to this for individual systems in a coming column.
Let's move onto software, because the dynamics there are similar but slightly different because of the nature of the product. Comparing the first six months of each year going back to 2007, the picture looks like this.
I've provided three retail estimates for the first half of each year: total units sold, total revenue, and year-to-date average selling price (ASP). (The YTD ASP is just the total revenue divided by the total units.)
A few months ago, I observed that the total software unit sales figures for 2011 could be suggestive that the erosion of the retail software market was bottoming out. That is, after declining about 7 percent per year in both 2009 and 2010, the unit decline in 2011 was a mere 1 percent.
Yet retail sales so far in 2012 appear to indicate otherwise, since the year-over-year decline is already a staggering 30 percent. (That's not a typo. It really is 30 percent.)
On top of that, as the table below the graph shows, the average price of the software being sold is going down as well. Together these factors have driven total software revenue down 31 percent.
Anita Frazier, an analyst for the NPD Group, points to the number of new titles being released as a key factor in the contraction of the market. Here's what Frazier said:
"In the first half of 2012, there were 34 percent less new software SKUs compared to last year. On an average SKU basis, they generated 4 percent less units, but 2 percent more dollars on average. This shows that while new launch performance is relatively stable, it is the sheer reduction in the number of launches that is contributing to the overall softness we are seeing in software so far in 2012. The decrease in new launch volume accounts for 41 percent of the net unit decline and 47 percent of the net dollar decline from first half of 2011."
Another way of saying this, I believe, is that new releases are performing like new releases should but more than half of the decline in unit sales and revenue is coming from older titles - what are commonly referred to as catalog software.
This is, I believe, what analysts Michael Olson and Andrew Connor of Piper Jaffray have referred to as the shorter tails of recent game sales. For example, Call of Duty: Modern Warfare 3 has shown sales each month this year that are consistently 50 percent lower than comparable period sales of Call of Duty: Black Ops a year ago. If this were to happen across a wide swath of older software titles, then that would certainly contribute to the other 59 percent decrease in volume and 53 percent decrease in dollars.
Moreover, consumers have the option to buy less expensive software, and I would submit that this is likely just as big a factor as the shorter tails of new releases. That is, consumers are buying older, cheaper software or seeking out newer titles only when they are on sale.
Even if a title generates more revenue when it's new as Frazier indicates, a shorter tail and consumer pressure on pricing could mean a lower net revenue over the lifetime of a title for publishers. That's bad news any way you cut it.
Turning to the final segment of the market, I think we can say that the accessory segment is one of the brighter areas of sales this year. Let's look at first half revenue figures over the past few years and make a direct comparison to this year.
Clearly the accessory market has been more stable, in terms of revenue. I believe that underneath these figures are actually no fewer than three accessory waves that have helped maintain these levels. However, as I've stressed before, we have almost no direct view into the accessory segment since the NPD Group gives out few details and even some analysts don't subscribe to the accessory data that the Group provides. What follows is my own informed opinion.
The increase in accessory revenue in 2008 and through 2009 is contemporaneous with demand for plastic instruments for music games like Guitar Hero and Rock Band and increased demand for Wii remotes as that console set mid-year sales records. In early 2011 I believe accessory sales were buoyed by sales of Kinect sensors for Xbox 360 systems. And in 2012, both points cards and figures for Skylanders have been hot sellers. In fact, NPD's Frazier noted that "point card sales were exploding" in 2012 and are up 36 percent from the first half of 2011.
Finally, let me comment on the longer term, as we head into late 2012 and then 2013. In order for the retail part of the industry to look respectable by the end of this year, hardware and software will have to make turnarounds.
On the hardware side, a turnaround will require price cuts from both Sony and Microsoft. I'm looking for Sony to move in August when a new and less expensive model will be introduced, while Microsoft may well wait for the effect of its new service plan pricing to become apparent. Moreover, the Wii U will have to launch at a reasonable price and see rapid uptake by consumers to make up for collapsing Wii sales.
With several key software titles moved out of the tail end of 2012 and into 2013, the stage is set for big names like Halo and Assassin's Creed and Call of Duty and Madden to compete only with each other for consumer dollars.
I want to dig into each of these areas more thoroughly - particularly the fortune of current and future platforms and some software specifics - later this week in a couple more columns, so stay tuned.
Exactly what constitutes the retail market? Are Steam sales part of it? Downloadable content or other sales direct to consumer from? I'm supposing that orders from online retailers are included.
Could it be that accessories are stable compared with software because their sales aren't being cut into by digital sales methods?
