Game Over? Why Video-Game-Console Sales Are Plummeting

Sales of consoles in the U.S. dropped 21% in 2012 to just over $4 billion, and figures from the manufacturers of the three top systems were lackluster over the crucial holiday season

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At a quick glance, it looks like it could be “game over” for the video-game-console business. Sales of consoles in the U.S. dropped 21% in 2012 to just over $4 billion, and figures from the manufacturers of the three top systems were lackluster over the crucial holiday season. 

When announcing its quarterly earnings last month, Microsoft said its Xbox-division revenue dropped 29%. At Sony, lower PlayStation 3 and PSP sales were responsible for a 15% drop in revenue for its video-game division. Nintendo’s next-gen console Wii U also failed to generate as much interest as originally predicted. Last month, the company said it had sold only about 3 million consoles and that it would sell a million more through March, a sharp drop from the 5.5 million it initially anticipated selling.

There’s less demand for the physical games these days too. According to research company NPD Group, game sales fell from a little over $11 billion in 2011 to less than $9 billion last year. Retailer GameStop says sales of new video games over the holiday season dropped by about 5%, and sales of used games dropped by 16%. “It’s tracking to be the worst quarter the company’s ever had in the used business,” Sean McGowan, an analyst with Needham & Co., told the Wall Street Journal.

Analysts blame a lot of the slump on timing. “It is a cyclical market,” says Lewis Ward, research manager of gaming at IDC. “The usual lifespan is 10 to 12 years for a console, and we are in a trough right now.”

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But the Wii U’s underwhelming sales illustrate that even the market for new consoles will be challenging, leaving the industry pinning its hopes on Sony and Microsoft. Sony is expected to unveil the next version of the PlayStation as early as this month, according to the Wall Street Journal, and start selling it some time later this year. Microsoft is also supposed to introduce its new Xbox this year, and analysts say the serious enthusiasts will pull out their wallets once the new consoles become available.

“The hardcore gamers will come back,” says Edward Woo, a senior research analyst at Ascendiant Capital Markets. Woo blames “console fatigue” for falling numbers.

There are other, more secular factors chipping away at the era of the video-game console as we know it today. For one, there’s the segment of players the industry calls “casual gamers.” If you want to know who they are, look around; they’re the people playing Angry Birds on their phones. And that’s the problem.

The original Wii got these people waving controllers in droves. Nintendo wasn’t able to repeat the magic with Wii U, largely because this fickle group of users has moved on to mobile games played on smart phones and tablets. This will put a serious dent in sales, particularly of portable-game players. “In terms of long-term outlook, the real difficulty is in handhelds because people gravitate towards tablets and mobile phones,” Woo says.

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Analytics company Flurry estimates that we spent more than $8 billion on mobile-game apps last year. “When it comes to app consumption on iOS and Android smart devices, consumers spend over 40% of all their time using games,” the company writes on its blog.

One of the appeals of mobile-app games is that developers often make “lite” versions available for free, and this penny-pinching extends to hardware. Consumers are still spending more cautiously than they were the last time hardwaremakers refreshed their console lineups. “The other major factor that’s been weighing on console sales is the macro downturn,” Ward says. “It’s pulled back consumer spending across the board.”

At around $350 for the high-end version of the Wii U, some people think the Nintendo priced the console too high, even though the company is said to be losing money on every unit it sells. “The price point is probably another factor I would point to that has limited uptake,” Ward says.

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This is a mistake TIME Techland points out Sony will need to avoid when it puts its new device on sale: “If Sony launches higher (and doesn’t include something like a free iPad), especially in a weak economy, it may find it’s looking for dance partners all over again.”

“As consumers look more and more for deals over the holidays while purchasing hardware, bundles which include software grew by 26%, while hardware selling alone with no games declined by 37%,” NPD analyst Liam Callahan says in a report accompanying the company’s data. “Consumers are becoming more savvy.”

Ward also blames a lack of good games, especially for the Wii U. “Some folks might wait until they see their favorite titles before they buy it — a lot of people are attracted to the consoles because of the games themselves,” he says. Nintendo has been slow to address this, and comments from company President Satoru Iwata at a recent investor event indicate that this is probably going to remain the status quo at least through the first half of 2013.

