Published as part of our sister-site GamesIndustry.biz's widely-read weekly newsletter, the GamesIndustry.biz Editorial, is a weekly dissection of an issue weighing on the minds of the people at the top of the games business. It appears on Eurogamer after it goes out to GI.biz newsletter subscribers.
Readers with lengthy memories may recall a controversy which raged quite a few years ago - the better part of a decade ago, in fact - over the withdrawal of sales figures from publicly available chart data. At that time, it was British chart firm Chart-Track which was dropping the data from its public reports. It happened largely at the behest of GAME, a high street retail group so enormous that its sales made up a very significant chunk of the chart, and which felt that as such it was essentially giving away commercially sensitive data for free.
History is not repeating itself right now, even though it's tempting to imagine so. NPD's decision to redact crucial sales information from its regular reports may mirror the decision into which Chart-Track was forced all those years ago, but the basis for the decision - and the context in which it occurs - could not be more different.
The last time this data was pulled, it was a direct result of strong market growth - which had spurred hyper-aggressive, competitive behaviour on the part of the leading firms in the games retail business. This time, the reverse is true. NPD fully admits that it is redacting its data because it has shown an ongoing decline - thus causing negative coverage and arguably unwarranted headaches for the industry as a whole.
This shouldn't be surprising anyone, although I rather suspect that plenty of people are surprised. Despite clear warnings to the contrary, there are many in the games business who still thought until pretty recently (and may still harbour hopes) that the fall-off in retail sales was a symptom of the global recession, and that growth would return to its former glory as soon as the world's economy sorted itself out.
It should now be utterly apparent to everyone that this isn't the case. Certainly, the global economy is far from being back on its feet again - and in some countries, the United Kingdom being a case in point, it's likely that things will get much, much worse before they have any chance of getting better. On that front, one might still hold out hope that the growth of videogame retail sales has merely been stunted by recession and is not suffering from a more general malaise.
Every other indicator, however, suggests otherwise - a fact which NPD has tacitly acknowledged in its decision to cut back on the data it releases, on the basis that this data is no longer as representative of the games business as a whole as it could once claim to be.
Red herring arguments have been raised as an excuse - such as the claim that the decline is all down to problems with Nintendo's market. On the surface, this is true, since it's Nintendo console sales which are slowing while the Xbox and PS3 show moderate acceleration. A longer term perspective suggests that without Nintendo's enormous success in previous years, the industry would have been seen to sharply decline some years ago - we'd be talking about the games business as a whole climbing out of a shocking slump right now, rather than fretting over a relatively minor slow-down.
The reality of the situation is poor news for retail, yet fantastic news for the games business. Once the dust has settled and we can look back on this era with full clarity, I firmly believe that the games industry will have grown through this recession - just as it grew through previous economic downturns, buoyed by a strong underlying growth curve which can presently only be slowed, not halted or reversed, by macroeconomic conditions.
For that to be true, one simple condition must be met - the growth of revenue from digital transactions must be outpacing the loss of revenue from traditional sales. Hard figures on this are tough to come by, of course, as not every publisher gives a useful breakdown and not every digital upstart gives any details at all. Right now, however, most of the evidence suggests that the slow decline of retail sales is being comfortably replaced by explosive growth in digital.
Some of the retail decline is, of course, due to the recession. The rest is probably cannibalisation of the existing market by the new markets. The well-worn and still fairly solid argument being that, while players aren't necessarily tired of familiar boxed games (the continual breaking of opening weekend sales records puts paid to any argument of that nature), the reality is that someone satisfying their gaming urge with Angry Birds, World of Warcraft, DLC for an older game or Minecraft is someone who may still be interested in the next big boxed game, but who has less time to spend on that kind of gaming. Consequently, the player spends less money on it. Thus, the cash walks away from boxed games, and finds itself a home elsewhere in the business.
This is a trend which is only going to accelerate. Many pundits predict that the successors to the Xbox 360 and PlayStation 3 will be digital-only devices, lacking any physical media distribution options. I'm not sure I agree, as yet - I think that it's a fairly blunt reality that the kind of high-fidelity gaming experiences which Microsoft and Sony will want to wow consumers with simply won't fit through the lowest common denominator broadband connections sported by many homes, even in advanced nations. A further generation down the line, killing off physical media entirely may make sense, but in the next generation, any attempt to do so is likely to be commercial suicide.
That being said, it's fairly obvious which direction things are taking, even if we can still argue over the velocity with which said things are moving. It's not hard to envisage a future - a not too distant future - in which physical sales are a rump of the industry, remaining important in niche markets and among traditional consumers who aren't ready to move to digital (for which there are any number of great reasons, I might add, starting with DRM concerns and right of first sale issues), but no longer constituting anything close to a majority share of revenues.
Given this trend, what has happened with NPD's figures was inevitable. We have mature, well-developed ways of measuring retail sales, and nothing even beginning to approach a consensus or an understanding of how to measure digital revenues. As such, the industry is going to project an image of decline for a while, as the bit we know how to measure drops in importance, replaced and outpaced by revenues which everyone recognises to exist, but nobody can quite quantify.
Rather than complaining about what NPD has done - almost certainly in reaction to heavy pressure from publishers and retailers who have a nervous eye on their own share prices - what the industry as a whole needs to do now is to think about how we go about quantifying our success. Things are immeasurably more complex today than they were five years ago. No longer do cash registers ring every time the games industry earns revenue; no longer can point of sale systems give us an accurate picture of success or failure. Unless we can figure out how to bring together the cloud of numbers which now surrounds us into a meaningful set of statistics, the bleak reality is this - we'll never again have an annual growth figure for the global games business which means anything at all.
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