Game Industry Sees Disparity in Sales as It Transitions Online

By Wingfield, Nick | International New York Times, December 21, 2015 | Go to article overview

Game Industry Sees Disparity in Sales as It Transitions Online


Wingfield, Nick, International New York Times


Research shows that physical game sales declined in November, but game companies swear things are going great.

This holiday season could be remembered as a digital watershed for the games business, the moment when the old way of selling video games -- on discs in boxes -- finally gave way to downloads.

The industry has been heading in this direction for years. But the signs of a sharp turning point have piled up in the last month, as new data has painted conflicting pictures of the game industry.

On one hand, recent market research shows that physical game sales declined in November, and GameStop, a leading retailer, reported disappointing earnings that made its stock tumble.

On the other, game companies swear that things are going great. Big titles are setting new sales records, and Sony, the leading maker of game consoles, said the latest PlayStation has been selling at a faster clip than any previous generation of the hardware.

Why the disparity?

A number of factors are at play, but none as significant as the industry's march toward a future of games downloaded over the Internet rather than bought in stores, analysts said. All mobile games are delivered over the Internet, as are nearly all PC games. But the transition for console games -- the biggest segment of the business -- has been far slower. Large game files could take hours to download and quickly fill a console's hard drive.

Now, faster broadband speeds and the bigger hard drives in the latest generation of consoles are reducing those obstructions.

"It finally feels like the inevitable is becoming the inevitable," said Evan Wilson, an analyst who follows the game industry for Pacific Crest Securities. "It feels like this is the holiday season where it's finally having a big impact."

Electronic Arts, the big games publisher behind Madden and Need for Speed, says about 20 percent of its new console games are now downloaded, compared with around 10 to 15 percent last year. For other games, the number may be 25 percent or more.

As a result, it is becoming harder to judge the health of the industry based on sales of physical game discs. NPD Group, a research firm that tracks retail sales in the United States, showed a 7 percent decline in November game sales from the same month a year ago.

"Shockingly Bad NPD Data Shows Big Physical Challenges" was how Mr. Wilson of Pacific Crest described the figures in the title of a research report.

A couple of weeks earlier, there was similarly grim news from GameStop, the big specialty retailer, which blamed a disappointing earnings report for the period ending Oct. 31 on weak new game software and hardware sales.

Executives at the retailer caused a further stir when they said one of the most anticipated games of the season, Star Wars: Battlefront, had missed their internal sales forecasts during the quarter. The stock of Electronic Arts, the game's publisher, fell 5 percent the day of the remarks.

The numbers were particularly striking because if game sales are ever going to grow, it should be now. The biggest games of the year have just landed on store shelves -- including Fallout 4, Call of Duty: Black Ops 3, and Star Wars: Battlefront -- and demand for them is running high among holiday gift buyers.

What is more, the industry is in the sweet spot of the hardware cycle, when the latest consoles from Sony and Microsoft are in plentiful supply, prices have come down on them and game publishers are cranking out titles that better exploit their capabilities. …

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