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Retail

Report blames used games for core sales decline

Fri 25 Jun 2010 10:29am GMT / 6:29am EDT / 3:29am PDT
Retail

Second month sales for new games down by over 60 percent since 2001

A new report by analyst group Cowen and Company has praised the introduction of the "online pass" popularised by Electronic Arts, suggesting that it could result in higher industry margins over the next 18-24 months.

The report specifically blames second-hands sales for a 20 per cent drop in Xbox 360/PlayStation 3 sales in 2009, compared to PlayStation 2/Xbox sales in 2003.

Although the Wii and portable formats are recognised as driving most of the industry growth in the current generation the report points out that "most of the publishers' margin-driving hit games" are released for the 360 and PS3.

The combined US PS2/Xbox userbase in 2003 was put at roughly 30 million units, resulting in around 106.9 million units of software sold - according to NPD data. The combined PS3/360 userbase in 2009 is estimated to be almost identical to 2003's equivalent but software sales have been only 85.5 million

Analysts Doug Creutz and Adam Nolly also contend that average second month sales of new PlayStation/Xbox software has fallen by 62 per cent since 2001. In a study of 20 new titles Final Fantasy XIII was found to have the worst second month drop-off, with a fall in sales of 93 per cent, with Operation Flashpoint: Dragon Rising and Halo Wars also above 90 per cent.

The report highlights "stubbornly high hardware price points" as one reason for the drop in both overall and second month sales, but identifies second-hand sales as the core problem.

In the US retailer GameStop is identified as benefiting most from the increase in the used games market. The company has seen used game sales rise from $403 million in 2003 to $2.39 billion in 2009 - estimated to be 85 per cent of the total second-hand market in the US.

Rather than being adversely affected by competition from casual games and new platforms such as the iPhone, the report suggests that demand for traditional games has risen "robust" over the last decade, but with used game sales accounting for a disproportionate percentage of this increase.

The report suggests that online passes are an effective way to increase both new game sales and digital content sales. The analysts predict that the online pass will be grudgingly accepted by both GameStop and consumers, with the former expected to accept that it is preferable to a faster move towards digital distribution.

Although analysts in general have been in agreement that online passes are a useful way to combat second-hand sales, in a recent VentureBeat interview Nintendo president and CEO Satoru Iwata blamed the quality and originality of new games for recent decreases in sales.

"Looking at the product line-ups this year, these titles might have been big hits three years ago. But now this year, they are not selling that much," he said. "In other words, people get tired of games more quickly than they did before."

14 Comments

Terence Gage
Freelance writer

1,288 120 0.1
Guys, third-from-bottom paragraph; you say GameSpot instead of GameStop!

---

I guess I'm not that surprised at these trends - they're dictated by the retailers more than anything, and I don't think sales drop-offs after a game's launch are particularly unusual, particularly when combined with some retailers making said game a loss leader on launch (as was the case with OpFlash 2). However, that rise in pre-owned sales for GameStop is huge - maybe I can see where the thinking behind the whole Online Pass thing is coming into play after all.

It will be an interesting few years as internet connectivity becomes more and more focal for hardware, software and publishers. I think companies like GameStop and Game should move now and make efforts to work with publishers, rather than the two sides fighting one another for a few million dollars profit.

Edited 1 times. Last edit by Terence Gage on 25th June 2010 12:31pm

Posted:4 years ago

#1

David Spender
Lead Programmer

128 52 0.4
Personally, except for maybe one or two blockbuster games a year, I will not pay the 'new' $60 price point for a game. I either wait for a few months (prices now drop faster than ever) or buy it used. I think companies planned on the $60 price point as the savior for their dropping revenues but if anything, it is probably the primary factor that has driven gamers to used games. If a game comes out at $40 or $30 (Endless Ocean is a good example) I instantly snap it up.

Posted:4 years ago

#2
In UK, its simple.

The RRP is way too high. I tend to only invest in 1-2 good games throughout the year.

If a straw poll were conducted, I'd would say good value for money (in this age of austerity) for games on release would be:

12.99 - Digital Download
19.99 - Normal (no frills)
25-29.99 - Additional content/Collectors Ed

With such pricing, there should be a increase in uptake for developers/publisher in volume, adn thus a decent profit margin.

Posted:4 years ago

#3

Andrew Crystall
Designer

13 0 0.0
...NPD data is retail only and does not include online sales, right? (Or has that changed yet)

Posted:4 years ago

#4

James Verity

132 25 0.2
people are not prepared to pay 39.99 - 49.99 for a game that lasts 7-10hrs to complete a single player game... you should know that by now...

