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A disappointing December leads to 2011 retail video game declines
A disappointing December leads to 2011 retail video game declines
January 12, 2012 | By Tom Curtis




As 2011 came to an end, annual U.S. video game sales at retail for saw a notable drop year-over-year, though alternative monetization strategies helped bolster the performance of video game content across retail and digital.

U.S. video game retail sales across hardware, software and accessories saw a sizable 8 percent drop in 2011, putting total video games sales revenue at $17.02 billion, from $18.59B in 2010. For December 2011 in particular, video game sales revenue dropped 21 percent to $3.99 billion from $5.07 billion during the same period last year.

While the video game industry typically depends on December sales to drive its annual revenues, the numbers this year were disappointing historically, according to the group.

"I had expected December sales to represent a larger portion of total year sales than what occurred," said NPD analyst Anita Frazier, explaining that December accounted for only 23 percent of this year's annual sales versus a ten-year average of 28.

For all of 2011, The NPD Group, in partnership with EEDAR, reported that its estimated total revenues from game content via all montization strategies -- which appends digital revenues on top of retail -- reached between $16.3 to $16.6 billion.

That above total excludes hardware and accessories, but includes new physical video and PC games, used games, game rentals, subscriptions, digital full-game downloads, social network games, downloadable content, and mobile games. With all of these revenue streams in mind, and despite a rapidly growing digital marketplace, this total is down roughly 2 percent from 2010.

Based on this estimate, the group reported that physical sales still make up the majority of consumer spend on game content. Retail sales of new physical game content, including portable, mobile, and console game software, reached 9.3 billion for the year, down 8 percent from 2010's $10.1 billion.

Frazier says that the results are not surprising, given that we are in the latter part of the lifecycle of the current console generation. While core gamers continue to buy established brands in droves, new customers for retail games are becoming rarer as the excitement of new hardware wears down.

Software

For December 2011, retail sales for console and portable games reached $2.04 billion, down 14 percent from $2.37 billion in 2010. The December 2011 total hit $2.14 billion with retail PC game sales included.

These figures fall well below analyst estimates, which predicted that U.S. retail game software sales (excluding PC games) would grow 2 percent or drop as much as 5 percent compared to the same time last year.

Major titles such as Activision's Call of Duty: Modern Warfare 3 Ubisoft's Just Dance 3, and Bethesda Softworks' The Elder Scroll V: Skyrim topped the charts for both December 2011 as well as the year overall, and games such as Call of Duty: Black Ops, Epic's Gears of War 3, and Just Dance 2 -- while they did not make the December list -- found their way into the year's top 10.

"Call of Duty: Modern Warfare 3 landed in the top spot for software title sales for both December and for Annual 2011. Looking at the top 10 titles for the year, two franchises scored with two titles each: Call of Duty and Just Dance -- two franchises that couldn’t be more different, demonstrating the range of appealing content on consoles in 2011.”

The top 10 best-selling retail games in the U.S. for December 2011 were as follows:

1. Call of Duty: Modern Warfare 3 (360, PS3, Wii, PC)**
2. Just Dance 3 (Wii, 360, PS3)
3. Elder Scrolls V: Skyrim (360, PS3, PC)**
4. Mario Kart 7 (3DS)
5. Battlefield 3 (360, PS3, PC)**
6. Madden NFL 12 (360, PS3, Wii, PSP, PS2)**
7. Assassin's Creed: Revelations (360, PS3, PC)
8. NBA 2K12 (360, PS3, Wii, PSP, PS2, PC)
9. Super Mario 3D Land (3DS)
10. Batman: Arkham City (360, PS3, PC)**


"The top 20 titles in December generated nearly half total software revenue for the month, which is very high," Frazier said.

The decline in software sales was slightly less steep when looking at all of 2011, during which console and portable game sales at retail generated $8.83 billion, a 6 percent drop from $9.36 billion in 2010. With PC games included, the overall 2011 total hits $9.27 billion.