In general, is it worth our time to worry about the retail software market as measured by NPD? Patterns of buying are changing. Are we discussing NPD's retail market merely because it's being measured, and no one measures the market as a whole?
"Could it be that accessories are stable compared with software because their sales aren't being cut into by digital sales methods?"
Hardware is down massively too, just compare 2005 with 2012 to see how massively down (especially if you keep in mind, that the GC and the XBox were essentially dead in 2005 and the PSP wasn't launched - the 2005 sales were almost PS2/GBA only), if it would be a digital vs. retail problem, hardware wouldn't be as down as it is.
Additionally, as the article states, it's the shorter tail of catalog titles, that plays a big part in the decline and I find it unlikely, that tons of customers buying CoD MW3 online, 8 months after it's launch, because it would be a development, that Activision/Blizzard would make public, the slowing sales of their prime franchise are hurting their stock.
Lewis: The retail market here includes anything sold as a physical product at brick & mortar or online retail, from hardware to software on discs and cartridges to controllers and redeemable codes printed on cards or receipts. It does not include direct Steam or Origin sales (i.e. only through the online interfaces of those services) but it does include GameStop, Wal-mart, Amazon, and many more. If a retail shop has an online store, those sales are also included here.
The physical product market is still over half of the money being exchanged for video game goods, in my estimation. No other segment (e.g. F2P, social, mobile, used) comes close, at least with current public estimates we have. So, in the sense that the majority of the market is important, yes, these figures are important.
And, as Christian helpfully pointed out, hardware is down. If you consider the console and handheld markets to be important markets (and this need not be your POV), then seeing dedicated system sales down is an important topic.
I think more pain is to come. US gdp estimates are being taking down to 1.1% and even they may be high. Retail over all is down three months in a row. You have europe imploding, Japan with all types of problems, china coming back to earth, and debt everywhere. I'm sure all the unemployed youth of the world have to do something with their time, there are no jobs for them sadly, so I guess that will help gaming some in the short term.
Of course this is happening to bricks and mortar stores, and their online shops. Steam (and maybe other not-as-good, online-only platforms) have (imho) been growing like wildfire for several years.
Online-only stores may well have picked up the slack (and MORE) from retail sales.
It isn't good news for the retail stores, but it may not be bad news for publishers.
Matt responds above and informs you that retail does in fact cover online sales. Brick in mortar are of course in trouble, but so are a lot of people and industries including game publishers. They become more irrelevant each and every year.
How can a potential rise in Steam sales compensate the drop in console hardware sales, because a large part of 2012's market contradiction comes from these collapsing console sales?
Last time I checked AAA PC games were not in it's best shape, in the last 3 years I can't recall any big PC exclusive games apart from the Blizzard games, while I can easily recall a dozen exclusive games for each console platform. Activision/Blizzard shippped worldwide 6 million copies of the biggest PC title of the year - Diablo III (retail + online), to me this seems quite underwhelming, as the game is easily the most relevant PC game since Starcraft 2.
PC gaming - apart from smaller independent titles - is in heavy decline for several years now and is by no means capable of compansating the declining console sales.
Besides, the argument of Steam sales always has the problem, that it isn't backed up by any unit numbers. Valve doesn't give out how many games are sold on their platform and they don't tell anybody for which price the games on their platform are usually sold.
My Steam Account now holds over 100 games, I purchased almost none of them on Steam, I just bought every single Indy Royale bundle and activated the games on Steam. I always paid more then the average for each bundle, but nonetheless, I don't fall for the illusion, that the money I spend on Indy Royale bundles is more then the money for 2 or 3 AAA titles maximum. So even the number of games, each Steam account holds (a number Valve isn't publishing) would be helpful.
Leaves the NPD estimates about online sales and they are very clear, digital sales don't make up the decline in retail sales.
"Matt responds above and informs you that retail does in fact cover steam"
Matt said the exact opposite. This measurement covers physical product. Steam is not physical product. This measurement does not cover Steam.
(Every time I see a comment like this I have to wonder what percentage of people simply cannot successfully read the article or comments about issues that actually matter, and respond anyway...)
my mistake Joe, but retail sales do include online sales, just not digital downloads, my mistake ,so sorry you got the "vapors" there reading my comment.
Point remains, steam does not even come close to filling the gaps in loses we are looking at here in the game industry.
and my larger point with regards to the economy as a whole is about the issues that actually matter.
"The Witcher II, Civilization IV, Star Wars The Old Republic, Anno 2070 "
I love the Witcher II, but when it comes to sales, it plays in a completely different league, then big console exclusives.
I guess you are talking about Civilisation V and not IV, but even this game came out in 2010 and not 2011 and the highest number I heard about sales of this game were 1.5 million copies, not the AAA league as well.
