Video Game Sales Are Down: Are Apps to Blame?

NPD, a research firm that tracks video game sales, reported that March hardware sales rose, but software sales plunged again. The industry cannot entirely articulate the reasons for the drop, which makes countering it all the more difficult.

Total video game sales in the U.S. fell 4% for the month to $1.53 billion. Sales of software -- i.e., the games themselves -- fell 16% to $735 million. Hardware sales moved higher by 12% to $495 million, thanks to impressive sales of Microsoft's (MSFT) Kinect and the new Nintendo 3DS, but the boost they give to the numbers probably masks a downward trend.

NPD points out that a large fraction of software sales in the video game industry have shifted into apps for smartphones and tablet computers, and those app sales are not included in the firm's numbers. The group claims that 23% of software sales in 2010 came from app sales for platforms like the iPhone.

But is it that simple? Perhaps not for major video game companies like Electronic Arts (ERTS). Many apps, like Angry Birds, sell extraordinarily well on Apple's (AAPL) iPhones. But are Angry Birds sales undermining sales of EA's sports games or Portal 2 for traditional consoles. That depends on how much people are willing to spend overall on video game software. If the figure is fairly low among a large number of gamers, the few dollars they spend per app game will cut into the sales of games played on consoles. If that's true, eventually, sales of hot consoles like Kinect will be badly hurt as the number of apps available for portable devices grows further. But, as the economy improves, so might discretionary spending on overall game software. In that case, the proliferation of games and platforms may simply pull more money from consumers' pockets.

For now, video game companies like Microsoft and EA aren't saying how much the rise of app games may be hurting them. Indeed, the industry is in such a state of flux that they may not know.

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8 Comments

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bhawkes328

ITS BUSH'S FAULT

April 29 2011 at 3:58 PM Report abuse rate up rate down Reply
vjoh40

video games are to expensive $60 when you can wait a couple of weeks and get them on amazon for half the price, or lesser. There are only a handful of games that are worth the $60 price tag. Re-think the prices

April 20 2011 at 8:56 PM Report abuse rate up rate down Reply
RichCocovich

I remember my video game was called a baseball bat, glove ad ball. I miss those days.

Rich Cocovich
Global Star Capital
www.globalstarcapital.com

April 19 2011 at 10:44 PM Report abuse rate up rate down Reply
andrewjshick

The main issue is poor-quality or repeated-plot games. How many f***in' CoD games are they trying to sell us? Originality started dying out 10-12 years ago. Over the past 5 years, there's been hardly anything worth buying, regardless of the price. $60 isn't too bad. There were games costing $50 20 years ago (late NES games), and several costing $60-80 throughout the entire time between when the SNES and 64 came out. But those were better games and worth the money.

April 18 2011 at 2:03 PM Report abuse rate up rate down Reply
thomasva6

video games are great because they make kids fat.

April 15 2011 at 2:52 PM Report abuse rate up rate down Reply
smokinaczes

It's not apps that are killing game sales. Besides poor quality games the number ONE reason is the $60 price tag. Who can afford to drop $60 on a video game when you can get apps for under $10. The big boys need to rethink their greedy pricing on video games and maybe they would sell more.

April 15 2011 at 12:28 PM Report abuse rate up rate down Reply
2 replies to smokinaczes's comment
RichCocovich

Very great point.

Rich Cocovich

April 19 2011 at 10:45 PM Report abuse rate up rate down Reply
Megan

Someone on another board said the same thing about the entertainment industry. They need to rethink sales. You'll sell a lot more and make more profit if you make yourself more affordable. Especially when there are competitors out there who are more affordable.

April 20 2011 at 8:16 PM Report abuse rate up rate down Reply
ZeitgeistXiii

How about the last quarter was nothing but crappy games released? Portal 2 is not even out yet so how it figures unless they are counting pre-sales now?

April 15 2011 at 11:10 AM Report abuse rate up rate down Reply
masaki iida

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April 15 2011 at 10:18 AM Report abuse rate up rate down Reply