Traditional Videogame Sales Continue Decline

No, I don't know what this has to do with March game sales, , but it showed up
when I did an image search for March 2011 game sales. Go figure.

March numbers are in, and once again we return to the old story: Total sales of hardware and software in retail stores dropped 4% in March, marking the third straight year of declines. Software dropped 16%, while hardware grew 12% and accessories grew 13%. Don't you think it would constitute a trend by now? Yet some executives continue to make public statements that the traditional business is strong. Activision, for one, doesn't seem interested in digital distribution or social gaming or anything other than getting out more retail boxed goods. At least EA is making a strong effort to move into new business areas; their stock price has suffered for it, but at least as the transition continues they are positioning themselves to take advantage of it.

It makes me wonder just how relevant new console introductions are. With things like OnLive being built into TV sets, and Google TV and Apple TV (also likely to be built into TV sets), the era of the single-purpose device for games and games only is coming to an end. The inexorable progress of Moore's Law has provided ample CPU power at a low price to enable pretty good game output in very inexpensive hardware. Social gaming has shown new monetization models, and digital distribution has opened the floodgates to content. The combination of these trends is putting a fierce squeeze on the traditional business, and we're seeing that reflected in the numbers.

Even the current generation of consoles have become aware of this. All three have other capabilities than just playing games; you can watch movies or TV shows (via Netflix), play music, show pictures, and other functions. All three allow some form of digital distribution, albeit tightly controlled. Free-to-play games are heading to the PS3 and likely the Xbox 360, as the new monetization model also spreads there.

The logical extension is the Apple/Google TV direction: low cost or invisible hardware (built into the TV) that provides a huge range of games, many free or ad-supported, with many other types of apps available. The whole app market model has proven enormously successful, and is driving the tablet market and will soon come to the TV to transform the family room. In the process it will upend the gaming market. I fear companies that have not realized this will be facing a very difficult time, and that includes Nintendo, who has traditionally been very far behind in their online efforts.