Besieged by increased competition for entertainment dollars and a sour economy, the video game industry saw sales drop 8% last year despite a deluge of highly anticipated titles that launched during the crucial holiday season.
Shoppers spent just over $17 billion on video games and consoles in 2011, down from $18.6 billion in 2010, according to a report released Thursday by NPD Group Inc., a market research firm.
Roughly $8.8 billion of the total spending last year -- about 52% -- went to buying games, down from $9.4 billion in 2010. The balance, $8.2 billion, was for console hardware and peripheral devices, such as extra game controllers. That figure fell from $9.2 billion in 2010.
December, typically the industry’s best shot at ringing up big sales, clocked even steeper declines. Combined sales of consoles and games fell 21% to $4 billion last month, compared with $5.1 billion a year earlier.
“Lots of people rushed into stores on Black Friday to buy games, but they disappeared in the first three weeks of December,” said Michael Pachter, an analyst with Wedbush Securities. “The stores were empty. They only came back during the week just before Christmas. Consoles in particular are way down. It’s weird, but people don’t seem to see them as gifts anymore.”
Sales of consoles such as the Wii, 3DS, PlayStation 3 and Xbox 360 tumbled 28% on a dollar basis in December, according to NPD. Sales also were down on a unit basis despite major price cuts on several consoles, Pachter said.
Consumers bought just 6.3 million consoles last month, down from 8.4 million a year earlier, Pachter noted. “That’s the lowest level since 2005,” he said.
Some of those dollars have migrated to online, social and mobile games, as well as games that are digitally downloaded, which were not included in the NPD report.
When spending for those games is included, industry revenue looks much more stable, down just 2% last year compared with 2010, said Anita Frazier, NPD’s game analyst.
"December was very rough," Frazier said. "Because of the great slate of content that came to market during the fourth quarter, I had expected December sales to represent a larger portion of total-year sales than what occurred. This year, December accounted for just 23% of annual sales, while the average for the past 10 years has been 28%."
The year was not uniformly bad for all publishers. Ubisoft Entertainment landed three of the top 10 games sold in 2011, including two versions of its Just Dance franchise. Electronic Arts Inc.’s Battlefield 3 and Madden NFL12 took two slots in the top 10 list. And Activision Blizzard Inc.’s Call of Duty military shooter franchise took the No. 1 and No. 6 spots.
“It was a tough year for the industry,” said Tony Key, Ubisoft’s senior vice president of marketing and sales. “But if you innovate and you bring something fun, you can still win.”
-- Alex Pham
Image: Characters in the Assassin's Creed: Revelations game. Credit: Ubisoft Entertainment