For several years, the NPD Group's monthly sales reports have painted a picture of a gaming industry on the decline. However, the scope of those monthly reports has been limited to US retail sales, and doesn't account for the rapid expansion of digitally distributed game sales. This hasn't gone unnoticed by the Entertainment Software Association, and the trade group is now openly pushing for more transparency in digital sales reporting.
Speaking to a handful of journalists at a pre-E3 dinner last week, ESA president Michael Gallagher brought up his "high-degree of dissatisfaction" with the revenue reporting for our industry, adding that the digital side of the industry was not being adequately reported, understood, or covered.
"I think we've seen the consequences of that over the last two years," Gallagher said. "On the retail side, the 'traditional' side of the business where you have a physical product that's sold, you've seen a flattening and a decline in those sales, as you would expect at the end of a console cycle, as you would expect when you have different technological opportunities for consumers to experience video games."
Gallagher said the result is that it creates "a misimpression" of the industry's health.
"The numbers are coming in that way, but yet you look at the energy in [the Los Angeles Convention Center], the investment that's being made, and the stories you hear separately from each one of these companies and you know it's not true," Gallagher said. "In fact, there's a very robust opportunity. It reaches more people faster, cheaper, and the margins are higher. But it's happening outside of what's covered and what becomes the storyline of the industry."
"There are other industries that do this well, and they enjoy the upside and the downside of having truthful numbers...I think the industry's better off if there's a standardized reporting mechanism"
Despite having acknowledged the problem, Gallagher said the ESA's options to address it were limited. For instance, the trade group must avoid actions that could be considered collusion by its members. And even if it could require its members to cooperate with a monthly data release, that would not encompass the countless non-member companies earning money through digital sales of games, whether they be on consoles, PCs, or mobile devices. There is concern then that such a one-sided release would put its own members at a competitive disadvantage.
"It's something we have got to get right," Gallagher said. "There are other industries that do this well, and they enjoy the upside and the downside of having truthful numbers...I think the industry's better off if there's a standardized reporting mechanism that is seen as whole, and complete, and truthful."
He added, "Because if we deliver the perfect product and the same headlines come out, why bother?"
Gallagher also fielded questions about the ongoing relevance of E3 in light of Nintendo's lack of a media briefing and Microsoft and Sony holding their own separate events to unveil new consoles in the months leading up to the show.
"When you look at those, they all pointed toward E3 when they did it, as well as the publishers," Gallagher said. "They said, 'Come to E3.' The steady refrain in all of the reporting was, 'See this at E3. You'll see it at E3.' So if you want to see the games that will make Xbox One come to life, where are you going to go see them?"
Gallagher said that Nintendo still had a huge presence at E3 with its booth at the show. As for the Xbox One and PlayStation 4 reveals, he noted they were held in coordination with the ESA.
"What's happened is E3's position is preserved, but the pyramid got bigger because the market's bigger," Gallagher said.