Digital gaming increases, but physical games still command the largest sales share. Steve Traiman offers a global games update.
Don’t count out the packaged games market! That’s certainly the one message that comes through from the first five month sales of video and computer games in the US and other key global markets, and major announcements and hints from this year’s E3.
The new console platforms, including Wii U due later this year, and Xbox 720 and Sony PS4, anticipated by year-end 2013, are expected to support packaged media and will provide a much-needed boost for console manufacturers and publishers alike. AAA titles will be key to maintaining packaged gaming revenues in the short term as these are currently difficult to replicate in the digital environment.
JUST THE FACTS
In the US for 2011, total consumer spend on gaming content via all monetization methods (including new physical video and PC games, used games, game rentals, subscriptions, digital full-game downloads, social network games, downloadable content, and mobile games) was about $16.6 billion, according to the NPD Group’s Games Market Dynamics report. Physical new and used console, portable and PC games, and rentals represented about 69% of the total market, including hardware and accessories, or $11.45 billion, a modest 3% decline from the prior year.
For the first six months of 2012 through June, new physical purchases at retail for video and PC game software were an estimated $3,460.7 billion, a 29% decline from the same 2011 period. However, one bright spot was the PC games sector, which hit $205.7 million, only a 1% decline.
As NPD games analyst Anita Frazier noted in her May report, “PC games sales realized a year over year increase of 230%, with $80 million in sales, which softened the decline in software sales overall. Blizzard’s Diablo III is the top selling title for May, the first time since July 2010 for a PC-only game. Since the game launched day and date through digital distribution as well, full sales are some multiple of retail sales. Starcraft II was the best-seller topper in July 2010, a testament to the power of the Blizzard brand in PC gaming.”
[According to a Blizzard spokesman, “Just a week after the game’s May 15 launch, more than 6.3 million heroes were slaying demons on their quest to save Sanctuary, helping make Diablo III the fastest-selling PC game in history.”]
Frazier continued, “To dig deeper into the new physical retail software performance in May, new launches generated 31% more dollars than they did last May, largely due to the success of Diablo III. This May, new SKU launches across console, portable and PC game software generated 188% more unit sales per SKU than they did last May. So while there were fewer new item introductions this May, they collectively generated more unit and dollar sales.
“In the first half of 2012, there were 34% less new software SKUs compared to last year. On an average SKU basis, they generated 4% less units, but 2% more dollars. This shows that while new launch performance is relatively stable, it is the sheer reduction in the number of launches that is contributing to the overall softness we are seeing in software so far in 2012. The decrease in new launch volume accounts for 41% of the net unit decline and 47% of the net dollar decline from first half of 2011.”
Despite 34% fewer new software titles in 2012, the first six months’ new physical sales of $2,455.3 billion were nearly 50% of total industry sales, including hardware and accessories, of $4,963.2 billion. This compares to new physical software sales of $3,460.7 billion for the same 2011 period, which was 51% of total industry sales of $6,780.5 billion.
Looking at the key gaming markets in Western Europe – UK, France, Germany, Italy and Spain – David Sidebottom, Futuresource Consulting games analyst, told D2D, “Packaged games are suffering similarly to music and video, with many markets seeing double digit declines. However, online gaming and mobile apps have helped fill in the ‘troughs’ in the cycle. The main difference between games, music and video is that to date, online gaming has added value to packaged games, whereas for music and video it has been largely cannibalistic.
“Moving forward, however, with next generation consoles, we expect that full games’ downloads will begin to cannibalize the traditional (packaged) retail market. While casual online gaming and apps are widening the gaming audience further, they are also providing increased competition to traditional platforms and publishers. Consequently, some publishers, such as Activision, are looking to prioritize mobile gaming.”
Futuresource’s Packaged Games Software Market Overview, forecasts for year-end 2012 a 15% drop from 2011 in the US in retail sales of console, handheld and PC games. In the same period, declines are projected for the UK at 13%, France and Italy at 12%, Spain at 10% and Germany at 9%. In the five key Western Europe markets, packaged games in 2012 should represent about €6 billion (63% of a €9.5 billion total market) compared with €8.1 billion or 82% of the total €9.8 billion market in 2008. By 2016, packaged games are forecast to represent about €4.5 billion or 45% of a €10 billion total market.
Sony, Microsoft and Nintendo all had major announcements at E3, but there was as much interest in what they did not officially say about their next-gen consoles that offered more encouragement for packaged media.