Star Wars: The Old Republic? Peaked at 1.7 million users and is in sharp decline since then, the decline is so sharp, that the game is now F2P until Level 15. Not even remotely close to the successfull AAA MMORPGs.
Anno 2070? Are you serious? When was the last time an Anno game sold more then 1 million copies in the US, did this ever happen? The game is for sure big in germany, but not in the US, the market we are talking about right now.
Console exclusives AAA titles usually sell 3 million minimum, otherwise they are considered as a flop.
As far as I can tell, Steam has been selling vast quantities of games, and... let me be clear... virtual sellers are not included in these figures at all.
I have 30 to 50 Steam-purchased games in my account, and I'm not a big spender (really).
As Steam and other direct-to-consumer sales are not included, nor (as far as I can tell from the replies) Apple/Android sales of games, then it's really a report about AAA/Console video sales, not about video game sales as a whole. And that segment of the market keeps declining as a fraction of the whole, right? Just as retail is declining as a fraction of all sales.
So how many conclusions can we draw from this information, about video game sales as a whole? Not a lot.
"As Steam and other direct-to-consumer sales are not included, nor (as far as I can tell from the replies) Apple/Android sales of games, then it's really a report about AAA/Console video sales, not about video game sales as a whole."
App Store worldwide revenues 2008-2011 3.6 billion US$, this includes all Apps not only games.
Because the US is only roughly a third of Apple's market, simply do the math yourself to see how much revenues the App Store generates in the US per year, this market is tiny in comparsion to the console industry.
Yes, I'm of the mind people are simply switching channels as well. And since a large portion of the market are adults tired of being refed fast food games.... I think many are simply waiting the industry out or refocusing their energy while our highly volatile economy shows some stability.
Again, 60$ games have never been worth the money, and people are becoming as a whole more educated about their spending habits.
People, really children buying D3 is a dying last chance effort to sell commercial garbage to the mass of desperate gamers willing to buy anything to escape reality.
The console cycle is almost dead. Hardware sales are down and in turn so are the game sales. The larger the game library the more people can hold out on buying things as they work off the list of games that weren't 'good enough' to merit a $60 purchase at release. Playing those gives time for newer software to fall in price as well. As the article called it 'catalog software'. The longer the console cycle the easier it is for people to fall into this consumer demographic.
"The larger the game library the more people can hold out on buying things as they work off the list of games that weren't 'good enough' to merit a $60 purchase at release. Playing those gives time for newer software to fall in price as well. As the article called it 'catalog software'."
The article says quite the opposite, new SKU are selling like they used too (despite the fact, that publishers don't release so many as they did, when the market was more healthy), it's the catalog titles, that aren't selling any more.
"Moreover, consumers have the option to buy less expensive software, and I would submit that this is likely just as big a factor as the shorter tails of new releases. That is, consumers are buying older, cheaper software or seeking out newer titles only when they are on sale."
Thus the new releases have very short tails as people will just hold out until new games are on sale. Instead of buying close to release they hold out.
I think they still see people that buy at release time buying at release time, but most people just hold out until the price drops (thus the shorter tail).
I think the author is pretty clear about his opinion on the reduced performance of catalog titles:
"Another way of saying this, I believe, is that new releases are performing like new releases should but more than half of the decline in unit sales and revenue is coming from older titles - what are commonly referred to as catalog software."
No recognition that this decline exactly corresponds to general economic conditions throughout the U.S. and EU? This is not an isolated problem that can be solved within the games industry.
Yeah, I wouldn't put too much blame on the economy here.
Nintendo is mainly responsible for the record breaking years and they are now trying to transition into a new generation for their handheld ( really rocky transition here) and console hardware, while not trying or just failing to keep sales up for the DS and Wii.
You can also blame the failure of Sony's Move and Mircosoft's Kinect to to get the non gamers that the Wii got.
Then there are less games being made for the current consoles since publishers and developers are ramping up for next generation hardware.
Last but not least the current hardware needs to be priced lower.
"Other game revenues - social, mobile, free-to-play - aren't in decline, only retail. "
Zynga's revenues are down and they are pretty important in the social games space.
I yet have to see any serious numbers about free-to-play or mobile, so far all I know comes from the PR departmentss of some manufacturers and publishers, but when I look at the wordlwide App store revenues, I find them pretty underwhelming ($3.6 billion in it's first 36 months - all Apps not only games and worldwide).
Sorry Matt,the crisis hit late 2008, and took hold in 2009. To think that some how the game industry is outside the macro economics of the world is beyond ridiculous.
