by James Brightman
Finally! After months of year-over-year declines sales of video game software were up a great deal in April, according to The NPD Group. But will the effects of the console transition persist? Or was April just a good spike in an otherwise bad trend? We speak at length with NPD Entertainment Industry Analyst Anita Frazier.
After seven months of witnessing software sales decline, the U.S. video game industry saw year-over-year gains in April. Total console software sales were $395 million, up nearly 16 percent over April 2005, although down 21 percent sequentially from this March. Year-to-date sales are currently down 3 percent, $1.597 billion compared to $1.654 billion.
In a bit of a surprise, current generation sales were fairly strong in April, especially PS2. Wedbush Morgan Securities analyst Michael Pachter said that April\'s \"upside was attributable to much stronger than expected PS2 software sales,\" and that current-gen software sales as a whole were only down $32 million—not bad considering we\'re in a console transition.
11 games sold more than 100,000 units each for the month, versus 10 for last April. The top 10 games captured 20 percent of dollar sales and 14 percent in unit sales in April versus 26 percent and 17 percent in March, which would appear to reflect stronger sales for catalog games this month. Top sellers in April included popular games from March such as Square Enix\'s Kingdom Hearts II, Take-Two\'s The Elder Scrolls IV: Oblivion, EA\'s The Godfather, and Ubisoft\'s Tom Clancy\'s Ghost Recon: Advanced Warfighter, as well as new releases including Eidos\' Tomb Raider: Legend (360, PS2, Xbox, PC, PSP) and Take-Two\'s Major League Baseball 2K6 (PS2, Xbox, 360, PSP).
Pachter found the PS2 sales success especially surprising. \"We are completely baffled by the sales trend reversal for current generation software. PS2 software sales have declined on a year-over-year basis every month since March 2005, and have declined by $28 million or more each month since August 2005. We were quite surprised that PS2 software sales were not down year-over-year in April, and were flabbergasted that they were up by more than $29 million for the month. Nintendo\'s legacy platforms saw a similar reversal, with flat sales year-over-year in April compared to declines of $16 million or more in each month since May 2005.\"
The Xbox 360's increased availability was undoubtedly a big factor in April's increased sales. The platform's tie ratio was over 4. Xbox 360 hardware sales in the U.S. are around 1.5 million units through April. "The increased inventory availability of the 360 was clearly evident in the numbers. Console hardware sales increased over 90% versus the prior year, and the 360 was a major contributor to that performance," NPD Group Entertainment Industry Analyst Anita Frazier told GameDaily BIZ. "In fact, while March was the first month since its release that 360 unit sales increased from the prior month, in April, 360 unit sales were up over 30% from March. That's a pretty significant increase during what is typically a slow month in terms of pure seasonality. And this momentum carries through to the software side: 5 of the top 10 titles were 360 titles. So as Microsoft continues to advance its inventory position at retail, all 360 products should benefit. Given that Microsoft is still working to address unmet demand for its product(s), I would expect this to continue in the months ahead."
Frazier also noted that the Easter holiday contributed to the sales spike in April: "Another contributing factor to April's strong results is that Easter fell in April this year (and in March in 2005). Easter typically brings a lift to the industry, and it appears catalog titles realized an even bigger lift than did software in total."
Unlike Pachter, Frazier wasn't shocked by the PS2 software sales results. She particularly noted the success of Kingdom Hearts II, a game which we've highlighted in a recent Chart Toppers. "Current gen software performance is led by the outstanding results that Kingdom Hearts 2 reaped. This is truly a blockbuster title, and had been very highly anticipated for many months," she said. "Its performance is a testament to the sizeable install base enjoyed by the PS2 and the innovative nature of the game. It's a perfect game for this stage of a console lifecycle. It carries a family-friendly rating, has mass appeal, and yet its gameplay is enjoyed by the most core gamers I know. It works on all levels and its sales results reflect that."
Also worthy of mention according to Frazier was the continued success of Guitar Hero. "There were 4 other PS2 titles in the top 10 for the month, but another standout title that came in at #13 was the Guitar Hero Bundle from Red Octane. This product carries a premium price point, yet it's going strong. It's another testament to the appeal of non-traditional content for gaming platforms."
Of particular note on the portable side was the Nintendo DS with unique games like Brain Age. "I also expect to see the DS platform benefit from sales of Brain Age and New Super Mario Bros. in particular. With a release date of 4/17, Brain Age sold more than 90K units in the U.S. before the end of April," Frazier told us. "This title has the potential to expand the demographics for the DS platform, just as Nintendogs did last year. And the review scores on New Super Mario Bros. are outstanding, not to mention that it's the most successful franchise in video gaming history. These two titles should not only do well themselves, but drive acquisition of hardware. May should be a great month for the DS."
The console transition appears to be another area where Frazier and Pachter don't fully agree. While Pachter thinks that the industry is still very much entrenched in the effects of the console transition, Frazier believes that the industry is finally "over the hump."
"We are not convinced that the April data is representative of a sustainable trend. In our view, the trend of the past year is likely to resurface, with declines in current generation software sales expected to persist for the foreseeable future," Pachter explained. "We do not expect these declines to be offset by next generation software sales until the fall, when a strong lineup of Xbox 360 games is anticipated and launches of the PS3 and Wii are scheduled."
Frazier countered, "I do think the industry is over the hump. While we may not see as dramatic results versus prior year in the months to come, I don't believe we'll see the multiple month malaise that we've seen starting in the latter part of 2005. Now that we (and consumers) have more information about the introduction of the PS3 and the Wii, the next-gen transition is in full swing. The PS2 price reduction should continue to bring the more price conscious consumers into gaming, which will benefit more mass oriented content as well as budget-priced back catalog content (and there is a lot of good, value priced content out there thanks to the 'hits' programs)."
by James Brightman