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In-Depth: The NPD Results - Everything You Need To Know
by Leigh Alexander [PC, Console/PC, Mobile Console, Exclusive]
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January 15, 2010
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Yesterday, the NPD Group revealed its U.S. console retail numbers for December and for the full year of 2009. Year-end NPD results provide a key metric in judging the health and overall trending of the game industry, and Gamasutra has your full coverage of the results.
As always, Gamasutra will present its in-depth feature analysis from Matt Matthews in the days to come, but for now, here's your cheat sheet for yesterday's results.
How 2009 Turned Out
Analysts have been aware for some months that the year 2009 was not keeping pace with the industry's gangbusters 2008, and that in terms of percentage comparison, the biz was likely to be down in 2009 -- and it was, down 8 percent to $19.66 billion.
Every market segment declined in 2009 -- except for portable hardware, which rose 6 percent. Seven out of the ten best-selling games of the year were first-party Nintendo titles, and the number one game of the year was Call of Duty: Modern Warfare 2.
This annual decline was less than many analysts had predicted -- numerous industry-watchers had forecast a double-digit slump.
How December Went
What about the holiday season? GameStop and several major publishers, like Electronic Arts, Take-Two and Ubisoft, all recently lowered their fiscal year forecasts on a weak market, and analysts awaited results of the industry's performance in December to predict rebound potential in 2010.
But in slightly better news following a tough year, the video game industry saw December revenues up 4 percent to $5.53 billion -- not only its best holiday yet, its best single sales month on record. Nearly all analysts had expected December to be flat, if not down.
However, video game software sales were still down 7% to $2.58 billion for the month. So, given the challenging climate that so many companies face, an overall boost is a ray of light for the year to come, even if game publishers did not feel the benefit.
How The Big Three Did
During December, Wii and DS led hardware sales with 3.81 and 3.31 million units, respectively, and Nintendo's New Super Mario Bros Wii topped Modern Warfare 2 on the software charts. Nintendo, somewhat vindicated after months of close scrutiny, pointed to the best year in console gaming history for its DS, despite Wii hardware down 5.7 percent for the year.
Meanwhile, the PlayStation 3 ratcheted up 87 percent year over year growth in December, and with 1.35 million hardware units sold for the month, Sony saw its best PS3 hardware/software month ever, too -- although a close look reveals a slight decline in revenue and 4 percent loss in overall Sony marketshare, year on year.
As for Microsoft, it sold 1.3 million units in the month, keeping its tie ratio constant at 8.8. Although its overall Xbox 360 revenue was slightly down, the system remains a soldier of third-party software revenue, generating 43 percent of the total during the year.
What The Analysts Say
"The September console price cuts, coupled with heightened promotional activity at retail, triggered a rebound in console sales in December," says Wedbush's Michael Pachter. "However, software sales continue to lag."
Pachter pointed to the music genre's bubble bursting, declaring a passed fad -- and pegging 72 percent of the annual decline in software sales on the vacuum left behind.
He adds, "We expect the decline to reverse in 2010, with a combination of a strong release schedule in the first half of the year, very easy software comparisons for March through October, and expected year-over-year growth for console unit sales for most of 2010."
"The Wii appeared to be losing momentum in the first 10 months of the year, but it regained it during the holiday season and ended the year on a strong note, as did the PS3 following Sony's relaunch of the consoles," says Kaufman Bros.' Todd Mitchell. "The success of first-party Nintendo titles continued in 2009; however, the growth in PS3 sales and the continued popularity of the Xbox 360 bodes well for the third-party publishers in 2010."
Says EEDAR's Jesse Divnich: "All too often the economy is blamed for the recent industry contraction. In reality, decreased sales in 2009 had more to do with a lack of innovation than economic recession."
He continues: "The growth of our industry now rests more on innovation than it ever has before, especially since non-traditional and casual markets consist of a larger share than in previous years."
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I agree.
Yes, but not for the reasons he goes on talking about.
"The growth of our industry now rests more on innovation than it ever has before, especially since non-traditional and casual markets consist of a larger share than in previous years."
Why does this mean you need more innovation? Actually wouldn't you need less? They haven't experienced the same thing over and over for the last 20 years. The only innovation one needs is a way for them to control the same stuff that has already been churned out for decades... (NSMB Wii for example)
The reason the industry needs innovation is because there is only so long you can mask the same type of games with graphics improvements to gamers. Gamers being the people that actually made this their hobby and spend money on it in a consistent fashion. There is only so long you can turn out sequel after sequel (it is a long time it turns out as most games are in the 4-5's in sequel-hood). It seems the industry is saying "Innovate" and so they do new models, more graphics changes then make the same games under a new IP name ("Devil May Cry... no I mean Bayonetta"), but that is missing the point seeming it seems like the hardware has not become the problem but rather the ability to create new stuff for the hardware.
Then again, making new IP's isn't helping EA and its partners much though. They are trying to innovate by giving the consumer different types of games (eg. Mirror's Edge) and they thud. Mostly though they are doing the same thing as everyone else (GH, no we mean RB; Resident Evil, no we mean Dead Space; etc) - 'innovate' by copying what we already have, gameplay wise, make new models, graphics, and put a new name on it.
Pacher: "However, software sales continue to lag."
Well, seems reasonable. $60 is a lot of pay for the same types of games consumers got 3 years ago. No major graphics improvements have been made... Consumers see no reason to keep buying the same type of games at full price, especially when they are so chalk full of features it takes 6 months to finish anyhow (to the typical gamer). Especially when the economy is in the tank.
The interesting question is what will replace the music genre bubble burst? or are these people that joined up completely leaving the medium. That is the scary part as it shows the industry might be shrinking as the fad moves on.
Facebook App Games, Online Browser Games, iPhone Games, besides the still new Wii audience - the market was never so diverse, like it is today.
When people will have more money they will spend it more again? The trend will go the other way.
Unlike in the States and UK, for example in Germany, where I live, are no indications of slower sales to my knowledge. The economy was not hit as hard here yet. Unemployment rates are still stable - did not grow significantly.
I would gladly share the data with you, but the German market has no valid independent tracking of sales numbers. There are NPD like institutions yet the numbers do not reflect the market. Big retailers don't participate and the online sales are not covered. It's just what I read and hear inside the country. Sorry.
The economy in germany is hit as hard as in the US, but we had general elections in the last year and the goverment used tons of money to hold unemployment rates stable, this money won't be here this year, so the effects of the recession will arrive here later.