Video game sales for the month of May 2012 plunged 28% to $516.6
million from the comparable previous-year period, according to
market research firm NPD. The downtrend is consistent with the
decline faced by the industry in the last 6 months. Moreover, sales
were down 18% sequentially. The decline in sales was primarily due
to the lower number of title releases.
However, NPD noted that in addition to physical retail sales,
consumer spending on social games, digital downloads, and used and
rented games amounted to $1.17 billion, which increased from $1
billion in April 2012.
Software sales, including PC games sales were $335.2 million,
which dropped 16% from the previous-year period. Interestingly, PC
game sales soared 230% to $80 million primarily due to the release
of Diablo III, which somewhat offset the fall in software sales.
Excluding PC game sales, software sales dropped 32% to $255.4
Amidst the dismal scenario,
Activision Blizzard Inc.
had a blockbuster debut and was the top-selling video game title in
Take Two Interactive
Max Payne 3
Tom Clancy's Ghost Recon: Future Soldier
claimed the second and third spots, respectively. The fourth and
fifth spot went to Activision's
and Take Two Interactive's
. Popular titles such as
Modern Warfare 3
lingered in the sixth and eighth positions, respectively.
Hardware sales had no respite either, dropping 39% from the
comparable month in the previous year to $138.9 million. Apart from
the Nintendo 3DS, which increased 17%, all other popular consoles
suffered year-over-year declines in terms of units sold.
) Xbox 360 was again the top-selling console for the 15
straight month with 160K units of Xbox 360 being sold. Accessories
sales increased 7% from May 2011 to $122.3 million.
According to NPD, new physical retail sales (software, hardware
and accessories) generated approximately 50%-60% of total sales.
The firm also noted that a 27% year-on-year decline in the new
title releases accounted for the overall decline in the industry.
However, NPD said that the recently concluded E3 meet had some
promising titles, which, post their release in the latter part of
the year, should positively impact the industry.
The ongoing transition from the physical to the digital platform
will ultimately benefit the video game industry over the long term.
As compared to the physical platform, digital games are more
profitable since they require minimum packaging cost. This cost
effectiveness has helped publishers to use the digital format to
keep a popular franchise running profitably over a longer period of
time. Online gaming is also expected to witness growth at the
expense of retail sales, owing to the growing popularity of digital
distribution and free-to-play browser games.
We believe that consumers are increasingly spending more on
smartphones and portable devices (such as the iPad) as compared to
traditional devices for playing online games. This trend keeps us
optimistic on the video game industry over the long term.
The video game business is very much cyclical and is also highly
dependent on time-to-time upgradation/introduction of new game
hardware systems. Lower demand for hardware systems also hurts
video game sales.
However, we believe that publishing companies that are focusing
on the digital segment will stand out even amid sluggish market
conditions. For instance, some companies like
Electronic Arts Inc.
) and Activision are well positioned to benefit from this trend
We believe that including digital gaming, the video gaming
industry is poised for significant growth going forward. However,
the highly fragmented video game retail market will see continued
competitive pressures. Therefore, overall profitability will remain
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