ANALYSIS: H1 2010 market

In January 2010, UK games execs told MCV they were hopeful of a positive start to the New Year.

And it was easy to see why: publishers had pushed their big Q4 2009 titles into 2010, and we had a mammoth release slate of blockbuster titles – including BioShock 2, Final Fantasy XIII, Red Dead Redemption, Splinter Cell, and more.

But the numbers speak for themselves. Combined sales of hardware, accessories and software reached 963 million for the first 26 weeks of the year, down 16 per cent compared to the 1.143 billion seen during the same period in 2009.

In terms of hardware, the market has dropped 32 per cent from 378m in 2009 to 256m this year (see Fig.2). Handheld sales suffered the biggest drop, down 40 per cent from 119m to 72m, while consoles sales fell 29 per cent from 259m to 184m (see Fig.3).

Despite the strong line-up, software sales fell ten per cent from 592m for H1 2009 to 533m this year. Accessories also dipped ten per cent from 194 million to 174 million (see Fig.2)

So what has caused the fall? And is this even a true reflection of the market? Especially as Chart-Track’s figures do not factor in second-hand or digital downloads.

In terms of traditional publishing, the maturing formats have shown rapid decline and portable markets have been impacted by mobile phones as well as a high level of piracy,” says Codemasters CEO Rod Cousens.

Digital downloads should be factored in. It needs to be looked at in that context and against a backdrop of economic meltdown. The industry is in better shape than most.

What cannot be underestimated is the impact of pre-owned software, which needs to provide a participatory benefit to creators if innovation is to prevail.”

Sony Computer Entertainment’s UK sales director Mark Howsen highlights the handheld and casual arenas as the major areas of decline. The handheld market is clearly at a point of fundamental shift driven by changes in consumer behaviour and I believe we are also seeing the more mass market casual consumer disengage with what is currently on offer,” he told MCV.

The casual and family games market is the one that appears to have dropped the furthest. In fact, sales of core games have risen year-on-year for H1. Xbox 360 software sales have increased by 18 per cent – from 143 million to 169 million, while PS3 game sales have increased by 27 per cent, from 111 million to 141 million. The steepest declines were felt on PSP, PC, PS2, Wii and DS (see Fig.1)

So are boxed casual games losing their appeal?
Casual consumers are always going to be the most transient in terms of flipping between different forms of entertainment,” says Howsen.

We’ve found from our SingStar experience that casual gaming communities are the most challenging to maintain and keep engaged.”

Cousens adds: Like everything else with great momentum, challenges arise. Software saturation, escalation in development and marketing costs, increased competition and so on. Social games have ridden roughshod over casual via Facebook.”

Indeed, Chart-Track’s data doesn’t look at sales from other casual areas, such as digital downloads and browser games. So it’s possible that the casual gaming audience is moving into the free-to-play online arena, and away from the boxed retail market.

Consumers are spreading cash over a much wider field,” said Chart-Track director Dorian Bloch.

We can’t see the wider entertainment market. We don’t know what iPhone, iPad, Facebook, MMOs, browser games, Steam, Xbox Live, WiiWare and PSN have done. Have these had an impact on sales? Well that’s the question, and we can’t know for sure.”

Parker Consulting founder Nick Parker adds: The casual element of the boxed product market that we loved five years ago has moved out of that area altogether.

These consumers are now looking at what they can get for free online. The key sellers this year have all been core games. It is a bit frightening for the long-term packaged goods market trying to get a broader profile.”

The market is down so far this year, but the trade has plans for a second half fight back.

There are (at least) two new pieces of hardware due before the end of year – Move and Kinect – which could well pull the casual audience back in. And both are backed by extensive launch line-ups and marketing campaigns.

Although it’s not expected, 3DS may also be out before the year is up, while the software slate for Q4 is much stronger than last year. Halo: Reach, Fable III, GT5, Final Fantasy XIV, Need For Speed, Assassin’s Creed: Brotherhood, The Force Unleashed II, FIFA 2010, GoldenEye, Just Dance 2 and that’s just to name a few.

There are lots of exciting developments around hardware products coming out that are likely to have a significant impact on the Christmas gifting period,” said HMV’s head of games Tim Ellis.

Not least among these is the new Xbox 360 S, and then with further platform enhancements in the shape of Move, Kinect and even 3DS.

There’s also strong software coming with much-anticipated sequels.

Early 2011 is likely to carry on the Q4 momentum with some great releases that include Dead Space 2 in January and Killzone 3 on 3D in March.”

Howsen concludes: The pipeline of product is very strong and I think we may see consumers spend more on the products they want as they try to beat the VAT increase. With Move we’ll also be making sure that millions of consumers are aware that this is coming. So all the ingredients are there for a successful Christmas trading period.”