NPD Group Blog » Here Comes The Sun?

Here Comes The Sun?

Monday, October 26th, 2009
By Anita Frazier, Entertainment Industry Analyst Toys & Video Games

The highly anticipated video game industry sales results for September have now been delivered, and many who were expecting a bigger increase over last year’s results, were underwhelmed by the numbers. The industry did return to positive territory after six consecutive months of posting declines, but the increase was a modest 1 percent.

Hardware price cuts delivered what they were designed to do: all three console systems received a price cut in either later August or September and the month-over-month unit sales increase, taking into account the extra week of sales in the September reporting period, was noticeable. PS3 unit sales increased 87 percent on a weekly sales basis over August, while the Xbox 360 and the Wii realized increases of 31 percent and 33 percent, respectively. Historically, price reductions on hardware have impacted unit sales anywhere in the range of 2 percent to 200 percent, with greater increases usually coming from price cuts that occurred earlier in the lifecycle than this recent round of cuts did. In most cases, unit sales of hardware exceeded what many analysts had expected. So, on the hardware front, the industry performed very well. And a greater install base of hardware provides the foundation for future software growth, and can provide a healthy shot in the arm for the entire industry ecosystem.

But for September, software sales didn’t live up to what many expected, despite having realized a 5 percent gain over last year. All eyes were on the battle of the Bands as The Beatles: Rock Band, and Guitar Hero 5 hit store shelves. While both titles performed well, and are the type of games that can have a long life, particularly through the upcoming holiday season, some were expecting bigger numbers out of the gate. Halo 3: ODST grabbed the top spot for the month, selling an impressive 1.5 million units. It is important not to overlook the fact that Madden NFL 10, which hadn’t performed as well in August as compared to last year’s game, made up some ground this month, narrowing the difference in the first two months sales of the title. Looking forward to October there are some key releases, which should generate some solid sales. They include Wii Fit Plus, Uncharted 2: Among Thieves, Brutal Legend, Mario & Sonic at the Olympic Winter Games, NBA Live 10, and more. The content line-up in aggregate looks very much like it could hold its own against last year.

Overall, based purely on seasonality trends, which put historical year-to-date through September sales in the range of 47 percent to 55 percent of annual sales, the total industry is poised to land in the range of $19 to $22B for the year. Because of how this year has shaped up so far, I would say that it looks more like a year where sales could be more heavily weighted in the back months than average, so the industry ending up flat at $22B isn’t out of the question.

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