Trouble for the Video Game Industry; Sales are down…way down

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It is essential for the traditional toy industry to track what is happening to its cousins in the video game business.  After all, video game sales take dollars away from toy sales. 

That is why it is important to be aware that though retail sales have been soft for the toy industry as of late, the video game industry is really getting hit hard.  According to a CNet article, “Game Console Sales Plummeted in June:” “…total U.S. game industry sales were $743.1 million in May, falling to their lowest point since October 2006.”  As a percentage, “…hardware sales last month were down 21 percent.”  Video game software sales were off as well, estimated at -6%, but nowhere as bad as console sales.

Obviously the video game industry is far more volatile than the toy industry where increases and decreases tend to run at + or – 2%.  BMO toy industry analyst, Gerrick Johnson, is currently projecting a flat year for the toy industry, down from a projected 2% gain in 2010.  It will be interesting to see if the decline in video game sales will benefit the toy industry and whether Gerrick’s original projection of a 2% gain may be more likely after all.


3 thoughts

  1. Wwell,
    If we are talking about retail sales for videogames,they will naturaly decline because digital distribution is gaining more power every day.
    How about hardware retail sales.
    We are on a period of console shift. Many platform holders are changing their consoles for the next generation ( Wii U, XBox 720, PSP Vita ), so consumers are waitin for a while, maybe for the prices to go down or for the entering of the new generation.

  2. I’ve been in the video game industry for almost a decade and a half now and it’s been very interesting (and occasionally frightening) to watch.
    The video game market collapsed with the rest of the economy when the housing bubble popped. At the time, most attributed the perceived sales declines to the broader economic woes but the reality is that the recession was simply masking a much broader market shift. Fewer people were buying expensive consoles and huge-budget titles but digital games were actually reaching an important tipping point and becoming a socially acceptable activity for mainstream audiences. No longer the sole domain of teenage males, video games were now drawing in a much larger and more diverse audience.
    The casual games revolution, which started on the Nintendo Wii before spreading to industry outsiders Facebook and the iPhone, has become big business and has proven extremely disruptive to the established players in the industry. For a long time, the industry didn’t even know how to quantify or report on this market shift as they were so used to measuring volumes and revenue by counting boxes sold over the counter at retail.
    So my advice is not to fall into the same trap. Plummeting game console sales is not news and should not be mistaken for an accurate indicator of the health of direction of industry. More people are spending more hours of their life playing digital games than ever before and consumer spending on digital games has also been increasing (although not as dramatically, due to the lower price points).
    Likewise, when looking at the analog game industry, don’t be blinded by the declining sales being seen at Hasbro and Mattel. As in the video game industry, highly disruptive changes are afoot, the tipping point is approaching, and, as Brian pointed out in one of his previous posts, newcomers from outside of the traditional industry will be the most likely to see the opportunities and take advantage of them.
    Personally, I don’t believe that digital and analog games rise and fall in an inverse relationship like you suggest (although that may be true of the broader toy industry, which I’m not as familiar with). As digital gaming becomes more popular and socially accepted across a broader range of ages, genders, and cultures, I strongly believe that that is actually expanding the market by removing barriers and building up an appetite for all types of game experiences, digital and analog alike. Right now, I would argue that both industries are benefitting from a growing acceptance and appreciation of games and gameplay as a worthwhile form of entertainment.

  3. Richard – I wonder what the sales (in $) of apps have been during the same period. Are kids playing less video games, or are they playing as many (or more) but now accessing them online vs. going to TRU or GameStop and buying cartridge-based games? And we should also look at the sales of smartphones to the pre-teen and teen crowd tosee how that might be eating into console / hardware sales. I just can’t imagine kids are dropping video games and running back to their TinkerToys…

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