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NPD: Digital Trumps Physical In PC Standalone Game Unit Sales
NPD: Digital Trumps Physical In PC Standalone Game Unit Sales
September 20, 2010 | By Leigh Alexander

September 20, 2010 | By Leigh Alexander
More: Console/PC

Most theorize that a full transition from packaged goods into digital sales is years away -- but in the PC video game space, unit sales by download have passed brick-and-mortar retail, according to estimations from U.S. analysis firm NPD Group.

In the first six months of 2010, 11.2 million PC games were purchased in the U.S. as full digital downloads versus 8.2 million physical units, says the NPD. Earlier this summer, the U.S. sales tracking firm said that during 2009, digital sales had just about reached parity with physical sales -- the total for last year is 21.3 million digital purchases alongside 23.5 million physical unit buys.

That doesn't mean that digital downloads are making more money, however. According to the NPD, games sold at physical retail have a greater marketshare by dollar revenues: 57 percent versus digital's 43 percent, because of a higher average selling price at retail.

And overall, PC software both digital and physical revenues are down 21 percent alongside a 14 percent drop in unit sales for the period year over year.

Notably, however, the NPD's analysis only provides a partial look at the PC digital space. Its statistics largely capture only sales of full games, and not the subscription or microtransaction revenue that often follows a software purchase in persistent titles, nor does it include revenue from virtual money or goods purchased on social networking platforms.

In addition, the tracking firm appears to lack agreements with the majority of digital retailers. This means that the figures cited are extrapolated from third-party tracking. The firm attempts to divine PC game purchase habits from surveys, using anywhere from 8,000 to 180,000 individuals on the NPD online consumer panel, depending on which of its methods it chooses.

"One major finding from this latest report is that the 'big got bigger' in the first half of 2010, with both Steam and Big Fish capturing a bigger share of full-game PC games digital download sales than they did last year," says NPD analyst Anita Frazier.

In its analysis of the digital sales landscape, the NPD says it divided retailers into two "segments"-- Casual Digital Retailers, which offer "smaller, easily accessible" games that tend to rely on trial-based or ad-supported business models; and "Frontline Digital Retailers", the sort that offer full downloads of the same kinds of PC games that are available on retail shelves.

By these metrics, is the number one "frontline digital retailer" as of June 2010, based the amount of survey respondents who purchased a PC game or game elements after visiting its website. Direct2Drive is second, followed by, and leads "casual digital retailers" during the same period, followed by and; EA's is fourth, and is fifth.

"The overall decline of PC games when combining sales via both digital downloads and physical retail sales is impacted by the expansion of social network gaming as well as the continued expansion of free game options," says Frazier.

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Cordero W
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So why does his article exist again?

Mike Lopez
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It is no surprise to me that digital is already unit-wise ahead of retail on PC (where digital distribution has been an option for longer than on consoles). Perhaps Retail revenue still has a bit of an edge but I expect digital profit margins in turn have an even larger advantage over retail.

It would be nice for NPD to do more forecasting on console digital distribution because I would bet the casual XBLA/PSN market is much larger than most people expect. In the past NPD claimed lack of console digital data but they seem to have been able to forecast the PC side with not much more data so appear to be making some efforts to overcome that, even if the reliability of the forecast is not as guaranteed as that of retailer reporting. They better evolve quickly into deep digital reporting or they will cease to be relevant.

Michiel Hendriks
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I have a hard time believing this. I thought NPD didn't track digital distribution, partially because they didn't get any numbers.

""That doesn't mean that digital downloads are making more money, however. According to the NPD, games sold at physical retail have a greater marketshare by dollar revenues: 57 percent versus digital's 43 percent, because of a higher average selling price at retail.""

From my own observations digital distributed games are only cheaper when on sale, but on average they are equally or more expensive. Also, isn't the publisher's cut from digital distribution on average larger?

Christophe Couderq
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They don't get any hard figures, these findings are all survey-based. It might be reliable given the sample size, but it's hard to tell.

Ian Uniacke
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Perhaps NPD wants to believe that digital distribution isn't important so that they remain relevant? Imagine how long it would take them to adapt their methods to digital distribution.

I also wonder how much the market is misrepresented by NPD because they can't accurately measure the effect of digital.

Bart Stewart
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The thing I find curious is that some version of this question -- why doesn't NPD include numbers on digital sales and online subscriptions (and now social game microtransactions)? -- has been asked here for at least two or even three years now.

You have to think there are people (i.e., analysts) who really want to see solid numbers in order to properly understand the industry's trends. So why hasn't that interest spurred NPD *or a competitor* to find a way to provide this information?

What are the impediments to somebody getting good sales data across the complete spectrum of computer gaming?

Sebastian Lindig
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Digital sales are growing somewhat in the dark since none of the major publishers have adopted it full heartedly. Which may also be the reason why NPD isn't putting as much effort into this analysis as with the retail market. From my experience at "traditional" publishers I know that many simply ignore the potential of digital sales over their still dominating retail business. It is quite difficult to develop a clear understanding of the similiarties but more importantly the differences between the two markets.

Matt Cratty
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Most of my digital purchases are games I missed and can no longer find in stores.

I'm not terribly trusting of services that must always work forever for me to play the games I own, so I buy them there as a last resort unless its something I know nothing about and buy on a lark.

But, I agree with Bart that until the NPD and others get it through their colossally thick craniums that subscriptions need to be tallied in some meaningful way in these extremely short-sighted reports, they are painting a picture of the game industry that doesn't entirely mirror reality.