July Game Sales Worst Month Since 2006

July 2011 physical game sales, carefully plotted.

The latest figures from NPD are in for July 2011, and once again it's bad news for physical game sales. Overall game sales (hardware, software, accessories) were down 26% to $707 million, the lowest monthly total since October 2006, according to NPD. When you add it all up, 2011 so far is down 4% over last year's sales, which means the third year in a row of sales declines for the classic physical retail sales channel.

Hardware sales were down 29%, and software sales were down 17%, and accessories dropped only 8%. Once again the Xbox 360 grabbed the lead position, with 277,000 units sold, though that's a decline over last July. Here's some perspective for you: Apple is selling around 7 million iPhones per month, and another couple million iPod Touches on top of that; Android phones are selling about 18 million per month. Apple's selling about 5 or 6 million iPads per month, too. Is it any wonder publishers and developers are looking at smartphones and tablets as a market?

NPD notes that digital sales could help make up for the decline in physical sales. What they don't say, though, is specifically how much digital sales could help. Probably because tracking digital sales is an enormous problem compared to tracking physical sales; NPD has their work cut out for them to come up with good numbers for things like subscriptions, DLC, in-game item sales, and the like.

We can already see the impact that the continuing sales decline is having on publishers dependent on traditional retail sales channels.

"New physical retail sales of software saw a 10 percent decline in unit sales versus last July. There were substantially fewer new releases this year, and the top selling games, with the exception ofNCAA 12, didn’t perform as well as last year’s top sellers did. Looking across PC, console and portable game sales, 19 titles sold over 100K units last July, while this year, only eight titles peaked 100K units," noted Frazier.


While you may have record sales for new releases like Modern Warfare, the reality is that most titles aren't hitting the kind of numbers they used to hit last year. This is why companies like THQ are having layoffs, and shifting development resources to social and mobile games. This is distressing to longtime console gamers, who fear a lack of the kind of titles they like. Markets are changing, and publishers are having to change with them... whether they like it or not.

Japanese Game Companies See Kuro & Aka

Japanese game companies have been struggling with the transitions in the game market; see Nintendo for a prime example. Not all the Japanese companies have been seeing aka (red) in their results; some have been getting nice kuro (black) ink.

Here's a company that's making some serious money from casual games.

Let's check in with Square Enix... they've been struggling with release dates and poor reviews of their latest Final Fantasy games. Their first fiscal quarter ended June 30, and they're reporting sales of $314.9 million with income of $8.8 million. Sales are down 25% over last year, and profits are down 62%. Lack of major releases was the big reason, while they struggle to get their development back on track. The only bright spots they cite are  “robust growth” in its online sim title Sengoku Ixa and its online community site Nicotto Town.

Meanwhile, Konami's been on a roll. Their first quarter was $705.9 million, up a few percent from last year, but profits more than tripled (to $52 million from $16.3 million last year). Was it some big software sales and hot new releases? Quite the opposite; their software sales were only 2.76 million units, down from 4.63 million last year. So what did the trick? Here's what IndustryGamers.com said:

Konami’s mobile freemium offerings like Dragon Collection, Sengoku Collection, and Professional Baseball Dream Nine were a huge success for the division and made up for the lack of premium titles in the console space.  The titles accounted for a total of 5.5 million registered players for Konami’s mobile games and the publisher will be pushing more properties over into the social space over the coming year.


Freemium games made a huge amount of money for Konami. Not surprisingly, they're planning on doing more of them. It seems pretty obvious that it's the business model of the future, and the way to expand the audience. It doesn't mean you have to stop making software for consoles that's sold in retail stores, but it certainly should affect how you allocate your development resources. We can only hope that Nintendo is learning something from these earnings reports.

Capcom Debuts New Game "Feature", Gets Flamed

Mercenaries about to assault Capcom's PR folks.

Capcom has been having some interesting moments in the press over the last few months, like the flap over young kids racking up hundreds or thousands of dollars in smurfberry charges on the parental credit cards. Now they've chosen a new direction for experimentation, one that's already gained them no small amount of bad press.

Capcom has released a game for the Nintendo 3DS called, adroitly enough, Resident Evil: The Mercenaries 3D. Essentially it's a collection of minigames from previous Resident Evil games, crammed into a 3DS cartridge and hoping that users would pay $40 for something that doesn't really resemble the Resident Evil brand. Ah, but it's not entirely a retread, since Capcom added a significant new feature: It's impossible to reset the save game data. In other words, once you use the game it maintains your save files forever and you can't change that.

