Hardware Results

 

Hardware

Total Units

EEDAR Estimates

LY Units

Y/Y Units

EEDAR Error

Nintendo DS

1,700,000

1,580,000

1,570,000

8.28%

-7.06%

Nintendo Wii

1,260,000

1,200,000

2,040,000

-38.24%

-4.76%

Sony PSP

293,900

270,000

421,000

-30.19%

-8.13%

Sony PS3

710,400

725,000

378,000

87.94%

2.06%

Microsoft Xbox 360

819,500

700,000

836,000

-1.97%

-14.58%

Total

4,783,800

4,475,000

5,245,000

-8.79%

-6.46%

 

Records

·         The Nintendo DS sales were the highest in history for a portable console in a November month.

·         The Nintendo Wii sales were the third highest in history for a home console in a November month.

·         PlayStation 3 posted the highest weekly sales rate in the consoles history for any month.

 

Health of the Industry

 

While home and portable console software sales were only down 3% in November 2009 (much stronger than in previous months), this should not be viewed as a healthy start to the holiday season.  Over 4.5 million units ($270 million or 20% of industry sales) of Call of Duty: Modern Warfare 2 were sold prior to the official start of the holiday season (Black Weekend).  EEDAR believes that nearly all of them were purchases made for immediate use and not as gifts.  If we take into consideration that 1.4 million units ($82 million) of Call of Duty: World at War were sold prior to Black Weekend in 2008, Call of Duty: Modern Warfare 2 added an additional $188 million or 14% of industry sales to November 2009 figures that should not be considered as “holiday sales”.

 

 

Additionally, core targeted games represented stronger sales in November than in previous years. While still a positive for the industry, this does, unfortunately, indicate that sales from casual and non-traditional gamers shrank in November compared to last year. Given that December’s sales typically depend more heavily on the casual and non-traditional audience, over any other category, December sales are likely to range in the -7 to -12% range.

 

Big-Box Goes After Big Sales

 

According to Rentrak’s Video Game Ad Monitor, a service that tracks video game promotions across major North American retailers, there were 24% more software titles being offered as part of hardware bundles on Black Friday compared to last year.  While these aggressive hardware bundles have certainly spurred hardware sales in November, it could create a hindrance on software sales in December and January, as people receiving these bundles as gifts are less likely to require additional software purchases in the short term to meet their entertainment needs.  Additionally, with November hardware units being better than anticipated and software sales being lower, it is clear that these hardware bundles did play a role in hindering software sales in November.

 

It is not just the amount of hardware bundles that pose a threat to top-line sales either. According to Rentrak’s Video Game Ad Monitor, comparing the amount of video game discounts across nine major retailers, there was 105% more software promotions being offered on Black Friday compared to 2008.  EEDAR believes that retailers are becoming more aggressive in the Video Game space by creating more promotions, and in some cases loss-leads, to drive additional foot traffic into their stores.

 

These aggressive discounts are new to North American retailers, but not among retailers through the rest of the world.  UK retailers entered into a vicious battle back in September over FIFA Soccer 10, where retailers were discounting the yearly soccer title by as much as 40%, well below cost.  Similar discounts were offered on more recent titles such as Call of Duty: Modern Warfare 2.

 

EEDAR believes mass-market retailers such as Best Buy, Toys R Us, and Wal-Mart will continue to use the video game category as a means to drive foot traffic into their stores through 2010. This reinforces our most recent EEDAR Expose newsletter that showed median game pricing will likely fall in 2010.

 

However, as EEDAR pointed out in its newsletter, pricing for top tier titles will likely remain unchanged.  This hypothesis is reinforced by Rentrak’s Video Game Ad Monitor data, which showed that top selling titles such as Call of Duty: Modern Warfare 2, Assassin's Creed 2 and New Super Mario Bros. went through the entire Black Weekend without any discounts from the major retailers.  It should be noted however that Call of Duty: Modern Warfare 2 and Assassins Creed 2 were both targets of aggressive pre-order discount programs which allowed consumers to acquire the titles for net values of $49.95 utilizing gift card promotions or even direct discounting.

 

If we had to summarize these findings, it would be: Supply and Demand are beginning to emerge as more active forces within the video game industry in relation to discount pricing.  The games people avidly want will remain at full price, the games people kind of want will be discounted, and the games that do not move quickly off shelves will be heavily discounted.  Only the best survive!

 

Disproportionate Sales

 

Last year, the top ten selling software titles (by SKU, special editions merged) accounted for 22% of total units sold in November (based on public sales data by The NPD Group).  This year the top ten accounted for an estimated 36% which was, of course, in large part due to Call of Duty: Modern Warfare 2

 

It is intuitive for one to believe that these high concentration of sales in November 2009 are the result of a smaller release schedule of high quality products; after all, we know of many AAA titles that were originally due this holiday season were delayed out of the year in order to avoid Call of Duty: Modern Warfare 2.  EEDAR ‘s proprietary database, however, suggests something entirely different.  In the September to November time period, there were 20% more games ranked 80 or higher in 2009 compared to 2008 (Note: For home console games, which excludes the DS and PSP, there were 27% more games ranked 80 or higher in 2009 compared to 2008). In other words, high quality games are selling less units in the 2009 holiday season compared to 2008, unless of course, you are Call of Duty, Left 4 Dead, Mario, or Assassin’s Creed.

 

Note: Anita Frazier’s comments that the top 50 games sold 5% less than the top 50 of last year reinforces our analysis since that implies a very large decrease for rank 11 – 50 titles, year-over-year, given that sales from the top 10 titles grew nearly 60% over last year’s top ten.

 

This would suggest that publishers who purposely diverted their AAA holiday titles into 2010 made the proper decision and will likely realize stronger sales with a post-holiday release than a holiday release.  Additionally, a by-product of this schedule shift will limit cannibalization and create a much stronger and healthier video game environment in the long-term.