When the sales-tracking NPD Group reported its estimates of U.S. retail video game sales for October 2011, the figures revealed a second straight month of software revenue growth. While October and November did show back-to-back software revenue growth in 2010, the last time the industry saw successive months of software growth was in January and February 2009.
Going by revenue and unit sales, that pair of months back in 2009 marked the very peak of the retail video game industry in the United States. From March 2008 to February 2009 the industry recorded a record $21.7 billion in sales, including a record $11.1 billion from software alone.
Given the slate of software available in November, the stage is set for a third month of growth and possibly a turning point in the industry's fortunes. We'll look into that argument more closely.
Next, we will examine Nintendo's fortunes, both in the U.S. and globally, and try to get an idea of how the company will fare between now and when the Wii U launches in 2012.
For the first time in this column we expand our horizons beyond just the results reported by the NPD Group about the United States market. Combining data from five major third party publishers in the industry – Activision Blizzard, Electronic Arts, Take Two, THQ, and Ubisoft – we will present a snapshot of the industry as of the end of September 2011 compared to the same measures a year earlier.
Among the questions we will address: How fast are digital sales increasing, and how quickly is retail decreasing? How much of the market does digital account for? Which platforms are seeing growth, and by how much? How much does North America really count for in the global video game market, and how is its share changing relative to the other territories?
Industry at a Glance
The big story for October was clearly the growth in software sales, a segment that suffered greatly during the middle of this year. Recall that four months, from May through August, sales fell to low levels that the industry hasn't seen in many years.
Total unit sales during that period were under 42 million units across all consoles and handhelds. The average price of the software sold at retail during that period was only $35. In the data we have – going back to 2007 – we only found a single month in which the average price of software approached $35 and found no earlier four-month period in which unit sales were lower than 46 million units.
With the launch of Madden NFL 12 from Electronic Arts in late August (included with the September data due to NPD's retail calendar), consumers appear to have begun opening their wallets again. The average price that month rebounded to over $43 per game, and unit sales jumped by nearly 40 percent on a per-week basis.
Expectations going into October were quite high, and most analysts expect an amazing finish to an otherwise lackluster year. Michael Pachter of Wedbush Securities expected revenue to grow by 14 percent while Cowen & Company's Doug Creutz favored a more optimistic 21 percent. The final figure was a much more modest 2.7 percent.
At the very least, consumers can't object to the big-name titles being offered to them – although they might object to the prices. The list of top releases for October is remarkable in itself: Battlefield 3, Rage, Just Dance 3, Forza Motorsport 4, Batman: Arkham City, and NBA 2K12. All of those titles made the all-format chart that the NPD Group released for October 2011, along with hardcore-favorite Dark Souls.
NPD Group analyst Anita Frazier noted in her comments to the press that if the chart were extended one more slot then Activision Blizzard's Skylanders: Spyro's Adventures would have taken that 11th position.
The actual figures behind the software for October are quite robust: average prices rose to over $45 and unit sales on a weekly basis grew nearly 18 percent from September. In terms of total unit sales, we believe this is the second-strongest October in history, lagging the October 2008 record by at least a million.
With momentum from October, it is likely that November will be another record month. Again there is a slate of high-profile titles like Call of Duty: Modern Warfare 3, Uncharted 3: Drake's Deception, The Elder Scrolls V: Skyrim, Assassin's Creed Revelations, Need for Speed: The Run, and Saint's Row: The Third. Moreover, Nintendo's 3DS will get what many expect to be its first evergreen title, Super Mario 3D Land.
All of those launches come at the very time when many retailers are priming consumers with competitive discounts on games and systems in general, and also preparing for blowouts on Black Friday, the Friday following the Thanksgiving holiday in the United States known for being the biggest shopping day of the year.