Interactive entertainment has reached a turning point. With games sales at retail in November down by 1 percent year-over-year according to NPD, the stage is set for digital games to claim the most important month of the year. Historically, December is the highest earning month for publishers in the United States, with over 40 percent of annual game software sales occurring during the last two months of the year. But while the numbers at retail disappoint, consumers are increasingly migrating toward digital distribution.
Shown: RETAIL, here defined as “total monthly software sales (PC + console) at retail,” according to NPD and DIGITAL, here defined as “combined total sales among digital game platforms (social, mobile, free-to-play MMO, subscription-based MMO, downloadable PC and digital console)” for the United States for the period January 2011 to November 2014. Digital sales based on transaction-level data collected by SuperData Research among 37 million paying online gamers. For more information on our methodology, please go here.
Photo Finish Suggests Digital Domination
Steadily averaging around a billion in monthly sales in the US, the digital games category is comprised of mobile, social, free-to-play, subscription, PC DLC and digital console sales. Retail sales, on the other hand, are highly seasonal and depend for a large part on the regular release of new hardware. But despite being in the early stage of a new console cycle, so far physical sales have been disappointing, reaching $1.071 billion in November due to a lack of new releases for the next console generation and the aggressive bundling at retail. As retailers tally the numbers for December, the financial industry has been releasing a salvo of early warnings, signaling the imminent release of disappointing figures.
Especially big blockbuster titles are increasingly purchased via digital download on consoles. Based on transaction data collected from over 37 million digital gamers, we were able to calculate that Take-Two Interactive’s hit title Grand Theft Auto V sold around 446,000 digital units in November, thereby exceeding analyst expectations. Since its September release, GTA V has sold around 2.7 million copies in total, or 7 percent of total unit sales, via download. By comparison Activision’s Destiny, which was released exactly a year later, sold 17 percent of total units via digital channels. Arguably the shooter game genre may appeal to an audience that is more likely to purchase via digital download, but it is difficult to dismiss the notion that the purchase preferences of console gamers are changing.
Suffering perhaps the most in this digital transition is specialty retailer GameStop, which will be reporting its 2014 holiday sales on January 13, but has announced it will not host a conference call. Despite unilaterally lowering the price of Activision’s most recent edition of its Call of Duty franchise to $39.99, it is unclear how effective this has been in offsetting the digital migration. More generally, the retailer has recently expanded its offering by acquiring several smaller tech and mobile retail stores to reduce its dependency on game sales.
Overall, games retailers have left the door open for digital distribution and are about to suffer the consequences. Basing our estimates on well over eight years of monthly sales at retail as provided by NPD, it appears that digital game sales are overtaking retail sales during the most important month of the year, during a critical time in the new console cycle. We’ll see what that means for the rest of the year, but digital is off to a strong start.
Go here to learn more about our research on the growing digital games market.
