NPD: Behind the Numbers, October 2009

[In Gamasutra's detailed NPD U.S. console/game sales analysis for October 2009, we examine Sony's post-PS3 price drop results and PSP Go launch, Nintendo's Wii price cut timing, and a possibly grim outlook for the rest of 2009.]

Earlier this year conventional wisdom held that the video game industry would make a dramatic turnaround in the back half of 2009. However when the NPD Group released October 2009 retail sales data last week, the dire reality of the market was plain for all to see.

In every segment of the market – hardware, software, and accessories – the revenues were down significantly, and the overall total was down 19% relative to October 2008.

Given the recent hardware price cuts by Sony and Nintendo, it was no surprise that there was a drop in hardware revenue. For example, the increase in PlayStation 3 hardware sales over the past three months has just begun to offset the loss in revenue from the system's price cut.

Software prices continued to decline with respect to prices a year ago and software unit sales were down as well. The combination of these factors drove a software revenue loss of 18% or over $126 million dollars. Only the accessory segment was close to flat year-on-year, contracting only 2%.

As of the end of October the year-to-date revenue figure stood at $11.4 billion. Even with the biggest two months of the year still to go, some analysts now expect the industry to post at least a 5% decline for the year. 

We retain our conservative outlook and expect a decline of at least 8.5%, putting the final annual total revenue at $19.5 billion. Clearly if revenue comes in above that, we'll be pleased to be wrong.

Sony: Two Steps Forward, One Step Back

October was Sony's third month running with better year-on-year sales of its flagship console, the PlayStation 3. Just over 320,000 units of the new PS3 Slim model were sold, an increase of 69% from the same month in 2008.

When we first examined PS3 sales after the August 2009 price drop, we suggested comparing the PS3 in 2009 to the Xbox 360 in 2008. During the three months from August to October 2008, right after price drops and the introduction of the Xbox 360 Arcade, Microsoft sold 913,000 systems with an average retail price of around $270-$280.

With the average price of the PS3 just above $300, Sony has sold over 1.02 million PS3 systems during the same three months of 2009. While PS3 sales did drop month-on-month from September to October, the increased level of interest suggests that Sony's PS3 Slim should do very well during the holiday months of November and December. It seems possible that year-to-date (YTD) PS3 hardware sales could nearly double by the end of the year.

The software situation has, likewise, also turned around for Sony. According to figures from Michael Pachter, analyst for Wedbush Securities, dollar sales of PS3 software have increased year-on-year for each of the past two months: up 135% in September and 12% in October. Some of the scale of that increase can certainly be attributed to a weaker performance of PS3 software in 2008, but keep in mind that most other platforms are seeing year-on-year declines in software this year.

While Sony's console fortunes are turning around, there is not much good news for its handheld, the PlayStation Portable (PSP), in particular the newer and smaller PSP Go.