Gaming Industy Numbers Keep Sliding - So Why Isn't Everyone Panicking?

The latest numbers on the video game industry aren't encouraging. But don't worry, you can probably ignore them.

In a preview of its upcoming report, research firm NPD announced its November gaming numbers. The results? Despite strong sales for the top five titles (led by Call of Duty), the industry continues to slide. While November had "the smallest year-over-year decrease we have seen for dollar and unit sales so far this year," it was still a drop, and the last year has seen an overall 11% ebb from the previous 12 months.

According to some in the blogosphere, the sky is falling and gaming is in trouble.

They're wrong. You can now return to fighting redcoats in Assassins Creed. Here's why.

Aging Consoles

If you have any interest in playing an XBox 360, a PS3 or a Wii, you probably already own one. The Wii U is new, but it was released half-way through November, so we won't really know what sales are like until the December numbers come through. With new hardware on the horizon, sales are supposed to slump. It happened with the iPhone 4, and it's happening here. Aside from must-have releases like Madden NFL 13 and Halo 4, gamers who are waiting for the next-gen system slow their software purchases, too.

NPD realizes this, stating that it's "important to compare this month's results to November 2005, which was the last time the industry began to transition between console generations with the launch of a new platform." When you compare those years, the industry is up 97%. NPD also acknowledged that there's momentum building into the holidays. So in meaningful numbers, business looks doesn't look that bad.

What's Not Being Counted

The NPD numbers don't include digital downloads, subscriptions, or any in-game purchases. So online marketplaces like Steam, F2P games like League of Legends, and subscription-based products like World of Warcraft - also an aging platform with slowing sales, but still a strong generator of ongoing revenue - are off the table. And there there are the growing number of ad-supported casual games.  

According to Wanda Meloni, Founder and Senior Analyst at M2 Research, "Retail sales alone do not provide an accurate picture of the overall market. Steam's revenues are estimated to be well over $2 billion alone. There are also publisher-specific sites such as Origin from Electronic Arts that provide consumers access to all of EA's product line, and all the mobile, social and online games that don't get counted in a pure retail play cumulatively make up well over $5-$10 billion annually."

It's pretty clear that the market has outgrown the traditional "units shipped" metric. A more accurate estimate of industry health might be gaming company revenue, though privately held companies, indie developers, and a blurring definition of the term "game" make that difficult too.

Maybe, as Ben Kuchera suggests, we should just stop trying to quantify it at all. As long as the games keep coming, someone's making money.

Especially the titles on NPD's best-seller list for November:

  1. Call of Duty: Black Ops II
  2. Halo 4
  3. Assassin's Creed III
  4. Just Dance 4
  5. Madden NFL 13
  6. Skylanders Giants
  7. Need for Speed: Most Wanted 2012
  8. NBA 2K13
  9. WWE '13
  10. FIFA Soccer 13
 
 
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