May was supposed to be the bright spot in the first half of 2010 for the U.S. retail console game industry.
While software sales were indeed up 3.5% from May 2009, a dramatic
20% drop in hardware dollars dragged the overall industry to a 5%
decline -- with $823.5 million in revenue for the month.
That figure – the 5% fall – has dominated the headlines since
the market-tracking NPD Group released its estimates for May retail
video game sales, lending further weight to the idea that the retail-focused game industry
is not simply in a lull but truly contracting, in a “state of
persistent secular decline” as analyst Michael Pachter of Wedbush
Securities has described it.
We'll examine this perception further,
weighing the arguments both for and against. Along the way we'll examine the fortunes of the current hardware
platforms, examine software sales in more detail, and take a closer
look at titles in the top 20 chart.
Industry At a Glance
The delayed report revealed that overall video game industry retail revenue in May 2010 fell to
$823.5 million, down 4.9% from $865.7 million the prior year.
All of
this decline came from the hardware segment where overall unit sales
dropped from 1.45 million to 1.2 million and dollar sales from $303.0
million to $241.5 million.
By contrast the software segment posted revenues of $466.3
million, a modest 3.5% increase over last May's $450.4 million. All
of this growth was driven by console software, with handheld software
dollar sales contracting by nearly 20% year-over-year.
As usual, the accessories segment is the only segment that has
demonstrated growth both in the year-over-year monthly and
year-to-date figures. For the month of May accessory dollar sales
were up 3%, with the Xbox Live 1600 Point Card the top-selling item
(as it was in March and April), according to NPD analyst Anita
Frazier. So far this year, the accessory segment is up 2% over the
same time in 2009.
These figures are strictly retail sales estimates and do not
include other revenue from subscriptions, downloadable console games (e.g.
from Xbox Live Marketplace), subscription-based MMOs (such as World Of Warcraft, which likely has tens of millions of dollars of revenue monthly in the U.S.), or social
networking games.
The non-retail revenues may be collected directly by individual private companies with
credit or debit cards or via services like PayPal, and are therefore much more difficult to
measure. As a result, we no longer have an extremely
comprehensive picture of overall industry revenues.