USA territory report

The last six months have been tough for the US games market.

The amount of money generated by video games in the US for the first six months of the year was $6.66bn, a drop of 9.1 per cent compared to the amount spent during the same period in 2010 ($7.33bn).

The biggest contributor to the slowdown has been the sharp decrease in software and hardware sales. Video game consoles accounted for $2.11bn of the market this year, a reduction of 16.3 per cent compared to the $2.52bn generated during the first six months of 2009.

Software dipped 7.6 per cent year-on-year, from $3.80bn to $3.51bn.

However, despite the decline the US market hasn’t fallen as steeply as it has in the UK (the games market fell 16 per cent in the UK during the same period). And NPD feels that the major releases at the end of the year could help the US market generate over $21bn before the year is up.

NPD industry analyst Anita Frazier says: Unfortunately, the industry realised a decline versus the same time period last year, driven by decreases in sales of portable hardware and console and portable software.

Looking at historical seasonality for the industry, total year US revenues could come in anywhere between $18bn and $21bn.

Given the strong slate of content still to come, and the release of the Move and Kinect controllers – which I believe will spark additional interest in gaming – I think we could see the total year new physical retail sales come in at around $20bn.

NPD will also be reporting consumer sales of digitally distributed, rental and used games content to provide insight into those non-POS sources of game sales.”
Despite the decline in hardware and software sales, it hasn’t been all bad news for the US games market.

Accessory sales have in fact risen, up 2.9 per cent from $1.01bn to $1.04bn. Sony also had a strong sales period, with 11 consecutive months of year-over-year increases in terms of PlayStation 3 sales.

The figures for June in the US were also encouraging.
Total sales of games, consoles and accessories came in at $1.10bn, down only six per cent compared to the $1.17bn generated in June 2009.

The biggest fall in sales came from software, which dipped 15 per cent from $627 million last year to $531.3 million in June 2010.

A lack of new releases were to blame for the fall, with Take-Two’s Red Dead Redemption the biggest selling game for the second month in a row – shifting almost a million copies in June alone. Because of this, Red Dead Redemption is the biggest selling title of the year in the US (in the UK, Ubisoft’s Just Dance took the crown as the largest selling game of the first six months).

Frazier says the relatively disappointing performance of EA’s Tiger Woods 11 meant June sales were lower than expected: Software was down, but the Top 10 SKUs for the month sold comparably to what the Top 10 did last June – game sales are more concentrated this year on the top-selling titles.

The new Tiger Woods sold only 32 per cent of what last year’s release sold in its introductory month at retail. That said, last year’s game saw a huge sales increase over previous versions, but still, Tiger Woods PGA Tour 11 did not break into the Top 10 games for the month.”

In terms of consoles, hardware sales actually saw a nice rise for June, with sales up five per cent to $401.7 million. Nintendo DS was the biggest seller, with over half a million consoles sold. Microsoft’s Xbox 360 is close behind it with 451,700 units shifted, and Wii sales are narrowly behind that with 422,500 consoles purchased.

Despite being in fourth place, PS3 continues to catch up with 304,800 units sold.

Frazier continues: Hardware sales saw a notable uptick from May on an average sales per week basis, and all three current gen console systems saw unit sales increases over June last year; in particular the Xbox 360 and the PlayStation 3.

In fact, Microsoft’s Xbox 360 experienced its second largest non-holiday month after September 2007 when Halo 3 launched.”

Accessories sales also increased last month, up six per cent compared to June 2009. NPD says the biggest selling accessories for June were subscription and points cards – overtaking game controllers. Frazier says this is another measure of sales of game content that occur outside of the traditional physical retail channels”.

Indeed, all the above figures only take into account money generated through physical retail and doesn’t factor in the growing digital markets. And pre-owned – an ever-increasing part of the business for retailer’s such as GameStop – is not included in these numbers either.

US games veteran and COO of Deep Silver US, Geoff Mulligans, says social gaming also needs to be taken into account when evaluating the market: Without a doubt one of the biggest changes in the US is the incredible growth of social gaming. Social networking has not only opened the games market to a vast new and ever wider demographic base, but has solidified the importance of being screen agnostic. This, coupled with the launch of Move and Kinect, bodes well for the 2010 Q4 sales period.”

Although the US games market is down – at retail at least – the decline hasn’t been as steep as in other territories. And with strong sales of digital points cards, there appears to be plenty of opportunities for publishers in both the retail and digital channels.

In terms of retail, the big players to engage with are GameStop, Walmart, Best Buy and Target, who account for more than 85 per cent of the retail games market. Meanwhile, key distributors include Jack of All Games, Solutions2Go and Kokem.

There’s also a range of other ways to enter the US that doesn’t involve hiring a specialised sales team and opening a US office. There are several companies that offer publishing services to European consumers, including the likes of Gator and Deep Silver.

Since 2008, Deep Silver has had a fully integrated publishing arm in the US. We have our North American headquarters in the San Francisco Bay Area and our marketing and sales partners in Dallas, Texas,” concludes Mulligans

As one of the very few European-based publishers operating on the ground in North America, Deep Silver’s integrated operations, from product submissions to sales, marketing and distribution, opens an affordable opportunity to other European publishers not willing to take the plunge directly into the market.”