Thursday, July 19, 2012

AGTurbo Says: Let's Play the Numbers Game

It's been a pretty rough start to the year for the videogames industry. With stocks falling, games being delayed left and right, and consumers trying their damnedest to hang on to their sweet moolah, it should  surprise no one that the numbers look pretty bad. Here to make sense of it all is our resident numbers man, Turbo.

2012 has been a rough year for videogames at retail. For the first 6 months of 2012, it has been nothing but year on year declines. For the first 6 months there were 34% less new releases in software compared to 2011. The main reason why accessories are doing okay is due to the fact that Skylanders consistently makes up 7 to 9% of total accessories sold throughout the year. 

Total videogame retail sales have fallen 29% for the first 6 months. While that sounds drastic, keep in mind that NPD does not track online subscriptions, payments, and sales, which they estimate only make up 50 to 60% of purchases in North America. 

Hardware has reached market saturation in North America.  Also, the prices for the 360 and PS3 are still $200 and above. The Wii software and hardware bubble has been popped for the last 18 months, and is sitting on store shelves like dried vaginas. The main reason for Nintendo to release a new console this year is that they can no longer make money on the Wii compared to Microsoft and Sony for their systems. 

For the month of March, not even the Vita could stimulate hardware sales. Mass Effect 3 sold 1.18 million units, but there is still a 26% decline from last year. May had the smallest year on year decline due to Diablo III’s record numbers, breaking the trend from April's dismal numbers. However last year was loaded with anticipated sequels throughout the first 6 months. Something 2012 didn’t have.

What’s in store for the next half of the year?

I don’t feel the Nintendo WiiU will reverse the year on year declines. With a drop of 29% in retail sales, retail chains will probably reduce their selection even more. Gamestop will be in more trouble with digital sales becoming more and more prominent. While Gamestop is gaining more sales in digital, that only makes up 15% of their company. We’re seeing digital sales eroding away at the retail sales for consoles, the same as with PC games 7 years ago.

Microsoft and Sony have online services that can generate revenue streams and will continue to grow late into this console generation. Nintendo, not having a good online platform to generate revenue, will likely be hit the hardest.

The main titles from established franchises will sell, but outside of that the market will be pretty  barren. The Wii during the boom also played a huge role in gains YOY in software along with hardware. The only thing that can sell well on the Wii is Just Dance. 

Also with new IP’s this late in this generation aren’t selling well, there will be no shortage of future Price Dropasaurus articles.

Turbo doesn't always, but when he does, he accidentally the whole thing.

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