Gamasutra is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Gamasutra: The Art & Business of Making Gamesspacer
View All     RSS
January 29, 2022
arrowPress Releases
If you enjoy reading this site, you might also want to check out these UBM Tech sites:

Analysts: Retail Game Sales Unlikely To Recover In 2011

Analysts: Retail Game Sales Unlikely To Recover In 2011

December 2, 2010 | By Chris Morris

December 2, 2010 | By Chris Morris
More: Console/PC

[Gamasutra editor-at-large Chris Morris talks to game industry analysts on what 2011 might bring for the struggling Western retail game biz -- with predictions of another slump in retail sales that might only be forestalled by the launch of Nintendo's 3DS, a "primary driver" of any possible retail rebound.]

There’s good news aplenty from gaming companies these days " but as financial analysts begin crunching the numbers for next year, many fear that the holiday cheer could be short-lived.

The shifting business models of the Western video game industry will continue to impact retail sales figures, even with the relatively easy comparables 2010 has established, say many analysts. The good news is that digitally downloaded content should continue to grow " and help make up some of the difference.

“At this point, I’d say it looks like the industry could be down again from a software perspective " maybe low single digits,” Colin Sebastian of Lazard Capital Markets tells Gamasutra.

“But the overall industry would be up - due to mobile games and DLC. And maybe the Facebook-like games will accelerate a bit. … That’s a story that investors may not understand. The packaged goods business is challenged " and publishers are publishing fewer games each year.”

Sebastian’s not alone in his predictions.

”If you looking at data like NPD is likely to report, I’d say there’s a good shot we’ll see a similar trajectory to this year, where you see a negative comparison " though maybe not as negative, depending on the success of the 3DS,” Edward Williams of BMO Capital Markets tells us. “We should see the category grow in calendar 2011, though, when you incorporate all aspects (including digital). … I would call it mid-single digits.”

Not every financial analyst is expecting the retail numbers to continue falling, though. Michael Pachter of Wedbush Securities tells Gamasutra he expects two factors will lead to mid- to high single digit growth in the NPD numbers next year.

“The primary driver is the 3DS,” he says. “The secondary driver is any console price cuts. If all three consoles go down by $50, that’s an easy 5 percent incremental growth for software " and I think all three are going to go down by $50 next year.”

Packaged software, he forecasts, will grow by $800 million. DLC and other digitally-themed revenue, he says, should be up by roughly $500 million - a 20-25 percent growth curve.

All of the analysts we spoke to agree that DLC will play an increasingly important role in the overall economy of video games " and will contribute more to the industry totals in 2011 and beyond.

The problem, though, is there’s no real authoritative source of information on DLC, making it hard for analysts to get a complete picture on the size and scope of the revenue it generates. The range of it is also very extensive " there’s DLC for console games; digital sales via Steam, Direct2Drive and other similar services; there are MMO subscriptions; and there are mobile sales " particularly with Apple and Android devices.

”There is no central integration of data to tell us that digital sales are ‘$X’,” says Williams. “That said, digital is clearly becoming more important to packaged goods. What’s increasingly happening is the game is generating incremental sales after the packaged good sale.”

Analyst predictions are, at their core, guesses " but educated ones. While gamers sometimes roll their eyes and enjoy pointing out inaccurate forecasts, the predictions often come from conversations with gaming industry executives and insiders.

Complicating their job in looking into 2011, though, is the fact that aside from a few big titles and products, publishers really haven’t given a lot of insight into what we can expect.

“Other than THQ, a lot of companies have played it very close to the vest about what’s coming out,” says Eric Handler of MKM Partners. “There’s not a lot of visibility into next year.”

Nintendo’s 3DS is expected to add some growth " and Move and Kinect could do so as well, if the second round of titles for those peripherals is strong. Among the expected big titles are the next Gears of War and BioWare’s Star Wars: The Old Republic, which Williams predicts will be “one of the best performing MMOs we’ve seen in quite a while.”

Missing from that list are any Blizzard titles (until Mike Morhaime gives a date, it’s not safe to assume the developers will release Diablo III next year) or any guidance on the next Call of Duty. Expected is a futuristic installment of the series from Sledgehammer Games " and while Activision COO Eric Hirshberg recently said the company will “never, ever charge for… multiplayer,” not everyone in the analyst community is convinced.

“It’s disingenuous at best,” says Pachter, who has been a proponent of the charges. “At worst, it’s disconcerting that Activision would forgo such a huge opportunity. … Why would you say ‘never’? Manage it so you can charge and not alienate people. How stupid does [Hirshberg] think people are? And if they (Activision) don’t charge, the shareholders should fire the entire management team.”

Related Jobs

JDRF — San Francisco, California, United States

JDRF Game2Give Community Manager
Disbelief — Cambridge, Massachusetts, United States

Disbelief — Chicago, Illinois, United States

Senior Producer
Cryptic Studios
Cryptic Studios — Los Gatos/ Remote Optional, California, United States

Art Director, Neverwinter

Loading Comments

loader image