With total industry sales down almost 8% in November, Wedbush Morgan analyst Michael Pachter has responded to the NPD data, acknowledging how he and other analysts were fooled into thinking 2009 would end up being a better year than it's been.
"2009 appears to be an all-out miserable year for both hardware and software sales. After two consecutive phenomenal years of growth, with software sales up 34% and 27% in 2007 and 2008, respectively, it should have been evident that a slowdown was coming, but many observers (including us) were lulled into the belief that the video game software business was recession-proof. Compounding our error was the belief that Wii sales would never slow, and that the music genre could continue to grow," he commented.
"We now see just how wrong we were. Wii hardware unit sales are down a staggering 28% through November. Even though combined PS3 and Xbox 360 sales are actually UP 5% this year, in absolute terms, the three consoles have sold almost 14% fewer units than in the prior year. At the same time, a lackluster lineup of games for the Wii (compared to a very robust lineup last year), software bundles with the PS3 and Xbox 360, and the effects of the recession clearly contributed to lower overall software attach rates this year."
He continued, "Compounding matters, sales of music genre games have suffered mightily in 2009, with sales through November totaling $620 million, compared to $1.19 billion in the same period a year ago. The $570 million decline in year-over-year music sales is responsible for two-thirds of the overall decline in software sales thus far in 2009."
December is likely to be another challenging month for the industry, but the "light at the end of the tunnel should be apparent in January," Pachter said, "when a much stronger release schedule and easier comparisons should permit a slight rebound in sales, with low single digit declines likely." After that Q1 should really take off: " In February, the game lineup is nothing short of spectacular, and we expect a rebound in sales to positive territory. Beginning in March, the strong release schedule will be further aided by easy software sales comparisons, and in April, easy hardware comparisons should contribute to software sales growth acceleration."
8 Comments
9 months ago
'We Now See Just How Wrong We Were'. Speak for yourself dude. A couple of buddies of mine and myself (we are just "plain gamers" with no advance statistical and/or sales interpretation knowledge), would be literally in shock every month after we would read your incredibly optimistic interpretations of the monthly NPD data, as we were all in agreement that the evidence of a weak yearly performance were abundant since April. I think the industry finds itself at a crossroad. Many changes that happened in the recent past (e.g. the unusual makeup of the Wii consumer population), as well as changes that are imminent (e.g. digital distribution, 3D gaming, gesture recognition software and hardware), are going to affect the course of the industry to a great degree. It is going to be an interesting journey...
9 months ago
Pachter appears surprised.
9 months ago
No matter, 2010 will be a fantastic year for the games industry. Especially with Gran Turismo 5 releasing, that's a franchise that's guaranteed to sell at least 10 million copies and probably a substantial amount of PS3 hardware to boot. Then there's Final Fantasy XIII, God Of War 3, Super Mario Galaxy 2 and Pokemon Heart Gold/Soul Silver.
9 months ago
2009 was definitely a weaker year than 2008 for video games. However, considering an unemployment rate over 10%, this non essential entertainment product sold relatively well. And the sales declines were mainly due to a single genre: the music/rhythm genre. With an improved economy and great slate of new releases, hopefully 2010 will be another great year.
9 months ago
I agree. With the installed bases getting bigger, and the economy (hopefully) bouncing back next year, all that great software in the pipeline should really drive 2010. Should be a good year.
9 months ago
I still think the traditional video game publishers don't get the serious threat they face from social games. Its not about quality, but about time share of their customers. More time spent on Farmville, MafiaWars or a F2P MMO means less for a traditional console game. That's a trend that I don't believe the vidgame publishers grasp - they think its a fad - but I say its a future reality.
9 months ago
To Mark's point. How much of the threat comes from existing gamers switching over from traditional games to social games? From what I have been able to gather, the social games space is expanding the video game market pie (in particular the causal gamer). People who have never played games before are giving Farmville a shot, etc.
The question is, are social and mobile games cannibalizing the the traditional gaming space? If so, what does this mean for the DLC/streaming trend?
9 months ago
Here's a request for some analyst somewhere - shouldn't be too difficult to do --
If you eliminated the sales from Wii and causl music genre games from the past few years' numbers, what do the trend lines look like?
Perhaps CORE gaming IS recession proof, but these more fad-like things come and go like, well, fads, and make the aggregate numbers confusing on this point.
My gut feeling is if you just look at the XB360/PS3 titles not bundled with hardware, you'd get a different picture of things. Less high-flying 2008, for sure, but also less crash now.
Anecdotally, I don't think erosion of core gamer time from social games, Wii, or downloadables is very significant yet. About the only significant factor that has eroded the core gamer market in my opinion has been the rise of blockbuster MMOs like WoW.
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