Look over there..recession does indeed tell a part of the story, as does lower median and take home pay, as does long term unemployment, as does all the macro factors and headwinds effecting the world. You think things like a trillion dollar student debt doesnt have real world and industry ramifications?
This industry lives and dies on disposable income, as it dries up, so does the industry.
TC Weidner: I've not said macroeconomic factors weren't important - they may well be - but the argument being made here is post hoc ergo propter hoc, and that's not rational. If you want to find evidence that the recession is a prime driver of this, then post it. Don't make an argument about timing.
Let me offer something that is contrary to your argument that lower income and unemployment may not be the key problems here. At retail, software for the Xbox 360 has an average price of about $10 or more above that of the Wii. Yet, it is the Wii that is suffering losses of over 50% in software revenue while the Xbox 360 isn't even hitting a 20% decline, far, far better than the industry average. In terms of units, I believe the Xbox 360 is crushing everyone else, across all prices.
When the most expensive platforms are outperforming the cheaper ones, it flies in the face of "lower income, therefore lower game sales".
This isn't to say economic factors aren't important -- again, they might be! -- but it isn't THE reason, and pointing to timing isn't an argument.
Finally, I took some time recently to look at spending on entertainment as a part of consumer spending recently. It appeared that things weren't that bad, at least according to the government. Spending was on the rise on entertainment, not on the decline. But I'd have to double check. Feel free to do the same.
This isn't to say economic factors aren't important -- again, they might be!
might be? you are kidding right?
your argument for the Xbox over Wii also holds very little weight and makes very little sense in this topic. Wii sales drop makes sense as they would be the ones who would drop first being a more cost conscious and casual gaming demographic.
and this just made me laugh a little bit
If you want to find evidence that the recession is a prime driver of this, then post it. Don't make an argument about timing.
yeah, lets just ignore the timing of it all, umm OK.. Evidence besides timing is everywhere. Poverty rates, declining median income, trillion dollar student debt, housing crisis which wiped out trillions of dollars in equity, 3.5 million people ditching their cable/satellite tv, I could go on and on. The evidence is everywhere.
All the would be new console owners want phones or new phones. The trend has been there for awhile IMO, but we kept chasing older, richer gamers.
Current consoles and games almost necessitate an unoccupied HDTV, a broadband connection that can handle siphoning or that no one is using, and $50+ on software and services.
Phones are easy and almost a necessity at this point. With jumping on the Family plan costing ~$125+/yr not including hardware I can see how one might be forced to choose between that and traditional gaming. The failure for both Sony and Nintendo to build upon their previous success in the handheld sector also seems to support this.
It's obvious that video game's aren't generating the amount of money they were a few years ago, but I'm still curious how much of a slow down there has been from a lack of new console hardware? It's impossible to know the impact but the graphs in the article look very similar to most forms of media where you see an initial spike of revenue for a brief period of time and then you have a long tail effect afterwards.
Hopefully after the Wii U, new Xbox, and new Playstation arrive we will see revenue get back to the level they were a few years ago. I know a lot of people are already claiming the death of consoles and while digital is quickly taking over, I still believe that the console market is going to drive a good chunk of the retail sales for the next few years.
It is a myth that game sales fall towards the end of a cycle waiting for new hardware. Publishers and devs were making money hand of over fist on the PS2 when Microsoft rushed the 360 out.
The other thing that is going to affect video game sales in the near future is the US health care law. Basically the biggest video game demographic (young men 18-30 or so) is now going to be required to either buy health insurance or pay a tax, resulting in less money to spend on video games. Something like 20% didn't have health insurance and unless they qualify for a subsidy (which I think is 200% poverty level) they're going to have to buy it themselves (or more likely, pay the tax)
It's not pay the tax ... they just won't get money back while filing for their tax return. They never saw that money and will never see it so they won't miss it (pro tip: tax is auto deducted from your paycheck) Your comment just reeks of more conservative misinformation.
More of the same. Consoles are their end of cycle. There is a massive base of good used software as well.
Console prices are high because MS and Sony aren't in the black. Nintendo prices are high because they don't have to go as low since the other guys can't drop their price and because the Yen remains very strong which hurts exports from Japan.
And of course Nintendo accounts for most of the decrease the past few years. Their platforms were the first in transition to next gen platforms. The Wii went down as fast as it went up. And the dedicated handheld business has taken a hit from Apple which means the 3ds is completely replacing DS sales.
New sht gets people excited. And I would say the new sht are the smartphones and iPads and iPod touches the past few years. For the general consumer at least.
That is where their attention is at the moment. This is different than saying its platforms are replacing consoles or even dedicAted handhelds.