Nintendo’s new Wii U console, announced last year, will debut for this holiday season at a yet unannounced price. It is strikingly different from other consoles, like playing a game or watching a movie, pausing it, then playing the same game or movie from a different room in the home from the pause point. The touchscreen-friendly console will launch with the new multi-player NintendoLand title, a virtual theme park that a Wii U’s player Mii avatar can visit with a variety of multiplayer mini-game type experiences to play with other Miis in Nintendo’s new cloud-based Miiverse network. Other top Wii U titles include Nintendo’s ZombiU, Super Mario Bros U and Pikmin 3, with Warner Interactive’s Batman Arkham City Armored Edition and Ubisoft’s Assassin’s Creed III among major new third party games.
The big announcement from Microsoft, in addition to the eagerly anticipated Halo 4 launch, focused on the Xbox 360 SmartGlass system that links the console to tablets and smartphones, adding some very Wii-U like functionality. It allows content to be swapped between devices, and it can turn the touchscreens of smartphones and tablets into controllers that are easier to use than the standard Xbox 360 unit. Nothing was said officially at E3 about the Xbox 720, but the Microsoft legal team separately confirmed that a leaked set of specifications was legitimate. Reliable industry sources say it will ship to retailers by early November 2013 with six times the processing power of the Xbox 360 and twice the power of the new Wii U.The Xbox 720 is said to have a Blu Ray drive as well, providing much more information space than the current Xbox 360 DVD games. A required internet connection will ensure that gamers are playing legitimate copies of the game – a key anti-piracy feature.
Jack Tretton, President and CEO of Sony Computer Entertainment of America, called E3 “the Super Bowl for game makers” at the company press conference. New PS3 games getting most attention include The Last of Us, God of War: Ascension, BEYOND Two Souls and Assassin’s Creed 3. Major announcement was the new Wonderbook add-on hardware that delivers augmented reality and will be available this fall. It’s a hardware book that generates video responsiveness on screen, and is intended to bring storybooks to life on screen through the PS3. Wonderbook will debut with Book of Spells from its first partner, Harry Potter author J.K. Rowling’s Pottermore.
There was no official announcement of a major upgraded PS4 console, but other reliable industry sources anticipate a late 2013 debut, powered by Gaikai. After E3, Sony acquired Gaikai, which has built the fastest interactive gaming network in the world that will allow gamers to run high end console-quality games instantly from the cloud in their Google Chrome browser and Chrome OS without the need for Flash or Java. It will offer a complete gaming experience, including using a gamepad and playing full screen.
Cross-play between PS3 and the handheld Vita portable, with the option to start a game on one device and continue play on the other, was announced as Sony’s “two screens are better than one” concept. Announcements included YouTube for Vita, along with Hulu Plus and Crackle, due by the holiday season. Top new Vita games include Assassin’s Creed Liberation, which features the franchise’s first female assassin, and Call of Duty Black Ops: Declassified, set for release holiday 2012. By year-end, Sony projects 60 new titles available on Vita, with PS One classics coming soon.
GAMES AND MOVIES
Physical games are particularly popular for day/date release with the movie or Blu Ray/DVD. As an example, Javier Ferreira, Disney Interactive Senior Vice President, Publishing, told D2D, “Disney Interactive continues to support our Disney/Pixar properties by creating innovative and action-oriented film-based content for families to enjoy across all game platforms.
“The June 2011 release of Cars 2: The Video Game continues to perform well at retail, with more than 3.5 million units sold-in worldwide. In addition, our Temple Run: Brave mobile title was released in mid-June and rapidly made its way to the number one spot on the App Store across 44 countries, a position it has maintained since launching. We also debuted Brave: The Video Game for PlayStation 3, Xbox 360, Wii, DS and PC/Mac.”
With many new games incorporating active motion experiences like archery in Brave, pre-release game testing has become much more important. “At BluFocus, we understand that any functionality issues that may exist in a game can create a negative user experience,” emphasized Juan Reyes, CTO.
“This can result in the user requesting a refund, posting a negative review, not purchasing other games from the developer, or other scenarios which can negatively impact the developer. Whether it’s a physical or digital game, the same importance for testing exists. When we conduct our testing, in most cases we are working with the developers before the products are released for retail distribution. So we’re the last set of eyes. For each game, we create a comprehensive test plan that covers all the functionality requirements from the developer perspective and all the possible scenarios from a user perspective.”