1) Total industry (hardware, video games software, accessories and PC software) came in at $1.22 Billion, an 8% decline over Sep 2009. Here's how that broke down vs. Sep 2009:
2) Hardware dropped 19% to $383 million
3) Software dropped 6% to $614 million
4) Accessories grew 13% to $180 million thanks to the launch of the PlayStation Move
First, for months I have been talking about the top 10 concentration, i.e., the % of monthly sales the top 10 games represents...each month. In short, this percentage been increasing, meaning the top games are taking up a larger share of an overall contracting retail software business. Said another way, the top games are getting a larger share of a smaller retail pie. Because NPD is no longer reporting the top 10 unit sales, we can't discuss that here anymore. But given that some publishers like to boast what their initial sales are for big titles, we can get good
2) Hardware dropped 19% to $383 million
3) Software dropped 6% to $614 million
4) Accessories grew 13% to $180 million thanks to the launch of the PlayStation Move
A few thoughts...
directional indicators of the monthly concentration ratio that we can discuss. For for Sep 2010, Halo Reach helped up the top 10 concentration ratio...big time. We know from Microsoft that Halo Reach sold over $200 million worldwide at retail in the first week of release. That implies over 3 million worldwide week one units. From past analysis of the Halo franchise, sales skew heavily to the US and UK where the 360 is strongest and shooters do very well compared to other countries with good per capita console penetration rates. Also, Halo Reach released on Sep 14, 2010, so if it did over $300 million in the first week, it for sure did more through the rest of the month. However, Halo is one of those games that core franchise fans usually run out and buy in the first week, so I'm willing to bet worldwide sales the rest of Sep were maybe another $100 million. Continuing my gorilla math, let's peg worldwide Sep Halo Reach sales around $400 million, with roughly have coming from the US. I'm willing to bet it's more like 55%. In any event, that puts US sales around $200 to $225 million for Sep. Let's call it $225M. Recall NPD reported video game software was $614M for the month. That means over 1/3 of industry sales in Sep were from Halo Reach.
Roughly 1/3 of US video game software retail sales in Sep 2010 were from Halo Reach.
Wow...Halo Reach is the September gorilla.
As for the rest of the year, you might think Call of Duty Black Ops will be the next big gorilla and take 50% of all Nov 2010 sales. It might, but there are a lot of good games coming up this holiday and since 50% of retail sales occur in Q4 typically, it's possible we might see a nice holiday season since consumer are hungry for good content this far into a console cycle without any new hardware.
Before you scream "Kinect" and "Move" at me, those aren't new platforms. They are sub-platforms akin to the Wii Fit. While Wii Fit was a blockbuster product for Nintendo, 3rd party publishers hardly saw any return from it. It did not become a new standard for 3rd party software in sports, fitness and...um...weightlifting (?) categories as some had predicted it would. Instead it became a big cash machine for Nintendo and another piranha in the tank for 3rd party to compete against. I view the Move and Kinect in this light, particularly the Kinect.
The issue with the Kinect is that it has no real killer app, nor is it easy to find good uses for it in core traditional games. It will be good for casual Wii type content and fitness / dance. Beyond that it is going to struggle. At least the Move can actually be adapted for shooters, action and even sports games, similarly to how Wii controls have been adapted. But the Kinect is going to struggle to be relevant to shooter gamers who like holding controllers. For example, can the Kinect distinguish between a 30 and 45 yard pass in a football game? If all you needed to do was make a throwing motion, would the Kinect auto detect where you want to throw to? If you were to play a football game on Kinect, wouldn't you want to get that level of simulation in the throwing game? Could you ever play a real game of Madden with Kinect?
What this means to me is that Kinect is an energizing new subplatform to the Xbox 360 that will generate a lot of initial excitement due to Microsoft's massive $500 trillion launch budget. (It's trillions right?...oh...divide by 1 million.) But beyond holiday 2010, the real challenge for Microsoft is to keep consumers buying software and encouraging 3rd party to develop games people actually want to play that make sense with the non-controller controller.
In the long run, Sony has a more favorable subplatform to develop traditional content for with the Move, but it still has a challenge to convince consumers that motion gaming on its new subplatform worth it when they've already done a lot of that business on the Wii. Is Wii type content in HD worth it? Certainly Sony's Kevin Butler adds are trying to position it as "it only does everything" along with their overarching campaign for the PS3. I have to give both Microsoft and Sony credit for their marketing efforts, as it seems both subplatforms will sell very well this holiday.
Finally, I'm now more optimistic about Nintendo that I have been in previous months. Without looking into 2011 and the 3DS, here's why I feel that way:
1) Mario 25th anniversary bundle at $199 that includes Wii Motion Plus, Wii Sports Resort and New Super Mario Bro Wii. This is a very compelling for consumers who have not yet bought a Wii who are thinking about it. The effective marginal cost the packaging on New Super Mario Bro Wii.
2) Donkey Kong Country Returns comes out in late November (US/EU...JP release is Dec or Jan). Personally I am more excited about this than Kirby's Epic Yarn simply because somehow I played a few of these DK games on my old GBA SP while I never once played a Kirby game. For the core Nintendo fan, DKCR is another great 1st party reason to play some Wii.
3) Next is Goldeneye 007 "reimagination" on Wii. I have the game. The graphics are crap compared to any PS3 or 360 game. The enemy AI is crap. The Wii-mote controls are fine I suppose, but still not as good as a standard PS3 or 360 game. But it has this retro appeal even though I never once played the original N64 Goldeneye game. I just wasn't into console games in the 90's. (Yes really.) But I get the appeal of the product. There are plenty of existing Wii gamers who also play shooters and other core games on their 360s/PS3s that should have room for some retro gaming in their budgets. Of course, Activision's big marketing efforts will help generate the necessary nostalgia for it. It's not going to outsell the best Wii 1st party games, but it should crush just about all other Wii 3rd party stuff, except perhaps #4 below.
4) Just Dance 2. Dance is hot. It's the new casual fad after fitness and of course guitar before that. The first Just Dance was a big seller with a big marketing campaign. Just Dance 2 could be bigger if Ubisoft markets it right.
So what am I getting at? First of all, for months I've been talking about the increasing monthly concentration ratio of the top 10 titles per month, underlined by Halo Reach in Sep 2010. This means the top titles are taking a bigger chunk of retail dollars and the smaller titles are getting squeezed out. In other words, consumers are going after the biggest / best / most well marketed / biggest brands they already now / etc. And they're flocking to those titles faster. Maybe consumers now have better information at their fingertips so they are more aware of what they'll like and what they won't. Or maybe the big dawgs simply know how to market better. What's clear is that you can still make money in the retail games business, but crapware simply won't cut it anymore. Yeah, we've known that for years, but do we need any more proof than now?
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