But right now attention is on those platforms. They are new. Not only have they brought a lot of creativity and ultra cheap games but the capacitive touchscreen brought new ways to play games.
So it up to these new platforms to do something new to get consumers excited. Like Iwata has said, it is getting increasingly difficult to compete on graphics alone at least when talking about the general consumer.
I would blame the decrease in sales to stagnation of the market.
Not so much with the consoles..but the games, the games the games. Two of my friends...a couple of the biggest video game nerds I know just posted their most recent podcast and they sounded like a couple of crotchedy old men. I feel the same way. I have been going to older games- Gamecube games, PS1/PS2, and DS games that I never had a chance to play because the new games on the market make me angry.
It's all the same shit. The consoles of today are great..they can offer great experiences. I know this. I enjoy this...but after I have experience similar experience 2x I generally feel like moving on is the best idea. We are currently in the cruck of the Trilogy. Many of the major franchises are working on the 3rd + game....I believe that many gamers are getting burnt out on it.
The game industry is slowing down because they aren't providing anything new or innovative. It's just the same old shit that was released 5 years ago with some slightly altered mechanics and a continuation of an already stretched out story that wasn't even that good to start of with. We have more rehashed and reimagined games this Gen than any Gen that I have been through. The word HD remastered makes me shit a little every time I hear it.
I understand that there are classics that people want to play again---that's what your online store is for. Re-release them as classics for cheaper cost....don't charge me 40-50 for a HD remaster game that is 10 years old.
Also, DLC is another issue that I think is killing the industry. Yea it's great, but not EVERY game needs or requires DLC. Yes I understand you want more money..but just throwing shit into a game that really has no relevance pisses people off and already on the disc DLC--that's another rim job that has no words to describe.
I think if there has been any generation of gaming that pisses me off more than any other, it is this one. Between rehashed games, sequels/prequels/trilogies(what do you call assassins Creed?), DRM, DLC, HD remakes, and one of the most artistically Blah! generations and also most forgetable(Yes there have been a few gems--but ultrarealistic this year will look pretty bad next year).
Harsh words, but I tend to agree. What new kind of games were developed in this generation? The PS1 generation saw the first "real" 3D games, a technology that changed gameplay in a fundamental way, Gran Turismo was fundamentally different from Pole Position, so was Colin McRae Rally from Drift Out. Tomb Raider wasn't just Rick Dangerous in 3D, it added things to the concept, that weren't possible before, the same goes for Zelda OoT. The list goes on, games like MGS, Sould Reaver or Shadow Man simply wouldn't be possible on a SNES or MD or any home computer of the 80s and early 90s.
The PS2 generation bought games like Devil May Cry or games like the 3D Dynasty Warriors, both were impossible to realise on consoles of the previous generation, because the processing power wasn't high enough, Fighting Force was the best you can get. Another thing, that emerged during the PS2 generation were the open world games, sure GTA was born on the PS1, but the the Top-Down view limited the gameplay to much to let the revolutionary mechanics shine. Look at Driver 2, to see how the concept didn't work on a PS1.
Here too, the list goes on, games like Katamari, Ico, Shadow of the Colossus, Okami or Resident Evil 4 couldn't have been done on a PS1.
This generation only polished the games and it's mechanics introduced in previous generations, some interesting games were released, true, but nothing nearly as groundbreaking as Gran Turismo, Zelda OoT, MGS, Tomb Raider, Guitar Hero, Silent Hill, Resident Evil, Shenmue, Beyond Good and Evil and many others, all these games were impossible to realise before and took advantage of the technology instead of just using higher resolutions for the game and bigger textures.
The exception in this generation is the Wii, this console had plenty of games, impossible to realise before, because there was no Wiimote before the Wii.
"The exception in this generation is the Wii, this console had plenty of games, impossible to realise before, because there was no Wiimote before the Wii. "
Agreed--Wii opened the door to some pretty awesome experiences..
One of my most memorable montion controlled games this Gen has been Red Steel 2.
"One of my most memorable montion controlled games this Gen has been Red Steel 2"
To me it was Silent Hill: Shattered Memories, throwing the enemies over your shoulder or pushing them back, while constantly fleeing without any weapon was an awesome experience, I never could imagine to have with a gamepad.
It is a great point. The 360 and PS3 merely polished up the games of the previous generation. There really wasn't much new introduced other than removing the smudges from our tv screens or adjusting the focus on our camera lense. Clarity of graphics in other words is what the 360 and PS3 brought to the table.
Surely the main thing that this generation has brought to gaming is the introduction of internet gaming to home consoles? I feel that this generation has improved graphics of the previous generation and added online gameplay (and achievements/trophies as well...)...COD was around in the previous generation, the single player was solid and enjoyable, but the reason for its massive popularity now is online multiplayer.
