Gaming stocks such as Electronic Arts (NASDAQ:EA), Activision Blizzard (NASDAQ:ATVI) and GameStop (NYSE:GME) plunged after the disclosure by a NPD Group report that retail video gaming sales declined by 21% in December 2011 compared to that in December 2010. [1] On the other hand, casual gaming companies such as Zynga (NASDAQ:ZNGA) gained as the report suggested increased play of cheaper, casual games on smartphones and social-networking sites.
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Choppy December 2011 Video Game Sales
Though December is usually considered the most important month for video gaming industry due to the holiday season, sales remained choppy in 2011. While early December video gaming sales were high due to the release of Call of Duty: Modern Warfare 3, sales in the later half of the month were flat due to lack of attractive games and gamers’ increasing inclination toward cheaper, casual games on the back of weak macro-economic conditions.
However, the biggest drop was seen in video-gaming hardware sales, which were down by 28% compared to December 2010. The massive decline in hardware sales primarily reflected a sharp decline in Nintendo’s Wii. The biggest losers due to drop in hardware sales have been retailers such as GameStop. Weak hardware sales was the primary reason for GameStop’s lackluster holiday sales despite gains made in video gaming software and pre-owned sales.
Rapidly Declining Retail Sales Testimony to Growing Dominance of Digital Gaming
While retail video game sales have gone down, the findings aren’t the same with purchases of digital games, add-on content, mobile and social games. With video gaming industry fast changing its landscape from retail to digital, smartphones and social networking sites are emerging as serious platforms for video games.
The growing inclination of video gamers toward casual games was one of the major factors behind the decline in retail sales. In the current tough macro-economic conditions, video gamers are shying to invest much on costly consoles and video games.
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Notes:- NPD Group disclose December video game sales data, Source: WSJ [↩]