More generally, NPD finds that nearly half of game sales were of the top 10 most popular games, a 12% jump over last year. People still buy the blockbusters, Callahan says, “but middle-tier games as well as catalog titles are suffering.”

Most important, the industry is in the nascent stages of a digital revolution. NPD says sales of digital games grew 16% over the past two years. If you compare the gaming industry to the music industry, right now it’s in a pre-iTunes, pre-Pandora era. Discs are still the primary way people consume this media. Ward says there are a host of technical reasons why people aren’t downloading games or playing them on a cloud-based service yet, but industry observers say it’s just a matter of time. Woo says the upcoming generation of consoles could very well be the last ones with drives, and Ward points to Sony’s $380 million purchase of cloud-streaming provider Gaikai last year as a sign that the company will put more emphasis on game streaming in the future.

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When players can download or stream games easily and affordably, the video-game console could shrink further to essentially become a handful of chips inside a next-generation smart TV. “In the future, I think that could become a significant challenge to the entrenched incumbents,” Ward says. Consoles might not die out completely, but they could be transformed into something hardly recognizable to today’s gamers.

45 comments
ChrisWilliams2
ChrisWilliams2

im literally scared to buy fallout 4 because i'm almost sure that it's just a over advertised game that's gonna suck 

ChrisWilliams2
ChrisWilliams2

every gamer know's what the real problem is, it's microsoft screwing there customer's, it's just bad buisness practice dont double dip your customer's with subscription fee's after they just paid an arm and a leg for your product. that's only one part of the problem the other problem is cheater's in competitive gaming who will win by any mean's neccescary even if it mean's destroying the spirit of the game. i still havent gotten to what the real problem is so stick around the real problem here is "Bad Game's" your console's are only as good as the game's you can play on it even hard core gamer's lose interest after so many disappointing game's like dragon age inquisition, the most recent call of duty, the elderscroll's online, and gaylo 4 (halo 4) it's sad in my opinion that minecraft is more popular than all of those game's and can probably played on a nintendo 64 also on another note gamer's are getting tired of repackaged game's like halo anniversary guess what we all played halo on the original xbox we dont wanna play it again take some note's from bandai namco, and fromsoft they know how to make a sequel without modifiying the original on the same engine and slapping a #2 on it armored core verdict day is the exception but who really care's.

JohnMichaelDahl
JohnMichaelDahl

I knew this was going to happen by smart phones, you can literally download almost any last Gen titles on a high powered smart phone...why buy a console that will be outdated in five year?..... I don't believe it will be the end of consoles.... but i do believe it will affect the console business extremely.

13thgenpatriot1
13thgenpatriot1

Two words:  "BACKWARDS COMPATIBLE"


Why would anyone pay several hundreds of dollars every few years to make their game library obsolete so that they can then spend hundreds more to by new games that are not as fun as the games that they already had?


I would upgrade to a PS4 if if were compatible (could play) my PS2 games.  The same is true of WiiU...it doesn't play my hundreds of dollars worth of Wii games that I already paid for and love.  


Until they make a backwards compatible game console, I will not buy a new one.  Games are a "want" not a need.  I can wait a long long time to get what I want.  How long can these companies operate without giving the consumer what they are willing to pay for?

HaroldOduardo
HaroldOduardo

you guys are missing the whole point, some have it on the tips of their tongues, some just make good arguments. 

Consoles vs. PC

1 - the major difference between them is that instead of buying the whole system, you can just upgrade or replace the bad part.

1.1 - some people are not as good with the thumbs handling a stick and rather more options to create the same movements, this also include the use of joysticks and hardware related to such. 

2 - online gaming is much of the industry now since most games coming out are far on par with the quality of consoles games allowing for players to "cheat" through the in game market buying different items, otherwise, don't spend a single coin, the game is after all, free to play unlike many console games with the similar aspects.

3 - now, one of the major collapses on the gaming industry in total, is the old fashioned "programers and companies dont listen to the buyers". true for the most parts, they promise something, we give them ideas to improve it and make it better, yet we get air and dead hopes back. why arent we looking exactly at this when talking about the gaming industry crashing millions? in the end, we gamers are never delivered what we bought or they promised us to present. 