Could it be that accessories are stable compared with software because their sales aren't being cut into by digital sales methods?
In general, is it worth our time to worry about the retail software market as measured by NPD? Patterns of buying are changing. Are we discussing NPD's retail market merely because it's being measured, and no one measures the market as a whole?
Hardware is down massively too, just compare 2005 with 2012 to see how massively down (especially if you keep in mind, that the GC and the XBox were essentially dead in 2005 and the PSP wasn't launched - the 2005 sales were almost PS2/GBA only), if it would be a digital vs. retail problem, hardware wouldn't be as down as it is.
Additionally, as the article states, it's the shorter tail of catalog titles, that plays a big part in the decline and I find it unlikely, that tons of customers buying CoD MW3 online, 8 months after it's launch, because it would be a development, that Activision/Blizzard would make public, the slowing sales of their prime franchise are hurting their stock.
The physical product market is still over half of the money being exchanged for video game goods, in my estimation. No other segment (e.g. F2P, social, mobile, used) comes close, at least with current public estimates we have. So, in the sense that the majority of the market is important, yes, these figures are important.
And, as Christian helpfully pointed out, hardware is down. If you consider the console and handheld markets to be important markets (and this need not be your POV), then seeing dedicated system sales down is an important topic.
I hope that helps.
There are headwinds everywhere.
Online-only stores may well have picked up the slack (and MORE) from retail sales.
It isn't good news for the retail stores, but it may not be bad news for publishers.
Last time I checked AAA PC games were not in it's best shape, in the last 3 years I can't recall any big PC exclusive games apart from the Blizzard games, while I can easily recall a dozen exclusive games for each console platform. Activision/Blizzard shippped worldwide 6 million copies of the biggest PC title of the year - Diablo III (retail + online), to me this seems quite underwhelming, as the game is easily the most relevant PC game since Starcraft 2.
PC gaming - apart from smaller independent titles - is in heavy decline for several years now and is by no means capable of compansating the declining console sales.
Besides, the argument of Steam sales always has the problem, that it isn't backed up by any unit numbers. Valve doesn't give out how many games are sold on their platform and they don't tell anybody for which price the games on their platform are usually sold.
My Steam Account now holds over 100 games, I purchased almost none of them on Steam, I just bought every single Indy Royale bundle and activated the games on Steam. I always paid more then the average for each bundle, but nonetheless, I don't fall for the illusion, that the money I spend on Indy Royale bundles is more then the money for 2 or 3 AAA titles maximum. So even the number of games, each Steam account holds (a number Valve isn't publishing) would be helpful.
Leaves the NPD estimates about online sales and they are very clear, digital sales don't make up the decline in retail sales.
"Matt responds above and informs you that retail does in fact cover steam"
Matt said the exact opposite. This measurement covers physical product. Steam is not physical product. This measurement does not cover Steam.
(Every time I see a comment like this I have to wonder what percentage of people simply cannot successfully read the article or comments about issues that actually matter, and respond anyway...)
Point remains, steam does not even come close to filling the gaps in loses we are looking at here in the game industry.
and my larger point with regards to the economy as a whole is about the issues that actually matter.
Your opinion is a tad biased I think.
>> in the last 3 years I can't recall any big PC exclusive games apart from the Blizzard games
Let me help you: The Witcher II, Civilization IV, Star Wars The Old Republic, Anno 2070
And that's just for 2011.
PC gaming is dead!
"The Witcher II, Civilization IV, Star Wars The Old Republic, Anno 2070 "
I love the Witcher II, but when it comes to sales, it plays in a completely different league, then big console exclusives.
I guess you are talking about Civilisation V and not IV, but even this game came out in 2010 and not 2011 and the highest number I heard about sales of this game were 1.5 million copies, not the AAA league as well.
Star Wars: The Old Republic? Peaked at 1.7 million users and is in sharp decline since then, the decline is so sharp, that the game is now F2P until Level 15. Not even remotely close to the successfull AAA MMORPGs.
Anno 2070? Are you serious? When was the last time an Anno game sold more then 1 million copies in the US, did this ever happen? The game is for sure big in germany, but not in the US, the market we are talking about right now.
Console exclusives AAA titles usually sell 3 million minimum, otherwise they are considered as a flop.
I have 30 to 50 Steam-purchased games in my account, and I'm not a big spender (really).
So how many conclusions can we draw from this information, about video game sales as a whole? Not a lot.
App Store worldwide revenues 2008-2011 3.6 billion US$, this includes all Apps not only games.