Here are the overall best-selling games of 2011:

1. Call of Duty: Modern Warfare 3 (360, PS3, Wii, PC)**
2. Just Dance 3 (Wii, 360, PS3)
3. Elder Scrolls V: Skyrim (360, PS3, PC)**
4. Battlefield 3 (360, PS3, PC)**
5. Madden NFL 12 (360, PS3, Wii, PSP, PS2)**
6. Call of Duty: Black Ops (360, PS3, Wii, NDS, PC)**
7. Batman: Arkham City (360, PS3, PC)**
8. Gears of War 3 (360)**
9. Just Dance 2 (Wii)
10. Assassin's Creed: Revelations (360, PS3, PC)


**(includes CE, GOTY editions, bundles, etc. but not those bundled with hardware)

Though Activision's toy-based Skylanders title didn't make it on either list, Frazier said, "We get asked a lot about how Skylanders is performing. If you combine the sales of software bundles with the character packs which are tracked in the accessories category, the title would rank fourth in December, and 10th for Annual 2011 on dollar sales."

She added, "[EA's] Star Wars: The Old Republic was the 14th best-selling title in December, and it was released only on PC. While the collector's edition sold less than the regular SKU, the SKUs both generated about the same in dollar sales, thanks to a hefty price point that fans were willing to spend on this well-loved franchise."

Frazier also discussed the impact of non-retail monetization methods on game sales for 2011 overall, saying, "Our preliminary estimate for the other monetization methods in which consumers can acquire games content is $7.24 billion for 2011, an increase of 7 percent versus 2010. This includes the consumer spend on used games, digital full game and add-on content downloads, mobile games, social network games, subscriptions and rentals."

"The increase in these areas partially offset the decline in new physical retail sales of content in 2011. Total spend on content is down approximately 2 percent in 2011 while the total consumer spend against all categories is down approximately 5 percent. Our final estimate will be issued in March 2012, along with our Q4 estimate for these same monetization methods in Europe."

Hardware

On the hardware side, revenues from U.S. retail reached $5.58 billion, an 11 percent decline from 2010's $6.29 billion. December 2011 contributed $1.32 billion to that total, a 28 percent drop from $1.84 billion in December 2010.

"Hardware was particularly hard hit in December," said Frazier. "Normally, we see sales increase from November to December on an average sales per week basis (keeping in mind December is a 5-week retail month as compared to November which is a 4-week retail month). The 3DS and the DS were the only platforms to realize a unit sales increase versus November, which is highly unusual since typically all platforms enjoy a lift in the biggest month at retail."

"The Xbox 360 was the best-selling platform for the year, and the two HD platforms (360 and PS3) were the two platforms to realize a unit sales increase over last year. All other platforms declined in unit sales versus 2010 (save the 3DS which wasn’t in market last year)."

Accessory sales very closely mirrored hardware sales during 2011 at large, dropping 11 percent to $2.61 billion from $2.95 billion year-over-year. In December 2011, accessory sales dropped 27 percent to $628.7 million from $863.5 million during the same period last year.

Microsoft's Xbox 360 closed out December 2011 with 1.7 million units sold, with total market spend on the platform reaching $1.5 billion. Microsoft added that total U.S. consumer retail spending on the Xbox 360 hit $6.7 billion for all of 2011, with $2.1 billion of that total spent on consoles and $4.6 billion spent on games and accessories.

"The Xbox 360 platform accounted for nearly 40 percent of annual 2011 new physical retail sales across all categories," added Frazier.

Sony kept tight-lipped on the sales figures for its hardware, and simply reiterated that the company sold 6.5 million hardware units worldwide during the holiday season.


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Comments


Steven Ulakovich
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This is not surprising, and really puts a dull light on those that call themselves analysts in this industry. You want to know why the numbers are so low? Walk into some retail establishments, and see for yourselves.



Foot traffic was down considerably in brick and mortar, as more and more are flocking to online retailers. To get more feet into stores, software was heavily discounted throughout the holiday season, which leads to lower revenues. In an attempt to attract people to the websites, free shipping promotions were offered left and right, which cuts into revenues.



Simply put, traditional big box retailers are started to treat the gaming industry as a loss leader to get feet in the door. Come in for some discounted titles, leave with a piece of electronic or toy with a higher markup.



The only game dependent retailer, GameStop, depends more on their used sales to keep afloat than anything. New games are the loss leader for their used product.

Joe McGinn
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Yeah and I'm getting really tired of this analyst canard, trotted out five times a day it seems: "Frazier says that the results are not surprising, given that we are in the latter part of the lifecycle of the current console generation"



Um, since when? The PS2 got stronger and stronger until the nextgen arrived. Our own nextgen hasn't even been announced yet. Ascribing these losses of market share to a console-cycle rhythm seems wilfully ignorant, especially in light of the evolution towards digital content. This is almost certainly representing a real shrinkage of the console game market - a conclusion analysts seem to be purposefully avoiding.

