We are two days away from when The NPD Group will be releasing their U.S. Games Industry Sales Report for March 2016. This report covers unit sell through and dollar spend in the Console Video Games Hardware, Software & Accessories market across retailers in the US. The NPD Group directly tracks around 95% of the retail Video Game Market in the USA through a point of sale tracking system. Participating retailers in the USA include Walmart, who account for nearly 50% market share, Amazon, Target, Best Buy and over 900 others. For the remaining 5% of the market, The NPD Group use sophisticated proprietary algorithms based on proven research and decades of experience in order to account for that small part of the market that they do not directly track. The monthly reports help provide an overview of the Video Games Market in the US each month and help show how publishers and platform holders are performing. More than 70% of total spend on new games is via retail and so the NPD Physical games report remains a very useful report that shows how healthy the Video Games market is for console games at retail.
As part of a new Monthly post I will be attempting to accurately forecast and predict each months results. The below is an attempt to accurately forecast the results for March 2016 as well as show readers what they should be expecting.
Please note that the March 2016 NPD report counts sales from February 28th 2016 through to April 2nd 2016. I will be writing about what we can expect to see in regards to Hardware and Software sales. Please note that the below is only for the U.S. retail market and does not include digital sales.
- Predict the U.S. Retail Video Games market to exceed $1b in March 2016 compared to sales of $964m last year.
- Predict HW sales to be down 12% YoY to $275m. Decline in 7th gen & Portable spend. Lower ASP on 8th gen HW.
- Estimate SW sales to be up 18% YoY to $465m thanks to successful launch of ‘The Division’.
- 8th gen home console sales on track to reach Install base of over 40 million units by end of 2016.
- Hardware dollar spend on track to be down YOY in 2016, Software dollar spend expected to be flat to slightly up in 2016 vs 2015
The console hardware market generated a total of $311.1m during March 2015 according to The NPD Group. Over 650,000 8th gen home consoles (PS4/XB1/NWU) were sold through to end users during March 2015 with the PlayStation 4 selling the most out of these three. I expect total spend on console hardware sales to decline 11.6% YoY during March 2016, down to $275m. This will be due to higher sales of 8th gen home console hardware being offset by lower ASP’s as well as a sharp decline in both portable and 7th gen hardware sales.
The PlayStation 4 has had a record year so far with total hardware sales up 20% over last year as of the end of February. I predict this trend to continue through March 2016 as more consumers purchase a PlayStation 4 to experience new 8th gen software titles, such as ‘The Division, that release this month. The current $349 bundle is at a very attractive price and comes with a copy of Call of Duty: Black Ops III, the best selling and most popular 8th gen console game so far. This bundle has worked in Sony’s favour over the last three months and I expect that the $60 pack in game will continue to drive hardware sales among mainstream consumers looking to purchase a gaming system. I’m predicting that the PlayStation 4 will see a slight 16% YoY increase in hardware sales to 395K.
The RRP of the PlayStation 4 has dropped from $399 during March 2015 to $349 in March 2016. Whilst unit sales will be up year over year it is clear that the average selling price of the console will have decreased by $50 or more. This means that whilst unit sales will be up, it does not necessarily mean that spend on PlayStation 4 hardware will increase as well. In fact I expect that total spend on PS4 hardware will remain flat YoY and the lower ASP will be one the reasons for the decline in total hardware spend this March.
The Xbox One has seen sales slide during the first two months of 2016 with sales currently down more than 10% YoY. The console, whilst selling well in its own right, does not have the pull and appeal that the PlayStation 4 currently has. Microsoft have been quick to react this month and put a temporary price cut into effect on March 21st which took the total cost of the system down to $299 on all base bundles. Microsoft also partnered with Ubisoft and Take Two this month to bring two bundles to market. One such bundle included a copy of ‘The Division’ and will have helped increase hardware sales among core gamers looking to take advantage of March’s biggest game. The other bundle came with a copy of ‘Grand Theft Auto 5’ and will have driven sales among a more casual audience. Microsoft also introduced a “Name Your Game Bundle” which allowed gamers to purchase an Xbox One at $299 with their choice of 1 Xbox exclusive title.
I expect that the deals above will have helped increase Xbox One sales by 15% YoY to reach a total of 270k. This is still considerably less than the PlayStation 4 despite a price and bundle advantage, however if the prediction above comes true then it means that the sales gap between XB1 & PS4 will be smaller this month compared to last month when the PS4 outsold the XB1 by more than 150k.
The Wii U from Nintendo has two big games launching for the console this month, ‘The Legend of Zedla: Twilight Princess HD’ and ‘Pokken Tournament’ are expected to sell in good numbers but these two games will not help grow the overall install base of the Wii U. The Wii U install base has already peaked and these two games will primarily be selling in to the current install base. Therefore I would expect Wii U sales to decline by 29% YoY in March 2016. This is similar to what the Wii U sells on a normal month.