What good is this feature? Well, Capcom says it's because they are trying to keep all the content unlocked and available once you unlock it. (Which I really don't understand, and I'm not alone in this.) Conspiracy theorists, who seem to be in the majority on Capcom's message boards, believe that Capcom is attempting to destroy the resale value of the game to prevent used game sales from eating into their profits. In support of this theory is the fact that Gamestop halted used game sales of this title... but they've since started that up again.

The whole thing seems odd to me. Why leave out the ability to reset the save games, which is a standard feature in most games? The only reason that makes any sense to me is an attempt to stop game resale. Really, it's just annoying. Especially when the game is no great work of art to begin with. But Capcom says no matter, they won't do it again. Doesn't this undercut the argument that the feature lack had a good reason?

Yo can read the official version here, along with some of the responses.

May 2011 Game Sales Lowest in 5 Years

Looks like Luigi glanced at Nintendo's sales figures for May.

While the traditional game industry was whooping it up at E3, trying to convince everybody that things are gonna be great, the sales figures for May came in. Overall retail sales for the game industry in May dropped 14% to $743.1 million, the lowest monthly sales total since October 2006. Ouch.

To make it even worse, Microsoft saw sales of the Xbox 360 jump 39%, and Sony saw PS3 and PSP sales increase, though NPD is no longer breaking out the numbers... as I said before, the news was getting a little harsh each month so NPD has backed off from being so precise. Still, they did say that overall hardware sales dropped over 5% for the month. So if Microsoft saw big hardware sales, and Sony saw hardware sales go up for both its platforms, that means Nintendo had a really, really bad month. June numbers should tell us what impact the Wii price cut had... but it doesn't look all that positive right now.

Software sales really took it on the chin, with a 19% drop. Analysts blamed a light release schedule, and perhaps some dollars were shifted to the Call of Duty map pack which of course isn't tracked by NPD or anybody else (except for Activision, and they ain't talkin').

So aside from the uplift the industry got from the nice report last month, we're back to the steady decline of retail software sales. The fact that hardware continues to do well could be due to several factors. One is the increasing use of game consoles to watch Netflix, which is certainly the biggest time spent on consoles in my household. Sony said at E3 that 30% of Netflix traffic comes through the PS3, which is interesting... I'd bet more than that comes through the Xbox 360 given the disparity in installed base.

Another factor is probably the increased game play time of individual titles through multiplayer online play. If you spent $60 on Call of Duty, why by another game when you can play online with new people all the time? Refresh things with a new map pack and you've kept yourself from heading to the game store and dropping $60 on some new title that may or may not be as much fun.

Finally, the indie titles available online for consoles must be having some effect. Those titles can sell in the hundreds of thousands... and that's dollars not appearing on retail sales charts.

Total spending on games appears to be on the rise, but it's certainly shifting away from retail stores and from traditional console titles with no DLC. Sadly, this appears to be leading to even less innovation on major console releases at retail; just look at the E3 announcements and all you see are sequels. Original titles are as rare as an understated press release.

3DS Will Outsell All Other Consoles in Japan?

Current 3DS sales figures make puppies cry.

In a rather bold prediction, video game publisher Enterbrain is claiming that the 3DS will outsell all other consoles this year in Japan, with a total of over 2.8 million units by the end of this year. Interestingly, they see the total 3DS sales dropping in 2012 to 2.475 million.

If you look closely at these figures compared to current 3DS sales, they would have to sell about 84% more than it's currently selling... every week for the rest of the year. Which seems more than a little optimistic given how lackluster 3DS sales have been so far. I really don't think a software title or too is going to make a huge difference at this point.

Of course, this just represents sales in Japan; worldwide sales would be perhaps triple that amount, maybe as much as 8 million units. To put 8 million units in perspective, that's about a month's worth of iPhone sales... or three week's worth of sales for Android smartphones.  Or  about two month's worth of iPad sales.

Perhaps you can see why I think smartphones and tablets are much more important to the future of gaming than the 3DS. A 3DS game by the end of this year might have 8 million installed units out there to sell to; an iPhone game or an Android game will have well over 100 million installed units to sell to. Heck, even iPads will have around 50 million in place by then.

So far Nintendo's stepped up the TV ads for the 3DS, but that doesn't seem to be moving the needle. I hope they've got some plans to reveal at E3 that will revive the 3DS, but I'm not expecting much.

3DS: Hit Or Miss?

Actual image of Nintendo's sales projections about to bite Reggie in the ass.