Because the US is only roughly a third of Apple's market, simply do the math yourself to see how much revenues the App Store generates in the US per year, this market is tiny in comparsion to the console industry.
Again, 60$ games have never been worth the money, and people are becoming as a whole more educated about their spending habits.
The article says quite the opposite, new SKU are selling like they used too (despite the fact, that publishers don't release so many as they did, when the market was more healthy), it's the catalog titles, that aren't selling any more.
"Moreover, consumers have the option to buy less expensive software, and I would submit that this is likely just as big a factor as the shorter tails of new releases. That is, consumers are buying older, cheaper software or seeking out newer titles only when they are on sale."
Thus the new releases have very short tails as people will just hold out until new games are on sale. Instead of buying close to release they hold out.
I think they still see people that buy at release time buying at release time, but most people just hold out until the price drops (thus the shorter tail).
I think the author is pretty clear about his opinion on the reduced performance of catalog titles:
"Another way of saying this, I believe, is that new releases are performing like new releases should but more than half of the decline in unit sales and revenue is coming from older titles - what are commonly referred to as catalog software."
In 2012 when the U.S. is in a mild, slow recovery, the retail video game industry goes through a 30% decline.
I don't think it's as simple as "look over there, recession!"
But, happy to be proven wrong!
Nintendo is mainly responsible for the record breaking years and they are now trying to transition into a new generation for their handheld ( really rocky transition here) and console hardware, while not trying or just failing to keep sales up for the DS and Wii.
You can also blame the failure of Sony's Move and Mircosoft's Kinect to to get the non gamers that the Wii got.
Then there are less games being made for the current consoles since publishers and developers are ramping up for next generation hardware.
Last but not least the current hardware needs to be priced lower.
Zynga's revenues are down and they are pretty important in the social games space.
I yet have to see any serious numbers about free-to-play or mobile, so far all I know comes from the PR departmentss of some manufacturers and publishers, but when I look at the wordlwide App store revenues, I find them pretty underwhelming ($3.6 billion in it's first 36 months - all Apps not only games and worldwide).
Sorry Matt,the crisis hit late 2008, and took hold in 2009. To think that some how the game industry is outside the macro economics of the world is beyond ridiculous.
Look over there..recession does indeed tell a part of the story, as does lower median and take home pay, as does long term unemployment, as does all the macro factors and headwinds effecting the world. You think things like a trillion dollar student debt doesnt have real world and industry ramifications?
This industry lives and dies on disposable income, as it dries up, so does the industry.
Its amazing you would think otherwise.
Let me offer something that is contrary to your argument that lower income and unemployment may not be the key problems here. At retail, software for the Xbox 360 has an average price of about $10 or more above that of the Wii. Yet, it is the Wii that is suffering losses of over 50% in software revenue while the Xbox 360 isn't even hitting a 20% decline, far, far better than the industry average. In terms of units, I believe the Xbox 360 is crushing everyone else, across all prices.
When the most expensive platforms are outperforming the cheaper ones, it flies in the face of "lower income, therefore lower game sales".
This isn't to say economic factors aren't important -- again, they might be! -- but it isn't THE reason, and pointing to timing isn't an argument.
Finally, I took some time recently to look at spending on entertainment as a part of consumer spending recently. It appeared that things weren't that bad, at least according to the government. Spending was on the rise on entertainment, not on the decline. But I'd have to double check. Feel free to do the same.
This isn't to say economic factors aren't important -- again, they might be!
might be? you are kidding right?
your argument for the Xbox over Wii also holds very little weight and makes very little sense in this topic. Wii sales drop makes sense as they would be the ones who would drop first being a more cost conscious and casual gaming demographic.
and this just made me laugh a little bit
If you want to find evidence that the recession is a prime driver of this, then post it. Don't make an argument about timing.
yeah, lets just ignore the timing of it all, umm OK.. Evidence besides timing is everywhere. Poverty rates, declining median income, trillion dollar student debt, housing crisis which wiped out trillions of dollars in equity, 3.5 million people ditching their cable/satellite tv, I could go on and on. The evidence is everywhere.
Current consoles and games almost necessitate an unoccupied HDTV, a broadband connection that can handle siphoning or that no one is using, and $50+ on software and services.
Phones are easy and almost a necessity at this point. With jumping on the Family plan costing ~$125+/yr not including hardware I can see how one might be forced to choose between that and traditional gaming. The failure for both Sony and Nintendo to build upon their previous success in the handheld sector also seems to support this.
Hopefully after the Wii U, new Xbox, and new Playstation arrive we will see revenue get back to the level they were a few years ago. I know a lot of people are already claiming the death of consoles and while digital is quickly taking over, I still believe that the console market is going to drive a good chunk of the retail sales for the next few years.