Kevin Jones
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@ Joe McGinn

:"Um, since when? The PS2 got stronger and stronger until the nextgen arrived"





Ummm.. you may want to take another look at your PS2 sales figures again in the two years before the 360 arrived(which are equivalent to 2011 December if the Wii U comes out December 2012).



In the last holiday season of last gen before 360 launched(2004), console sales were well under this December's results, despite the Xbox having received Halo 2 that November, and the consoles being 3-4 years old then instead of 5-6 years old now, and the consoles being cheaper then than the 360 and PS3 are now.The XBOX did actuallyoutsell the PS2 that December.



NPD Dec 2004:

Xbox = 1,050,000

PS2 = 990,000

Gamecube = 810,000





In the following year:



NPD December 2005:

PS2: 1.5 million

GCN: 600,,000

Xbx: 420,000

X360 281,000

http://pvcmuseum.com/games/charts/monthly-console-hardware-sales-
in-america.htm



None of them two December last gen console sales figures(2004 and 2005) are as high as last December's(2011) total console sales figures which add up to approx 3.7 million (360 - 1.7 million, Wii - 1.06 million, PS3 - 936K)

http://www.neogaf.com/forum/showthread.php?t=458765



"Ascribing these losses of market share to a console-cycle rhythm seems wilfully ignorant"





In view of the real facts, you may want to amend that statement of yours.





"This is almost certainly representing a real shrinkage of the console game market - a conclusion analysts seem to be purposefully avoiding. "



XBOX LIve and PSN sales(which are considerable and very much a part of the console market but not counted by NPD) say, "HELLO!"

Kevin Alexander
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I agree with you. And I don't really mean to snipe your post but....



I'm not sure why your assertion supports how this article puts a dull light on the analysts themselves, as they too, specifically noted that theirs an INCREASE in digital sales etc. Now, i'm not saying they would go so far as to agree with you about why, as I think they want to stay a bit more objective and just deal with the actual stats, nevertheless... Their study has evidence for us all to easily make the right conclusions.



"Frazier also discussed the impact of non-retail monetization methods on game sales for 2011..."



"The increase in these areas partially offset the decline in new physical retail sales of content in 2011. "

Joe McGinn
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Kevin - your figures are confirming my point, not arguing against it.



2004 PS2 = 990,000

2005 PS2 = 1.5 million



Shows the leading console software market was *growing* at the end of the cycle, not shrinking as the analysts say. Comparing the market then in absolute terms to 2011 is not what the analysts have said at all. They'd said it's normal for console software sales to slump late in the cycle, and your figures show the opposite.

Bob Johnson
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Industry is fine. Numbers are lower for natural reasons. Consumers bought more in November. That's when many many big games came out. Perhaps more so than usual.



Nintendo's platforms are in transition. Much of the decrease in sales are due to a big decrease in Wii software sales. The industry is historically cyclical as sales dip late in a console's lifespan and continue into the launch of the next-gen system.



Perfect timesink storm of SkyRim and CoD and BF3. Realistically ONE of those games is enough for many consumers especially considering digital add-ons.

Jonathan Dodd
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I think a lot of people overestimated the potential sales figures for the year quite a bit due to people forgetting that, yeah, it was an incredible year for game releases but a fair chunk of those were playstation exclusives. Looking at the top ten for the year, not even Uncharted 3 broke through on PS3 exclusives.



In regards to Wii - well, I'm sure it's pretty obvious why it's currently in such a state.

Geoff Yates
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The spend also could have went to Amazon's Kindle and iPad 2s for December as both were big in sales. It does state in there it covers mobile game sales but no mention of these products. Does this correlate to the 7% increase in "non-retail monetization methods"?

Doug Fresh
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"I had expected December sales to represent a larger portion of total year sales than what occurred," said NPD analyst Anita Frazier, explaining that December accounted for only 23 percent of this year's annual sales versus a ten-year average of 28."



Obviously Wii/DS have fallen out of the sky, and I agree with your statement about lower revenue due to discounted prices at retail... but this statement is pretty alarming in my opinion. I'm not quite sure I understand why, without knowing the digital sales picture.



Can't help but wonder if the sheer size/depth of Skyrim (and it becoming so mass) didn't play a part in this. Were dollars historically spent on multiple premium titles still busy climbing mountains and slaying dragons?



HARDCORE gamers have spent 80-100 hours playing, thus the mass fan who bought in can barely be scratching the surface in their second month of gameplay! Most titles can be consumed in a few weeks (at most) and the masses are looking for the next mass title to consume. Skyrim is quite different!