Edited 1 times. Last edit by James Verity on 25th June 2010 4:51pm

Posted:4 years ago

#5

Jason Sartor
Copy editor/Videographer

104 33 0.3
I think a lot of factors go into the decline of packaged software sales between 2003 and now. It's can't be all blame used game sales, as GameStop was selling used games then too.
The added $10 price point of entry for every new game represents a 20% increase in the cost of game purchases.
Secondly, non-packaged games are not included in a lot of sales figures and digital games sales are significant. Steam, PSN and XBox Live downloads cost real money and provide real games. Also, PC digital games are popular. WoW and Farmville do big business as do Nexus games such as Maple Story, etc. Throw in games like Torchlight which become popular enough in the digital realm to earn package deals and it is evident large sums of money are not being added into the equation.
Thirdly, while the PS3/Xbox 360 may be roughly close to the same installed base as in 2003, the economy then as opposed to now surely caused people to scale back on all purchasing.
Lastly, I am not sure Iwata is right that people become bored with games more easily. I find the opposite to be true. Games today are far richer experiences, the problem I find is that we have far more high quality games on the market at any one time now that I find myself stopping one great game and playing another and being drawn into it and not going back to the other for a while. I took out 3D Dot Game heroes and put in ModNation Racers and have not played Heroes since, though I still think it is an incredible game and I will get back to it - eventually, and hopefully before the next great game comes out and takes my attention then too.

Edited 1 times. Last edit by Jason Sartor on 25th June 2010 8:58pm

Posted:4 years ago

#6

Doug Abramson
Programmer (C/C++/Embedded Linux)

16 0 0.0
do you really need madden 11 over 10? ok maybe madden 14 would be worth the upgrade from madden 10 but you don't need to buy a new version every year. it isn't worth the $60 for most gamers' budget, besides the very small hardcore group. i got tired of upgrading so i only buy new versions (or rent from online site or TRADE from friends) every few years instead of every year.

Posted:4 years ago

#7

Sam Maxted
Journalist / Community / Support

155 65 0.4
I simply can't afford to pay full price for games at the moment. For example, I really want to (and fully intend to) buy Red Dead Redemption, but I can't justify it at or around 40. I generally try and wait until games come down to 20 before picking them up, other than for a few select titles each year.

Posted:4 years ago

#8

Damon Kwong

3 0 0.0
very true, we are getting tired of games more quickly, its really true, i remember playing some old games and i used to get so into them that i didn't get bored of the game after several months, now though, i get bored of new games a lot quicker :/

Posted:4 years ago

#9
Not to mention, purchasing from retailers is less now. Far better bargains, with pre-orders and postage free are decent incentives these days. Thus, retailers might be forced to downsize or go the way of Amazon.

Posted:4 years ago

#10

Chris McKeague
Quality Consultant

1 0 0.0
In the UK it's just as previous posters have mentioned; 40+ for a new game is just too expensive. Some games can get away with this I suppose, but there are so many games out there now with poor production values, inadequate testing etc that you will often just end up feeling ripped off. If you have such an experience, you're more likely to wait for the price to drop or buy second hand next time around.

I'm glad EA have tried to be a little bit progressive. It's all strangely similar to complaints by executives in the music industry over the recent past - these people need to stop forcing their business models onto the consumer and pay attention to the demand that actually exists in the market place.

Posted:4 years ago

#11

Jim Webb
Executive Editor/Community Director

2,232 2,161 1.0
The simple fact is we are jaded. Production costs have increased many times over the past 2-3 generations while per unit sales have not increased at the same rate. Further still, prices have fallen per game over those generations.

During the 16 bit generation, games cost very little to develop. I've heard unconfirmed accounts of games like Mortal Kombat costing just $50,000 to make with a small handful of people. Yet the game would cost at much as $65 at retail. I personally paid $75 for Street Fighter II.

With the advent of optical mediums being used for games, per unit costs could drop to an MSRP of $50. This generation many titles jumped to $60. But the production costs have jumped far higher in relation.

So we got used to prices getting lower while production costs increased drastically. Exactly how long could we expect costs to increase on the production side before the retail side moved with it?

However, used games as a means for savvy consumers to get new games cheaply increased greatly thanks to the sales policies of major retail chains.

So who's to blame? If you aren't pointing fingers at every party involved, then we know where our problems lay.

Edited 1 times. Last edit by Jim Webb on 28th June 2010 5:18am

Posted:4 years ago

#12

Shane Sweeney
Academic

349 249 0.7
I dont know about other countries, but in Australia prices have just gone up and up in Australia. Games used to be $50AU in the Atari era, $80AU in the NES era, by the PlayStation 2 era they jumped to $100.

All titles are now $110 with the majority of big titles now launching at $120.

Posted:4 years ago

#13

Kingman Cheng
Illustrator and Animator

945 161 0.2
As many above have said the retail price of a new game is is bloody crazy, 3-4 new titles can buy you a whole console bundle. I always go online, or wait for offers personally, and there's Sony trying to push 3D TV's!!

Posted:4 years ago

#14

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