The New Nintendo 3DS launched during February last year and sold in big numbers during February and March 2015. The same has not been repeated this year and February 2016 saw 3DS sales fall significantly YOY. The 3DS has no big game launching this month and therefore I expect the 3DS to fall nearly 60% YoY in March 2016. It is becoming increasingly clear that the portable handheld market is on its last legs in the US and it’s unlikely that a new entrant into this market will succeed.
7th Gen console hardware sales are on their last legs as well. The PlayStation 3, Xbox 360 and Wii hardly sell in any significant number these days. It’s clear that 7th gen hardware is now very much dead. This decline will also contribute slightly to the lower spend on Hardware sales.
The Division is the highlight of March 2016. The game is expected to be the best selling title to launch during a March since ‘Super Smash Bro’s Brawl’ for Wii in March of 2008. The huge launch for ‘The Division’ will help increase dollar spend on software at retail by a predicted 18% YoY for March 2016.
The Division had a huge launch from day 1 and Ubisoft revealed that the title had grossed more than $330 million worldwide in its first five days on sale. This made it the biggest New IP launch since ‘Destiny’ back in September 2014 which grossed $325 million worldwide in its first 5 days. Ubisoft also revealed that the game saw over 1.2 million peak concurrent users over the games first weekend and that together players spent more than 100 million hours playing online in the game’s week after release. Destiny debuted with more than 2.5 million unit sales across console at retail during September 2014. It is important to remember that ‘The Division’ had a PC release as well and therefore I predict it unlikely to have sold more than Destiny did at retail in its first month due to the simple reason that The NPD Group do not track digital PC sales in their retail sales report. The game looks like it is on track to sell over 2.1 million units at retail on PS4 & XB1 during March 2016 and generate more than $130m in revenue at retail for Ubisoft in the US.
Another big launch this month is “EA Sports UFC 2” which is the sequel to the 2014 title. The game has been praised by critics and in many regions such as the UK has performed better than the first title did. I expect the sequel to also perform better in the US and sell more than the 278,000 units that EA Sports UFC sold through during June 2014. The game received an early price cut that may mean that sales were lower than expected but I still forecast the game to do well and the lower price as well as the demand for a new UFC title (Due to growing popularity of the sport) will help the game achieve somewhere close to 400,000 unit sales, albeit at a slightly lower ASP, meaning it may only generate $20 million at retail in the US. Mortal Kombat XL also launched this month as a complete version of Mortal Kombat X. Despite the high $60 price tag It is expected to sell very well among fighting fans and therefore I’m projecting that it will sell over 200,000 units in the US during March. The original game sold more than 1.25 million units during its first month in the US.
Sony exclusive title MLB The Show 2016 launches on PS4 and PS3 during March and should sell in similar numbers to the 2015 title. I would expect the game to do somewhere around 250,000 units and generate around $18m in revenue. Nintendo’s exclusive titles this month are Twilight Princess HD and Pokken Tournament. Both games will sell in good numbers however will be limited by the small install base of the Wii U. There is certainly demand for Twilight Princess HD and It could double the unit sales of Wind Waker HD during its first month should the Wii U install base respond favourably to the title. Pokken Tournament is a new fighting game IP for Nintendo but based on a popular franchise, therefore the game will perform in line with, if not better, than Street Fighter V did on PS4.
Overall the software market will be up this month thanks to The Division. 8th gen console software will continue to dominate the charts whilst sell through of portable and 7th gen software will continue to decline at sharp rates. We are now getting to the point where no major releases are launching on 7th gen consoles and therefore it won’t be long before 7th gen console sales no longer matter in NPD reports.
March will be a healthy month for the industry and could potentially generate over $1b in dollar spend. The boost will primarily come from the launch of The Division on PlayStation 4 and Xbox One. Should the $1b prediction come true then the total retail Video Games Industry in the US will have generated $2.45b for the first 3 months of 2016, this is slightly lower than the $2.55b generated during the first 3 months of 2015 and further reflects the decline that retail is seeing. Hardware sales are forecasted to be down this year despite an increase in 8th gen home console unit sales. The increase here will be offset by declining ASP’s as well as sharp declines in portable and 7th gen hardware sales.
The number of 8th gen home consoles titles being published this year is expected to grow and in turn will generate higher revenues. However the number of titles being published on portable consoles and 7th gen are set to decline sharply in 2016 which will offset the increases seen on 8th gen. In turn this means that software spend at retail is likely to remain flat in 2016. Digital is also expected to grow in 2016 for both full game downloads and add on content. The accessory market is expected to grow slightly this year as the toys to life and collectables segment matures.
Previous Months forecast (Februrary 2016):