I'm back home after nearly a month of voyaging through China, South Korea, Taiwan, and Japan. I have many interesting things to write about from my travels, but I also have to catch up on events that transpired while I was voyaging. So there will be a rather interesting mix of blog posts in the days ahead... while I also get going on a number of new projects. I hope the blog posts I put together before I left were enough to keep your interest; they were perforce less immediately topical since I had to write them weeks in advance. Still, it's nice to see that my page views continue to grow by double-digit percentages even when I'm not around to push things hard. Thanks for all of your support and continued spreading of the word about this blog.

On to the subject of this post... Nintendo and the 3DS. The 3DS launched in Japan on February 25th, and in the U.S. (and Europe) on March 27th. While it's still far too early to call the long-term success of the new handheld, we can look at how the 3DS has done so far against Nintendo's projections and general expectations.

Nintendo's projections called for 4 million sales of the 3DS worldwide in the month plus a few days from the release of the system until the end of their fiscal year March 31. What's the reality? Nintendo sold about 836,000 units in Japan, 303,000 units in Europe, and there's no details on how many they sold in the USA... but they only expected to ship in about 1 million units to the US, and reports are that there was plenty of stock left on store shelves after the launch. So, being generous with US sales, we end up with somewhere in the neighborhood of 2 million units sold worldwide in the first month and a bit... which is about half of what Nintendo was projecting.

Nintendo's trying to polish up that smelly fact by touting the first day sell-in numbers, but it's still not equal to the PSP's first-day sales. Adding insult to injury, the 6-year-old PSP outsold the 3DS in Japan last week by 15,000 units.

So the results are in, and the 3DS has by any reasonable assessment a disappointing launch. When you miss your sales target by 50%, it's time to polish up your resume.

What went wrong? A number of things that I can see, and some of those are shared by others. I think the hardware is expensive at a time when economies are still lagging, and there's no killer launch title. Hell, there's not even a really good launch title. No Zelda? No Mario? Donkey Kong? Star Fox? Anybody from Nintendo's all-star roster? You'd think they would have planned at least one gotta-have title for launch time.

The system is still missing some good features, like the new eShop and Netflix. I'm still amazed at the very lackluster marketing effort Nintendo put into this. TV ads? Nope. Not even a PR blitz of any great note. It's as if they were so overcome by the praise at E3 they figured they didn't have to put out much in the way of marketing dollars. Hmm, I guess we see how well that worked out.

Nintendo can still pull out of this and have some good sales. They'll need to really spend on marketing, and dropping the price would sure help. They absolutely will need some killer software to appear as soon as possible. I realize they can't overcome the hardware problems so swiftly (3-5 hours of battery life? Really?), but a hardware update has got to be in the works for next year if they really want to replace the DSi.

This just shows how much work Sony has ahead of them in order to make the NGP a success. That beast is going to be even more expensive than the 3DS, at least from the rumors, and that's going to make it a tough sell. I think Sony can execute better on getting some must-have software out with the system, and certainly their digital distribution will be far better than Nintendo. It still won't be easy.

I'll be very interested to see at this year's E3 if Nintendo has some substantive efforts to improve 3DS sales, or if they will just try to spin the disappointing facts into something more palatable. It will be interesting, too, to see if third-party support for the 3DS gets a little less enthusiastic with these sales numbers. It's not another Virtual Boy, but it's certainly leaning more in that direction than in the DS direction. It's time for Nintendo to get serious about making the hardware successful.

Best Selling Video Games of All Time

You have to click this link to see the full chart.

Cool infographics... showing the bestselling video games, or at least those that sold over 1 million copies. Kotaku scored a nice one here, and it shows just how much sales have increased over time, as the recent years are flooded with titles making the mark. Of course, at the scale the artist has had to round off the numbers, but it still gives you a very good idea of where the industry has been in terms of hit games.

Game Sales Down Again

The 360 still leads... the Wii is hanging in at #2, but that's with a $100 price advantage.

This isn't exactly the way NPD cares to announce it, but game sales continued to drop in February. At least, traditional game sales dropped 8% over last year. Sure, overall sales were up 3%, but to get there you had to add in sales of Kinect and Move which are still doing quite well. If you're just looking at software, the picture continues to be grim.

Hardware sales were up 10%, and the PS3 was up 12%. Happy times for hardware... but software is just not catching up. I'd guess that Xbox Live and PSN are doing a good business in digital sales, which aren't captured by NPD (of course).

