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Comment: Look beyond consoles for the real industry growth

Although they only measure sales in one country, the figures released on a monthly basis by NPD for the US videogames retail market are awaited anxiously by the industry all around the world. The US, after all, remains the single largest national market for videogames, and while many of the figures NPD provides are meaningless in Europe or the Far East - where nobody really cares which American Football or Baseball game sells best - the report as a whole is seen as the single best indicator of the global market's state of health.

Taking the pulse of the industry in March seems to be surprised quite a few people, with NPD's report indicating a mere eight per cent drop in software sales over the same month last year. Now, a drop is still a drop, of course - and once you factor in falling hardware sales, it's more like 16 per cent overall - but this needs to be seen in light of the predictions of even the industry's most reliable analyst voices, who had expected to see a shortfall of up to 20 per cent in the figures.

The fact is that even in the face of tough year on year comparisons - last March did see the release of Gran Turismo 4 and the PSP in North America, after all - videogames software has really done quite well in what was expected to be a very tough month. Kingdom Hearts II, Elder Scrolls IV: Oblivion and Ghost Recon: Advanced Warfighter held up and sold strongly; and by and large, the hugely pessimistic expectations for 2006 aren't quite coming to pass just yet.

Actually, even that is an unfair assessment of the situation - because looked at in a more comprehensive way, it's probably entirely correct to say that 2006 will be yet another year of impressive growth for the interactive entertainment industry. Revenues, player numbers and probably even profits will grow in 2006, despite the downbeat projections of many commentators and industry insiders. It's just that it might not all be easy to see from the figures reported by NPD, Chart-Track, GfK or Media Create.

The reason for this is that not all growth is necessarily going to be growth in retail sales of console software, and not all profits are necessarily going to be made by NASDAQ-listed publishers. On the periphery of the industry, a whole host of sectors are coming into their own and starting to turn in real money, none of which is being tracked or measured in the traditional indicators of growth.

Take for example March, and that 8 per cent, better-than-expected, decline. Would that figure still be a decline if revenues from the mobile gaming industry were counted into the figure? How many percentage points would it change if you factored in the growth of PC casual games? How about the revenues pouring in from subscriptions to games like World of Warcraft, Final Fantasy XI and City of Heroes? Would it have made a difference to factor in the money paid by players of Oblivion to buy new content online for the game?

Even while larger publishers feel the pinch of next-generation development costs, smaller and more nimble companies are finding new ways to make money. In the past, any journalist working in the videogames sector would hear occasional success stories from small companies - two or three people working together, certainly no more than ten, and creating an underground hit product or service that kept them all earning comfortable salaries from revenues that no major publisher had ever even realised existed. Nowadays, those stories come in thick and fast - and it's increasingly obvious that if anything, it's the traditional strategy of spending three years building an epic game to put in a box and flog through a retail chain that's starting to look decidedly unusual.

The interactive entertainment market is far more than just console games, and when the growth of every aspect of that market is taken into account, it dwarfs the growth of the console market alone. Sadly, no metric exists to measure that growth - but if someone ever does think of one, we can't help but feel that the concept of transition periods will fall away just as rapidly as the tiresome comparisons to Hollywood's revenues will.

Author
Rob Fahey avatar

Rob Fahey

Contributing Editor

Rob Fahey is a former editor of GamesIndustry.biz who spent several years living in Japan and probably still has a mint condition Dreamcast Samba de Amigo set.