The videogame industry continued its negative run, as U.S retail sales declined for the second straight month. In June 2011, sales were down 10% from the comparable previous year to $1.03 billion, according to market research firm, The NPD Group.
A lower number of game releases coupled with some disappointing game reviews were primarily responsible for the dismal results. The poor reviews deterred the sales of a few games that were aimed for hardcore gamers like Take-Two Interactive Software Inc.’s (TTWO) Duke Nukem Forever and THQ Inc.’s (THQI) Red Faction: Armageddon.
In June 2011, software sales dropped 12% to $469.5 million. Including PC games, total software sales fell 10% to $508.9 million. Amid this grim picture, Take-Two Interactive Software Inc’s titles managed to hold on to the lead positions, as its “L.A. Noire” snatched the top spot for the second month in a row and was followed by “Duke Nukem Forever”. Though the latter title received poor reviews, it still managed to hang on to the second position.
Sony Corp.'s (SNE) "Infamous 2" was in third place. Disney Interactive Studios’ Lego Pirates of the Caribbean: The Video Game and Nintendo’s Legend of Zelda: Ocarina of Time 3D grabbed the fourth and fifth positions, respectively. Long time favorite Call of Duty: Black Ops, by Activision Blizzard Inc. (ATVI) managed the sixth spot.
Hardware sales were down 9% to $366.6 million. Microsoft Corp’s (MSFT) Xbox 360 sold 507,000 units followed by Sony’s PS3 and Nintendo’s Wii that sold 276,000 and 273,000 units respectively.
Accessories sales were down 11% from the previous year to $158.9 million.
Despite the decline in sales for two consecutive months, market researcher Gartner Inc. recently reported that the video game industry is poised for strong growth in 2011. Gartner expects the video game industry to grow 10.4% to $74.4 billion from the 2010 level of $67.0 billion.
Gartner estimates that software spending in 2011 will be roughly $44.7 billion (60.4% of total spending), and it will continue to dominate the overall gaming market in the next five years as it absorbs almost two-thirds of consumers’ gaming budgets. Spending on gaming hardware and online gaming are expected to reach $17.8 billion and $11.9 billion, respectively, in 2011.
Gartner expects video game related spending to reach $112.0 billion by 2015, with 50.4% of spending on software ($56.5 billion). Over the next five years, the share of gaming hardware as a percentage of total spending on gaming will remain constant, while spending on the fast-growing online gaming segment outpaces software spending. Developers have already started shifting their business model and are increasingly announcing digitized versions of games.
We also believe that the tremendous success of online social gaming will further change the dynamics of the video game industry going forward. We believe that the social gaming market is well positioned for continued growth, primarily attributable to its casual, social and interactive environment compared to the more conventional platforms.
The video game market overall remains highly fragmented, graced by a large number of companies, including Activision, Electronic Arts Inc. (ERTS), Take Two Interactive Software Inc., Capcom, Koei, Konami, LucasArts, Midway, Namco, Sega, THQ and Ubisoft. This has increased competitive pressures that have kept the lid on prices.
Moreover, the economic slowdown has taken its toll. Consumer spending remains weak to date and the lack of new game releases has not helped.
ACTIVISION BLZD (ATVI): Free Stock Analysis Report
ELECTR ARTS INC (ERTS): Free Stock Analysis Report
MICROSOFT CORP (MSFT): Free Stock Analysis Report
SONY CORP ADR (SNE): Free Stock Analysis Report
THQ INC (THQI): Free Stock Analysis Report
Be the first to comment