NPD tries to put a happy face on things, but I don't think this report should be cause for happy dances in the console games business. Fortunately, mobile, social, and other forms of game revenue continue to do well. NPD intends to report regularly on those things, but so far any of their reports are mostly speculation since digital revenue goes largely unreported in public.

NPD continues to become less relevant as game industry revenue moves more and more online and out of retail stores. What will replace them?

Apple Gaining On Nintendo

Since Apple doesn't release sales figures very often, it's hard to be sure. But one research firm has done their homework and says that over 40 million Americans use Apple devices (iPhone, iPod Touch, iPad) to play games... compared to Nintendo with 41 million DS installed base in the US. Plus, the latest sales trends are not exactly favoring Nintendo... Apple is selling over 1 million iPads a month, and more than twice that in iPhones and iPod Touches. Meanwhile, handheld sales are down 25% over last year's dismal sales numbers, which no doubt accounts for Nintendo's dropping the DS pricing by $20. (By the way, manufacturers reduce pricing only when they feel they need to because sales would be better. They will never do it out of the kindness of their hearts because their manufacturing cost dropped... they'll cheerfully pocket the additional profit as long as sales stay high.)

Nintendo is hoping the 3DS will revitalize their handheld sales. I think it will, to some extent; but Nintendo's market share will continue to erode as Apple's sales continue to increase with new models of their handhelds coming out every year. Also, the Android platform is growing like crazy, and games are an important part of that market, too. Nintendo may have a 3D display in the 3DS, but in many other ways the hardware is inferior to these other handhelds; processor, display resolution, orientation sensors, network connectivity, size of the software base, average software price an order of magnitude higher on Nintendo. It's hardly a fair fight any more, and it's only going to get worse.

Nintendo is losing the fight for developer mindshare, too. Even big developers are seeing great returns from iPhone software (like EA, for instance). Plus developers, large or small, prefer the unfettered market of Apple or Android to the regimented, bureaucratic, expensive and unpredictable Nintendo regime.

Bottom line: If you're already a Nintendo developer, you can probably make money continuing to do products for their handhelds. If you're not already a Nintendo developer, you should first make your products for Apple or Android, with far lower risk and expense. If you have a hit there, then perhaps think about a Nintendo version. If their handheld devices still matter by that time.

Yup, Traditional Game Sales Are Bad

NPD reports that overall sales (combining videogames, and hardware) for August were down 10% over last year; hardware was down 5% and software was down 14%. These are the worst August sales since 2006. Looking at the year so far, total sales are down 8%, with the handheld software and hardware sector down an amazing 25%. No wonder Nintendo just dropped the price of the DSi and DSi XL by $20, though that seems like an insufficient response to the news.

Of course, these sales figures leave out PC sales (like the 300,000 copies of Starcraft Blizzard sold in August) and DLC, and social games, and mobile games. Two possible reasons come to mind: Either sales are down because people aren't playing games, or they're playing games NPD isn't tracking. I don't think gameplaying is going away.

I see no reason for optimism that traditional videogame sales will turn around. Even if you assume Move and Kinect are hits, and the 3DS kills in March, and all the console makers dropped their prices for Christmas... you're still left with games that cost $60 new. You can still play Halo or Call of Duty online instead of buying a new game. You can buy used games, and the quantity and availability is just getting better. There's plenty of DLC to choose from at prices way less than retail stores, generally. You can play games like League of Legends for free, and many other MMO's. Facebook games are free to play too. Thousands of mobile games are available for nothing or just a few dollars.

The universe has changed and it ain't going back. Sure, there will still be AAA titles with multiyear development cycles and development and marketing costs pushing $100 million (or exceeding it). But that won't be where the majority of the revenue lies, and this will happen in a few years. Time to start charting a new course, or build a new boat, or hop off and go overland for a while. The seas ahead look pretty stormy.

Multiplayer Is Not Multipayer

It looks like August sales figures for the videogame industry are once again going to be down... perhaps 7% or 8% over last year. The reason, according to Michael Pachter, is that there are too many multiplayer online games that have gotten too good at keeping players engaged. So it's eating into their gaming time, and why buy a new game if you're already playing games as much as your time allows?

Yet another reason for publishers to change their business models to a subscription pricing, as if they needed any more encouragement. But it will be a bumpy transition, as gamers don't like change very much. I think you'll have to introduce new games with the new business model; shifting existing games over to a subscription mode will be very hard.

