Video Game Industry Slumps for Second Straight Year

Revenue generated from purchases in 2010 totaled $18.6 billion, down 6% from the previous year.

Marking a rarity for the industry, sales of new video games, hardware and accessories in the U.S. were down for the second straight year, according to data released Thursday from NPD.

The research firm said 2010 revenue generated from purchases of new items was at $18.6 billion, off 6% from $19.7 billion the year earlier.

The downward trend, while not coming as a surprise to analysts, is nevertheless disconcerting to an industry used to steady and sometimes rapid increases.

In 2007, for example, revenue surged 44% to $18 billion as Wii games flew off store shelves and teenagers suddenly had to have Guitar Hero, an expensive proposition considering it required a purchase of hardware and software.

A year later, in 2008, revenue again grew, this time by 19% to a record $21.4 billion, but it has been downhill ever since.

The 2010 news was bad in the important Christmas gift-giving month of December as well, with revenue dropping 9% to $5.1 billion, NPD also reported.

Among the few bright spots in NPD's report was a 13% rise in revenue generated by accessories in 2010 to $2.9 billion, which NPD attributed to price increases. Also seeing growth were PC games, digital downloads, mobile gaming apps, social network games and used games.

In 2010, only the Xbox 360 platform enjoyed a year-over-year increase in sales, NPD said.

The Top 5 games of the year each came from a different publisher, with Call of Duty: Black Ops from Activision Blizzard tops. The next four were Madden NFL 11 (Electronic Arts), Halo Reach (Microsoft), New Super Mario Bros. Wii (Nintendo) and Red Dead Redemption (Take-Two Interactive Software).

NPD also calculated content-only revenue, including new and used games, subscriptions and rentals in the U.S. With final data expected in March, NPD says this category was either flat year-over-year or down 1% to between $15.4 billion-$15.6 billion.

As for physical sales of new games for consoles, portables and PCs -- the number Wall Street usually cares most about -- revenue was off 5% year-over-year to $10.1 billion. 

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