4 - unlike consoles (correct me if i am wrong on this) many pc gamers enjoy the ability to modify files which improves the gaming experience and allows for a wider range of interactivity withing the same old game. besides, easier to cheat your way through instead of wasting meaningless hrs and days grinding your way through unlike on consoles (ps. i know some hacks can still be done on consoles, but sometimes its better to just cheatengine everything) .. *rolls eyes*

5 -  now this is a con against pc, but its not really much if you know what you are doing. unlike consoles, sure, pc gaming is less stable due to bugs on either the hardware, or softwares (both drivers and games). while downloading games is becoming much more of an annoyance in the gaming world, we are still wasting minutes instead of put disk in and play which brings the "missing files" from bad downloads, or even bugs on the game itself. this however does not mean the released product does not come without bugs, it is a software after all and bugs are bound to happen sooner or later, some leading to game crashes. 

6 - the biggest con against pc gaming? peer to peer game sharing. lets face it, how many times have we bought a game and it was never what we where all expecting? where did the magical colors in the rainbow and innovating new systems go? well, peer to peer is there because of that, many of us old gamers have gotten tired of wasting our own money into these kind of programs, we would like more frequent play before buying like free trials, 15 mins, 5, first mission, that will give us an idea of what kind of crap we are buying. (ps. excuse my french.... ps.ps. got nothing against french so dont judge me, just a saying)... anyways back into topic.... this costs companies tons of money and i agree, but are they really delivering what they promise?!!!?!??!?!?!?!!??!?!?!!!?!??? .... nope, didn't think so.... so, their plan is to capture you and force you into buying console games which are harder to share and sometimes making these games only available to consoles.

7 - want me to put the lid into this old controversy once and for all? how about companies stop mimicking everything in the market and for once start creating new games that are ACTUALLY NEW. first person shooters will always follow the "shooting" habit, the mission is to make it more enjoyable, updated,and fix things in the software PLAYERS are telling you to fix before you copy and paste everything from older versions, and PLEASE, make the newer games be able to handle better emotions into characters and not look like the previous versions. as for mmo's in general, how about doing some digging? same thing happens over and over from what i previously mentioned, instead of mixing system from 2, 3 games (which sometimes are good mixes if you actually use your head and listen to gamers) why not come up with something new? also, stop restricting gamers into a follow the path storyline and let us discover the world designers and programers came up with? some open gaming while storylining in a game would bring things to a whole new level, instead of following this road, how about letting players choose their own approach to the objective? 

and finally, before i forget, how about you companies stop trying to buy us with goodies? yeah, sure, exclusive give away for pre purchasing the games which are bound to suck your money out of your pocket and give nothing of pleasure back is a good way to go....  how about spending more time into the actual game instead of these goodies? id rather prefer a map of the game and a key chain in return if you promise a good game and actually deliver a good game worth of some praise and not a exclusive weapon or character that OMFG sucks along with the game, and let me guess, you spent half a year perfecting?


anyways, am tired of writing so ill be stopping it here, thing is, companies need to re-market their strategies onto what we as gamers ask otherwise, the system they are creating will bring their own crash. if i missed something, please feel free to add.

good luck, and happy gaming to you all.

kgbkgb1967
kgbkgb1967

"10 to 12 years for a console, and we are in a trough right now"

Yeah, tell me one console that lasted 10 years.  The original gameboy comes as close as any, but it is not a console system.  Even the original Nintendo didn't make it quite 10 years before the SNES came along.  

JasonThacker
JasonThacker

I love how this ignores one of, if not THE, biggest issue with declining console and game sales.


The repetitive, borderline rip-off nature, of console games.


How many times can a Publisher force a studio into remaking the same game, before people finally tire of paying for the same product every single year? EA is especially notorious for this - much to their own decline. See Medal of Honor and Dead Space for how this is going. Relaunching the same product year after year is insulting to customers. Especially given the price tag of these "new" games.


This is why I game on PC. I wanted a new PC anyway. I was also considering a gaming console. Total price tag for both: $800 at the time. So I made a financial decision and poured all of that into a nice gaming rig instead. For $950, delivered to my door, I got a high end gaming PC and never looked back. We have indie titles and lots of choice. Not to mention sales. The price of games on Steam compared to buying console titles in stores has saved me hundreds of dollars already, and added a good deal of variety to my gaming experience that gaming on a console would deny me.

