IndustryGamers - Informing the Games Industry

Music Genre Down 75% in June, says Analyst

Posted July 17, 2009 by James Brightman

In 2008, the video game industry was propelled to new heights by the momentum of the Wii and DS and the continued rise of the music genre. Now, however, demand for the Wii console is clearly not as huge as it once was, and some would argue that the music genre reached its peak a while ago. 

Responding to the recent NPD data for June, Broadpoint AmTech analyst Ben Schachter commented, "June 2009 had its fair share of high-profile releases, but the industry is clearly struggling to grow (and is down 12% YTD in CY'09) in the absence of the explosive Nintendo hardware sales and Music genre popularity that propelled the sector during the first half of CY'08. We estimate that overall Music genre dollars were down 75% y/y in June."

Upon inspecting the NPD's top 20 games for June, there wasn't a single SKU for Rock Band or Guitar Hero present. Although music game sales are down currently, we fully expect the genre to see some uplift later in the year when Rock Band: The  Beatles, Guitar Hero 5 and DJ Hero all hit the market. If those games underperform, then we'll know that consumers are finally fatigued on the music genre.

As for the industry as a whole, Schachter still thinks a fantastic second half of the year can negate some of the declines we've seen to this point. "While the weak start to the year may lead some investors to believe that the cycle could be running out of gas, we remain cautiously optimistic for the back half of the year," he said. "While anemic industry growth rates are clearly being impacted by slackening demand for both higher-ASP Music genre titles and Wii hardware, we expect 2H'09 will benefit from a strong software line-up, a larger installed base, further hardware price cuts and promotions, and a possible broad macroeconomic recovery. Some of the most highly anticipated titles slated for 2H carry higher than average price points via peripherals (DJ Hero, Guitar Hero, Tony Hawk) and also special edition titles (Modern Warfare 2: Prestige Edition)."

He continued, "It is lining up to be another very competitive holiday however, and not all publishers will benefit equally. In addition to having a quality game, retail placement, marketing and pricing strategies will be just as important this year as last. All that said, we hold out hope that CY'09 could end better for the overall industry than how it began. Looking farther out, we continue to believe that this cycle will be longer, deeper, and richer than those prior, which will help the software publishers, on average, achieve higher levels of profitability and sustain those levels for longer periods."

James Brightman has been covering the games industry since 2003 and has been an avid gamer ever since the days of Atari and Intellivision. He was previously the EIC of GameDaily Biz.