Following the release of the disappointing November NPD sales data, EEDAR has issued us its own assessment of the industry's retail performance for the month. Analyst Jesse Divnich said outright that this "should not be viewed as a healthy start to the holiday season." Part of the problem is that the casual audience does not seem to be buying as much as last year. This is likely an indicator that December sales will be down too.
"...core targeted games represented stronger sales in November than in previous years. While still a positive for the industry, this does, unfortunately, indicate that sales from casual and non-traditional gamers shrank in November compared to last year. Given that December’s sales typically depend more heavily on the casual and non-traditional audience, over any other category, December sales are likely to range in the -7 to -12% range," said Divnich.
Taking a closer look at the data and Rentrak’s Video Game Ad Monitor, a service that tracks video game promotions across major North American retailers, EEDAR came to the conclusion that hardware deals ultimately hindered software for November. "There were 24% more software titles being offered as part of hardware bundles on Black Friday compared to last year. While these aggressive hardware bundles have certainly spurred hardware sales in November, it could create a hindrance on software sales in December and January, as people receiving these bundles as gifts are less likely to require additional software purchases in the short term to meet their entertainment needs. Additionally, with November hardware units being better than anticipated and software sales being lower, it is clear that these hardware bundles did play a role in hindering software sales in November," Divnich pointed out.
He continued, "It is not just the amount of hardware bundles that pose a threat to top-line sales either. According to Rentrak’s Video Game Ad Monitor, comparing the amount of video game discounts across nine major retailers, there was 105% more software promotions being offered on Black Friday compared to 2008. EEDAR believes that retailers are becoming more aggressive in the Video Game space by creating more promotions, and in some cases loss-leads, to drive additional foot traffic into their stores."
This pattern from stores like Best Buy, Walmart and Toys R Us is something that's likely to continue in 2010, which reinforces EEDAR's conclusion that median game pricing will likely fall in 2010. Even with pricing likely to come down, the "AAA" games should maintain their full prices. It seems like now, more than ever, the video game industry (at retail) is a hits driven business. "Supply and Demand are beginning to emerge as more active forces within the video game industry in relation to discount pricing. The games people avidly want will remain at full price, the games people kind of want will be discounted, and the games that do not move quickly off shelves will be heavily discounted. Only the best survive!" noted Divnich.
Interestingly, however, the top-rated games are selling fewer units this holiday season. EEDAR's database suggests that from the September to November time period, "there were 20% more games ranked 80 or higher in 2009 compared to 2008 (Note: For home console games, which excludes the DS and PSP, there were 27% more games ranked 80 or higher in 2009 compared to 2008). In other words, high quality games are selling less units in the 2009 holiday season compared to 2008, unless of course, you are Call of Duty, Left 4 Dead, Mario, or Assassin’s Creed."
The good news, though, is that publishers that delayed their top games into 2010 should benefit. "Anita Frazier’s comments that the top 50 games sold 5% less than the top 50 of last year reinforces our analysis since that implies a very large decrease for rank 11 – 50 titles, year-over-year, given that sales from the top 10 titles grew nearly 60% over last year’s top ten," Divnich explained. "This would suggest that publishers who purposely diverted their AAA holiday titles into 2010 made the proper decision and will likely realize stronger sales with a post-holiday release than a holiday release. Additionally, a by-product of this schedule shift will limit cannibalization and create a much stronger and healthier video game environment in the long-term."
