A disappointing December leads to 2011 retail video game declines

As 2011 came to an end, annual U.S. video game sales at retail for saw a notable drop year-over-year, though alternative monetization strategies helped bolster the performance of video game content across retail and digital. U.S. video game retail sales across hardware, software and accessories saw a sizable 8 percent drop in 2011, putting total video games sales revenue at $17.02 billion, from $18.59B in 2010. For December 2011 in particular, video game sales revenue dropped 21 percent to $3.99 billion from $5.07 billion during the same period last year. While the video game industry typically depends on December sales to drive its annual revenues, the numbers this year were disappointing historically, according to the group. "I had expected December sales to represent a larger portion of total year sales than what occurred," said NPD analyst Anita Frazier, explaining that December accounted for only 23 percent of this year's annual sales versus a ten-year average of 28. For all of 2011, The NPD Group, in partnership with EEDAR, reported that its estimated total revenues from game content via all montization strategies -- which appends digital revenues on top of retail -- reached between $16.3 to $16.6 billion. That above total excludes hardware and accessories, but includes new physical video and PC games, used games, game rentals, subscriptions, digital full-game downloads, social network games, downloadable content, and mobile games. With all of these revenue streams in mind, and despite a rapidly growing digital marketplace, this total is down roughly 2 percent from 2010. Based on this estimate, the group reported that physical sales still make up the majority of consumer spend on game content. Retail sales of new physical game content, including portable, mobile, and console game software, reached 9.3 billion for the year, down 8 percent from 2010's $10.1 billion. Frazier says that the results are not surprising, given that we are in the latter part of the lifecycle of the current console generation. While core gamers continue to buy established brands in droves, new customers for retail games are becoming rarer as the excitement of new hardware wears down. Software For December 2011, retail sales for console and portable games reached $2.04 billion, down 14 percent from $2.37 billion in 2010. The December 2011 total hit $2.14 billion with retail PC game sales included. These figures fall well below analyst estimates, which predicted that U.S. retail game software sales (excluding PC games) would grow 2 percent or drop as much as 5 percent compared to the same time last year. Major titles such as Activision's Call of Duty: Modern Warfare 3 Ubisoft's Just Dance 3, and Bethesda Softworks' The Elder Scroll V: Skyrim topped the charts for both December 2011 as well as the year overall, and games such as Call of Duty: Black Ops, Epic's Gears of War 3, and Just Dance 2 -- while they did not make the December list -- found their way into the year's top 10. "Call of Duty: Modern Warfare 3 landed in the top spot for software title sales for both December and for Annual 2011. Looking at the top 10 titles for the year, two franchises scored with two titles each: Call of Duty and Just Dance -- two franchises that couldn’t be more different, demonstrating the range of appealing content on consoles in 2011.” The top 10 best-selling retail games in the U.S. for December 2011 were as follows: 1. Call of Duty: Modern Warfare 3 (360, PS3, Wii, PC)** 2. Just Dance 3 (Wii, 360, PS3) 3. Elder Scrolls V: Skyrim (360, PS3, PC)** 4. Mario Kart 7 (3DS) 5. Battlefield 3 (360, PS3, PC)** 6. Madden NFL 12 (360, PS3, Wii, PSP, PS2)** 7. Assassin's Creed: Revelations (360, PS3, PC) 8. NBA 2K12 (360, PS3, Wii, PSP, PS2, PC) 9. Super Mario 3D Land (3DS) 10. Batman: Arkham City (360, PS3, PC)** "The top 20 titles in December generated nearly half total software revenue for the month, which is very high," Frazier said. The decline in software sales was slightly less steep when looking at all of 2011, during which console and portable game sales at retail generated $8.83 billion, a 6 percent drop from $9.36 billion in 2010. With PC games included, the overall 2011 total hits $9.27 billion. Here are the overall best-selling games of 2011: 1. Call of Duty: Modern Warfare 3 (360, PS3, Wii, PC)** 2. Just Dance 3 (Wii, 360, PS3) 3. Elder Scrolls V: Skyrim (360, PS3, PC)** 4. Battlefield 3 (360, PS3, PC)** 5. Madden NFL 12 (360, PS3, Wii, PSP, PS2)** 6. Call of Duty: Black Ops (360, PS3, Wii, NDS, PC)** 7. Batman: Arkham City (360, PS3, PC)** 8. Gears of War 3 (360)** 9. Just Dance 2 (Wii) 10. Assassin's Creed: Revelations (360, PS3, PC) **(includes CE, GOTY editions, bundles, etc. but not those bundled with hardware) Though Activision's toy-based Skylanders title didn't make it on either list, Frazier said, "We get asked a lot about how Skylanders is performing. If you combine the sales of software bundles with the character packs which are tracked in the accessories category, the title would rank fourth in December, and 10th for Annual 2011 on dollar sales." She added, "[EA's] Star Wars: The Old Republic was the 14th best-selling title in December, and it was released only on PC. While the collector's edition sold less than the regular SKU, the SKUs both generated about the same in dollar sales, thanks to a hefty price point that fans were willing to spend on this well-loved franchise." Frazier also discussed the impact of non-retail monetization methods on game sales for 2011 overall, saying, "Our preliminary estimate for the other monetization methods in which consumers can acquire games content is $7.24 billion for 2011, an increase of 7 percent versus 2010. This includes the consumer spend on used games, digital full game and add-on content downloads, mobile games, social network games, subscriptions and rentals." "The increase in these areas partially offset the decline in new physical retail sales of content in 2011. Total spend on content is down approximately 2 percent in 2011 while the total consumer spend against all categories is down approximately 5 percent. Our final estimate will be issued in March 2012, along with our Q4 estimate for these same monetization methods in Europe." Hardware On the hardware side, revenues from U.S. retail reached $5.58 billion, an 11 percent decline from 2010's $6.29 billion. December 2011 contributed $1.32 billion to that total, a 28 percent drop from $1.84 billion in December 2010. "Hardware was particularly hard hit in December," said Frazier. "Normally, we see sales increase from November to December on an average sales per week basis (keeping in mind December is a 5-week retail month as compared to November which is a 4-week retail month). The 3DS and the DS were the only platforms to realize a unit sales increase versus November, which is highly unusual since typically all platforms enjoy a lift in the biggest month at retail." "The Xbox 360 was the best-selling platform for the year, and the two HD platforms (360 and PS3) were the two platforms to realize a unit sales increase over last year. All other platforms declined in unit sales versus 2010 (save the 3DS which wasn’t in market last year)." Accessory sales very closely mirrored hardware sales during 2011 at large, dropping 11 percent to $2.61 billion from $2.95 billion year-over-year. In December 2011, accessory sales dropped 27 percent to $628.7 million from $863.5 million during the same period last year. Microsoft's Xbox 360 closed out December 2011 with 1.7 million units sold, with total market spend on the platform reaching $1.5 billion. Microsoft added that total U.S. consumer retail spending on the Xbox 360 hit $6.7 billion for all of 2011, with $2.1 billion of that total spent on consoles and $4.6 billion spent on games and accessories. "The Xbox 360 platform accounted for nearly 40 percent of annual 2011 new physical retail sales across all categories," added Frazier. Sony kept tight-lipped on the sales figures for its hardware, and simply reiterated that the company sold 6.5 million hardware units worldwide during the holiday season.