The hidden problem here is that this will change the fundamental design of the games, the development process, and the marketing. Marketing will have to be much more integrated with product development. The traditional antagonism between the two castes will need to be overcome. Which will also be a struggle at many companies... they may have to start hiring marketing people who are gamers, not just P&G marketing experts. Oh, the horror.

The illo above isn't from Halo? Hmm, well, it should be...

Game Sales Up and Down

The different segments of the game industry are far from moving in lockstep. Games are selling well... and games are selling poorly. Some games are making a lot of money... others are losing a lot. The latest word from the classic console market (home of the largest publishers like EA and Activision) is that sales are continuing to be awful. As in, down 8% for software sales over last year. It could be worse, though: In the UK sales are down 16% for hardware and software combined (only down 10% for software, but an appalling 32% drop for hardware).

Meanwhile, reported revenue for Zynga was $350 million for the first half of 2010, with more than half of that operating profit. Must be hard to find an open spot to work with all that money piled up in heaps.

In the adventure gaming industry, results are better than the console game sector: Hobby sales continued to grow in Q1. Heck, even comic book sales shot up in May (though it was after a nasty drop in April).

What conclusions can we draw? The economy may be partly to blame for weakness in the console gaming area. But they are under siege by a wave of used game selling (now Walmart's jumping in big time, and 7-11, and more) and free-to-play games and social games. Heck, even DLC that extends the play time of a game helps keep players from shelling out for a new game... it's a double-edged sword (which we all know does more damage). If anything, a weak economy helps lower-cost alternatives do better, so adventure games, used games, social games and the like will all benefit.

What's the best marketing strategy? Stress value; look for ways to offer lower-cost products; tie into licenses and cross-promotions to build market share. And keep your expenses down...

Traditional Console Game Sales Continue Lame

May sales for the traditional game industry were disappointing. While Red Dead Redemption and Super Mario Galaxy 2 sold well, everything else underperformed. Several high-profile games failed to hit 200K in sales, as was expected. It looks like gamers are making the big hits bigger, but they're not spending their money on as wide a variety of titles.

Which makes sense in hard economic times. Consumer spending in general is down, so it's not surprising that gamers are being more careful with their dollars. This is probably also a factor behind the rise in free-to-play games, and lower cost games in general.

If this is the new reality, how should publishers adapt to it? Currently they don't seem to be changing anything, except perhaps hoping that increased marketing budgets might make one of their titles into the lucky few superstars. A more logical effort that can be implemented in a short timeframe might be to produce more DLC for your hit titles, both to encourage sales of the title and to bring in more revenue.

In the longer view, making investments into new growth areas of gaming makes sense, and Electronic Arts has been doing this. Taking some of their marquee titles (like FIFA) into the social gaming arena is a good first step. We'll know real change is happening when we see EA turn Madden into a subscription model game.

For smaller publishers, these May sales are one more indicator that change is continuing to occur in the marketplace. Big publishers keep hoping things will turn around, but the more time that passes without a turnaround, the more likely it is that consumer behavior is changing permanently. Which is only good for companies that recoginze that change and adapt to it.

E-Games Down 26% in April

The latest NPD numbers are in, and any hopes that this year would see a recovery in the game industry seem very far away... at least as far as the classic console business is concerned. Overall sales for hardware and software were down 26%. Note that this is for consoles and handhelds, as sold through retail stores. So we're not talking about Apple's devices, or social games, virtual products, DLC, digital distribution, or mobile games.

Still, console hardware tanked by 37% over last April, and software was down 22%. The industry was down 11% for the first four months of the year. That's not good at all, considering how crappy last year was, with sales down 8% overall even after significant price cuts on console hardware.

This does not bode well for the rest of the year. True, Microsoft will come out with Natal for the 360, and Sony will ship Move for the PS3, and everybody will attempt to drum up enthusiasm for 3D. All of this activity does not address the fundamental issues behind the slowdown in sales. Here's reality: Consumers have an ever-growing array of less expensive options, and they're becoming aware of them. Why buy a DS when you can get thousands of games for a fraction of the cost (or free) on an iPod Touch, which also plays music and videos and has many other functions, too? There's a terrific array of free-to-play games on computers that everyone already has, and most of those don't require any high-end hardware to run. New business models and new technologies are pulling gamers into different places, and the traditional $50 or $60 game doesn't look like that much of a deal any more... especially not when you get to read all of the reviews online ahead of time and can readily identify the real clunkers before you lay out hard-earned cash.

Traditional console games are having a tough time, but gaming as a whole is doing great. Publishers need to examine their business models and see if they're positioned to start taking advantage of trends, rather than being run over by them.