If my theory is correct, January and February should show increased sales of "catalog" titles (2-4 months old) as gamers finally have the bandwidth to play all these great titles released in the holiday season.

Mike Lopez
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The cynical side of me thinks NPD downplays the trends with digital distribution (including social/mobile) out of self-preservation reasons. They have very accurate reporting numbers for retail but vague forecasts for digital and as retail continues to shrink they increasingly become less relevant.

Harlan Sumgui
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One thing to remember is that the install base for the consoles is larger than it has ever been, so an actual decline is sales is bad news now matter how you spin it.



Gaming is an industry that relies heavily on hype to drive sales of the new, which is where the real money in the industry is made. As the POS Kinect proved, give the punters some new tech and the promise of a new better gaming experience and they will get excited and buy it.



But hype is getting harder and harder to create the further we get into this generation. How many impending console releases are getting gamers excited; you know, excited enough to spend $129 on the 'extra special plastic statue enhanced' collector edition, or the $59 bargain regular edition of whatever this month's FPS/RPS/etc retread is on release day at midnight?



I have hope that the wiiu will generate some excitement in 2012 and lubricate people's wallets, but I have a feeling that retail sales of new games will continue their decline in 2012.

Florian Garcia
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Natural phenomenon very well known in this industry: Milking Christmas killed Christmas :)

(You can also replace Christmas by any IP of your choice, it works).



Retail sees a slow death, digital distribution grows. People don't want to pay more for the middle man anymore.

Sylvester O'Connor
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I agree with you 100%. There was a plethroa of games between September and December. I don't care how Hardcore of a gamer anyone is, it was almost too many games this season. I have several people that always buy on day one, and they too had to choose carefully what they got. The choices of course were all great, but a more stretched out release plan probably would have done better.



Also, the economy is picking up slowly so people still have tight pockets. That is another reason why you saw crazy discounts depending on where you shopped. I saw someone earlier mention Ipad 2 and Kindle. It is system overload so to speak. And yes, I think all the games were great but it was just too much to digest. And, with certain name recognitions, certain games were destined to sell more.



One more thing before I go, I don't know if anyone noticed but Zelda, normally a huge selling game, is not even on the list. Another game that would have been better coming out before the holiday rush if it were possible and not suffereing in sales like other titles.

Eric Geer
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I would bet some of this on MW3, BF3, Skyrim, Saints Row3rd, hell even Skyward Sword---Notice how many of these games are big name games and they are either heavy on multiplayer or heavy in RPG/OpenWorlds---these games take many many hours to get through---I bought all but MW3--and I can tell you I will be busy for quite a while, I've only really focused on BF3 and Saints row...that means I have At Least 80 hours of gaming before I think about other games.....no plans to buy anything for console for quite a while.

Sylvester O'Connor
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Another great point. Especially if bought in November.

A W
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As a gamer I was really choosy last year because of money, so I when for the games I know I wanted and rented the ones I just wanted to try. My choice where BF3 and LoZ SS. also I picked up an internet buddy that like Monster Hunter, so we play Tri on the Wii. So between those three games I'm good.

Eric Geer
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@AW--Yeah...you should be good for a while....I think I played MHTri way too long when it first came out...I think it is one of my most played games in my game library.

Harry Fields
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There are many a paradigm shifts occuring across the industry. Evolve, or go extinct. The number of consumers willing to pay 60$ for a 10 hour experience at B&M boxes is declining. The number of consumers willing to pay 35-45$ online to get same experience is increasing.

Bart Stewart
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A point maybe worth making here is that as more publishers do more business via digital than retail, in theory their cost per unit should drop by some amount due to the reduction in physical distribution costs. (Even in the cut taken by digital distributors reduces that savings somewhat.)



Are publishers lowering prices (and thus revenues) to pass those savings on to consumers? Or are they pocketing the difference as profit and the 2% drop is attributable to something else, such as economic concerns?



Or is it still too early in the expected retail-to-digital transition to see any meaningful reductions in distribution costs across the industry as a whole?

Cody Scott
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I guess all the records broken in November and the amount of hit series that had a release that month ere forgotten, since a good chunk of people buy their Christmas gifts in November.

Jae Onasi
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Any surprise that in an economy this awful, people are also spending a lot less? It's hard to justify buying lots of games for the family when you can't even afford to put food on the table.


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