Despite Slipping Game Sales In 2011, Industry Still Had Winners
January 14, 2012

Despite Slipping Game Sales In 2011, Industry Still Had Winners

Despite record-breaking sales for a handful of popular franchises, a market study released Thursday reported that the video-game industry suffered an 8% slump in overall sales for 2011.

According to the report by consumer marketing research group NPD Inc., gamers spent just over $17 billion on videogames and hardware last year compared with the $18.6 billion they dished out in 2010.

Total sales for 2011 were split roughly 50-50 between games and hardware (i.e. consoles and peripheral devices like game pads) as was the case in 2010 as well.

The problem was thus initially attributed not to a wanting selection of games and consoles but rather to an overall decline in entertainment spending due to high unemployment rates and stagnant economies in the western world.

The holiday season proved particularly disappointing for creators of traditional video games and gaming devices. Usually the most robust shopping month of the year, December sales figures registered an even steeper decline compared to the previous year, plummeting 21% from $5.1 in 2010 to $4 billion.

“Lots of people rushed into stores on Black Friday to buy games, but they disappeared in the first three weeks of December,” explained Michael Pachter to The Los Angeles Times (LA Times), an analyst at Wedbush Securities.

“The stores were empty. They only came back during the week just before Christmas. Consoles in particular are way down. It´s weird, but people don´t seem to see them as gifts anymore.”

Across the board, gaming consoles fared even worse. Despite significant price-slashing by the makers of Wii, Playstation 3, and Xbox 360, sales of the gaming units grossed some 28% less during the 2011 holiday season compared with the previous year. In all, consumers bought a modest 6.3 million consoles in the last month of 2011–some 2.1 million fewer than the previous year.

And it isn´t just that 2010 was such a bang-up year for game manufacturers. According to Pachter, these were the most meager sales figures the industry has seen since 2005.

But several analysts have noted that the gaming industry´s lost sales revenue hasn´t simply disappeared. Much of that money has been spent instead on mobile and online social games, said another NPD analyst Anita Frazier.

Sales for these increasingly popular forms of gaming were not reflected in the report, Frazier explained, thus giving the initial impression that people simply weren´t spending as much on games, period. But she says that when these other varieties of gaming are calculated into the statistics, total sales for 2011 were only down by about 2 percent compared to 2010.

“December was very rough. Because of the great slate of content that came to market during the fourth quarter, I had expected December sales to represent a larger portion of total-year sales than what occurred,” said Frazier.

“This year, December accounted for just 23% of annual sales, while the average for the past 10 years has been 28%.”

Viewed in this light, the struggles of the traditional gaming industry seem to reflect a shift in consumer spending patterns rather than just a reduction in absolute spending.

And not all game publishers had a dismal year. Ubisoft Entertainment was able to boast three of 2011´s top-ten games while Electronic Arts´s Battlefield 3 and Madden NFL12 commanded another two positions on the list.

Yet the undisputed heavy-weight champion of 2011 was Activision Blizzard Inc.

In November the company´s wildly popular franchise “Call of Duty” released its newest installment “Modern Warfare 3” to a fan base that seems to grow exponentially larger with each new addition to the series. The first-person shooter game smashed all previous records, earning $1 billion in just 16 days and dethroning the film industry´s legendary flick “Avatar” which took 17 days to hit the billion-dollar mark.

And Activision Publishing wasn´t the only company to make lemonade in a year of lemons. Looking at the combined sales for games and consoles, Xbox led the pack by leaps and bounds. Of the $17 billion in total industry sales, $2.1 billion went to Xbox consoles and another $4.6 billion to Xbox games, giving the Microsoft-engineered gaming unit command of some 40% of the total market.

The breakdown shows that $2.1 billion was spent on the Xbox console in 2011, and the other $4.6 billion was on games. The entire video game sector in 2011 racked up $17.02 billion. That sounds like a huge amount of money, but it is an 8% drop from money spend in 2010. The total spent on the gaming segment in 2010 was $18.6 billion.

Ubisoft´s senior marketing VP Tony Key said that it was in fact a rough and competitive year for the industry as a whole. But, he added, the market was not impenetrable for creative game designers.

“If you innovate and you bring something fun, you can still win,” said Key.


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