[Gamasutra analyst Matt Matthews examines the shifting power dynamics in the U.S. console market, the attach rates of cross-platform software for the HD consoles, and the disruptive effects of inexpensive software and online distribution channels.]
Last week, amid expectations of another down month the NPD Group reported its latest estimates for U.S. retail video game industry sales for February 2011. On the back of stronger than expected hardware and accessory sales, the industry grew by 4%, excluding PC software sales.
Despite the upbeat report, software sales declined by 5% in terms of dollars and unit sales were down 4%.
Below we will examine three key trends: the shifting power dynamics in the console market, the attach rates of cross-platform software for the HD consoles, and the disruptive effects of inexpensive software and online distribution channels.
The top line figures from the NPD Group show that hardware and accessories were the driving forces behind retail in February. While the accessory segment has been a source of good news for several months now, the turnout in hardware fortunes was unexpected.
In particular, the Nintendo Wii saw only its second month of growth since August 2010, with a very strong 455,000 units. The Xbox 360 sold over 500,000 systems in a non-holiday month for only the second time since its launch, the other time having been in September 2007 with the launch of Halo 3.
Even the PlayStation 3, which has suffered in sales since the one-year anniversary of the PS3 Slim price cut, eked out an increase in February, hitting just over 400,000 systems.
Despite those increases, total hardware unit sales were down, primarily due to softer Nintendo DS sales. Yet higher hardware prices helped push hardware revenue up 9.5%, driven by bundling.
According to data from the NPD Group, 44,000 Killzone 3 PS3 bundles (MSRP of $300) were sold in February. More importantly, approximately 350,000 Xbox 360 systems sold last month were Kinect bundles, priced at between $300 and $400, according to comments made by Michael Pachter of Wedbush Securities.
The impetus behind the increased hardware sales is unclear, although some have suggested macroeconomic factors in the U.S. (like decreased unemployment and increased consumer spending in general) may have played a role.
We recall that in March 2009 the NPD Group delayed its February results by a week to make internal adjustments. When the February 2009 results were reported, hardware sales were significantly higher than the January results, again without any obvious explanation. We have not ruled out the possibility that a similar adjustment was made this year, with a similar result. Along these lines, the NPD Group adjusted its revenue figures for February 2010 upward when it reported the February 2011 figures.
For the record, the NPD Group is now clearly labeling its 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 online games, along with other segments, but those figures are not included in the figures above nor are they considered directly in this analysis.