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Last Thursday, the gloom that has surrounded retail video game sales in the U.S. lifted – perhaps only temporarily – with the release of the November 2010 hardware, software, and accessory sales estimates from the retail-tracking NPD Group.
Not only was it the biggest November on record, but it also hosted the biggest single software launch in American history. Activision Blizzard's Call of Duty: Black Ops, developed by Treyarch, leapt to 7th on the all-time best-selling sales chart with 8.4 million units of sales in a mere 19 days on the market.
Furthermore, Microsoft also released its new Kinect camera – which permits controller-less interactions – for the Xbox 360, driving accessory sales to an astonishing $413 million dollars, the largest single-month total for that segment of the market outside of December, and a 69% year-over-year increase from 2009.
As we do every month, we'll dig into these figures and pin down just how these big events shaped the market and where they're likely to lead us from here.
In addition to the topics above, we'll examine Sony's predicament as the effects of its PS3 Slim redesign from 2009 wear thin, Move continues its modest growth, and the PlayStation 2 and PSP ride off into the sunset.
In terms of overall revenue – including hardware, software, and accessories – the industry has shown year-over-year growth in seven of the previous 24 months, and only two of those were in 2010. That's part of what makes the 9.4% growth in November so notable.
It's also important that every individual segment of the market showed growth.
Let's take the hardware segment as an example. Not only were hardware unit sales up, from 5.00 million units in November 2009 to 5.05 million for the same month this year, but hardware revenue was up, driven primarily by higher priced Xbox 360 units bundled with Kinect.
In the software segment, the same pattern holds with unit sales and revenue up about 4%, to over 33 million units and $1.46 billion, respectively.
The growth in the accessories segment was driven primarily by Microsoft's Kinect, which retails for $150 as a standalone product bundled with a game. Along with Sony's various Move accessories, including the $100 bundle (camera, controller, and game), the addition of motion controls to every current-generation console fattened the accessory category to over $400 million.
This sets the stage for a very interesting possibility in December 2010. In the past three years, the revenue from accessories in December has been between 2.5 and 3.1 times the accessory revenue in November. Assuming that Microsoft can maintain the momentum and supply for Kinect, and Sony and Nintendo continue sales of their own accessories, the accessory segment could pass $1 billion for the single month of December 2010.
That would be fully 30% beyond the record accessory sales from December 2009 and 50% of all accessory revenue in calendar 2010.
The table below lays out the latest top-line figures, as estimated by the NPD Group, for the month of November 2010.
For the record, the NPD Group is now clearly labeling their media releases to indicate that the figures include only retail sales. They are providing quarterly estimates of extra-retail sales, including mobile games, downloadable content, and casual games, along with other segments, but those figures are not included in the figures above nor are they considered directly in this analysis.
In her notes accompanying the release of the data, NPD Group analyst Anita Frazier commented that “new physical retail sales should come in between $18.8B-$19.6B” and that “gains in November offset a good portion of the year-to-date declines”. These are important points to keep in mind, especially the latter one.
Year-to-date industry revenue was down 8.5% and 8.1%, respectively, in September and October of this year. This month, as the table above shows, the industry is only down 4.8%. Would a strong December be enough to get annual revenue back the $19.7 billion recorded in 2009?
To get the industry to even the $19.6 billion level at the upper end of the range supplied by Frazier, total revenue in December 2010 will need to reach over $6 billion, or nearly 12% above the record $5.5 billion recorded in December 2009.
We're not naturally predisposed to optimism, it does seem probable that in December the industry will maintain last year's hardware and software revenue levels (although these are far from guaranteed) and that the accessory segment will reach $1 billion for December. Under those circumstances, annual revenue in 2010 would reach $19.2 billion, or a very modest 2% decline from 2009.
The figure below shows our estimate, in context with monthly and annual revenues throughout the past five years.