Console prices are high because MS and Sony aren't in the black. Nintendo prices are high because they don't have to go as low since the other guys can't drop their price and because the Yen remains very strong which hurts exports from Japan.
And of course Nintendo accounts for most of the decrease the past few years. Their platforms were the first in transition to next gen platforms. The Wii went down as fast as it went up. And the dedicated handheld business has taken a hit from Apple which means the 3ds is completely replacing DS sales.
New sht gets people excited. And I would say the new sht are the smartphones and iPads and iPod touches the past few years. For the general consumer at least.
That is where their attention is at the moment. This is different than saying its platforms are replacing consoles or even dedicAted handhelds.
But right now attention is on those platforms. They are new. Not only have they brought a lot of creativity and ultra cheap games but the capacitive touchscreen brought new ways to play games.
So it up to these new platforms to do something new to get consumers excited. Like Iwata has said, it is getting increasingly difficult to compete on graphics alone at least when talking about the general consumer.
Not so much with the consoles..but the games, the games the games. Two of my friends...a couple of the biggest video game nerds I know just posted their most recent podcast and they sounded like a couple of crotchedy old men. I feel the same way. I have been going to older games- Gamecube games, PS1/PS2, and DS games that I never had a chance to play because the new games on the market make me angry.
It's all the same shit. The consoles of today are great..they can offer great experiences. I know this. I enjoy this...but after I have experience similar experience 2x I generally feel like moving on is the best idea. We are currently in the cruck of the Trilogy. Many of the major franchises are working on the 3rd + game....I believe that many gamers are getting burnt out on it.
The game industry is slowing down because they aren't providing anything new or innovative. It's just the same old shit that was released 5 years ago with some slightly altered mechanics and a continuation of an already stretched out story that wasn't even that good to start of with. We have more rehashed and reimagined games this Gen than any Gen that I have been through. The word HD remastered makes me shit a little every time I hear it.
I understand that there are classics that people want to play again---that's what your online store is for. Re-release them as classics for cheaper cost....don't charge me 40-50 for a HD remaster game that is 10 years old.
Also, DLC is another issue that I think is killing the industry. Yea it's great, but not EVERY game needs or requires DLC. Yes I understand you want more money..but just throwing shit into a game that really has no relevance pisses people off and already on the disc DLC--that's another rim job that has no words to describe.
I think if there has been any generation of gaming that pisses me off more than any other, it is this one. Between rehashed games, sequels/prequels/trilogies(what do you call assassins Creed?), DRM, DLC, HD remakes, and one of the most artistically Blah! generations and also most forgetable(Yes there have been a few gems--but ultrarealistic this year will look pretty bad next year).
I think this is why the sales are down.
The PS2 generation bought games like Devil May Cry or games like the 3D Dynasty Warriors, both were impossible to realise on consoles of the previous generation, because the processing power wasn't high enough, Fighting Force was the best you can get. Another thing, that emerged during the PS2 generation were the open world games, sure GTA was born on the PS1, but the the Top-Down view limited the gameplay to much to let the revolutionary mechanics shine. Look at Driver 2, to see how the concept didn't work on a PS1.
Here too, the list goes on, games like Katamari, Ico, Shadow of the Colossus, Okami or Resident Evil 4 couldn't have been done on a PS1.
This generation only polished the games and it's mechanics introduced in previous generations, some interesting games were released, true, but nothing nearly as groundbreaking as Gran Turismo, Zelda OoT, MGS, Tomb Raider, Guitar Hero, Silent Hill, Resident Evil, Shenmue, Beyond Good and Evil and many others, all these games were impossible to realise before and took advantage of the technology instead of just using higher resolutions for the game and bigger textures.
The exception in this generation is the Wii, this console had plenty of games, impossible to realise before, because there was no Wiimote before the Wii.
Agreed--Wii opened the door to some pretty awesome experiences..
One of my most memorable montion controlled games this Gen has been Red Steel 2.
To me it was Silent Hill: Shattered Memories, throwing the enemies over your shoulder or pushing them back, while constantly fleeing without any weapon was an awesome experience, I never could imagine to have with a gamepad.
It is a great point. The 360 and PS3 merely polished up the games of the previous generation. There really wasn't much new introduced other than removing the smudges from our tv screens or adjusting the focus on our camera lense. Clarity of graphics in other words is what the 360 and PS3 brought to the table.
That and DLC as Eric mentioned.
The XBox Live was introduced in the last generation and on the XBox FPS like Halo enjoyed big success, it was nothing introduced in this generation.