CharleyAbrams
CharleyAbrams

The article misses in a lot of respects, Xbox and PlayStations are about to introduce new systems, why would anyone buy the old ones? Wii U probably did lose some casual gamers(good, might mean better titles). The article was correct in that it will pick up when the fans games are delivered. I have recently purchased a Wii U, I love it as a game system, mii verse allows for a friendly chat environment about the games, you can pause the game, take a screen shot, post it to Mii verse, and ask a questions about the games with other gamers. The game pad controls the TV, cable, volume, channel exe. My son loves it too. I could go on and on, it is a wonderful experience. That being said, I have also watched the system be trashed by Sony and Xbox fans for not being a graphic power house. It is disheartening to say the least. Wii U is roughly 19% more powerful than 7 year old systems, some of the game ports are better and some worst. This plus a sorry excuse for new game selections from the last couple of years of the Wii has left a bad taste in peoples mouth. Nintendo is teaming with other developers to offer more first party games, they are becoming more personal and open with their game announcements, the 3DS is the leader of the hand held systems, crushing the competition. I do not think it is over for them by a long shot, but if it was, they certainly do not represent the game industry as a whole. The game will never be over.

KGelner
KGelner

If Sony were really, really smart they would announce a new console that made use of Apple iPads as secondary controllers.  Then they can price the console reasonably and have a lot of ready-made customers.

Microsoft cannot do this because they sell the Surface...  and if they use the Surface in the same way how many people will buy an XBox + a Surface?  They just don't have the install base to do that.

styrgwillidar
styrgwillidar

Well my kids have an Xbox, Playstation 2 and 3, and a Wi. My son is the biggest gamer and has shifted over to gaming on PC along with most of his friends. They're all about the on-line gaming and downloadable content from Steam.  His goal is to build a dedicated gaming PC (currently games on a laptop with a Radeon 6770).  

So, I think a lot of this market drop is kids returning to PC based gaming.


BenFranklin
BenFranklin

The rest of the economy is in the toilet as well.  Why should the gaming industry be any different?

With Obama doing everything he can to destroy jobs, especially entry level ones, there isn't any way for kids to earn the money they once used to buy these sorts of entertainments.  Things aren't likely to get any better in his second term either since two big priorities he has announced are importing millions of new residents from Mexico to compete for entry level jobs that our youth would normally take and raising the minimum wage so that there are fewer of those jobs.  Combine that with Obamacare kicking in to punish businesses who hire and the fact that each kid entering the workplace now start out with $100,000 in public debt added in Obama's term alone and it isn't hard to see why money for things like video games is drying up.

So in short, this is the new normal under socialism.  Get used to it.

segesta65
segesta65

When Nintendo puts out a Legend of Zelda game for the Wii U in 2014, sales will soar. To sell a console, you gotta have the games.

Viktor_King
Viktor_King

What irritates me about these articles is that they consistently ignore the decades-old monolith of PC games. Is the market dying, waning, or is it going somewhere else?

The PC game library only grows, 'exclusivity' for a game typically doesn't apply to discluding the PC, the hardware only gets better without the growing pains of gimmicky launch titles or wide-spread hardware failure, all while retaining a massive percentage of legacy titles, and an X360 gamepad works just as well on a PC as it does an XBox. These articles acknowledge mobile phones, but not the progenitor of billion-dollar franchises such as Call of Duty or Grand Theft Auto or The Sims.

Take your desktop computer, put a $200 video card into it. Connect it to your flat panel TV, using a wireless keyboard, mouse, and X360 gamepad to surf the web, grind rails, and drift apexes at the track, and of course, shoot all manner of scary people and space aliens with all the same blockbuster games. Try this for a year, and see how anxious you are to stand in line for two days to get the newest Playstation or XBox.

Where's the console market going?

danielheartland
danielheartland

How does everyone keep comparing consoles released in 2005 (Xbox360), 2006 (Wii), and 2007 (PS3) to an economy circa 2013! The Market has grown people! And just like any thriving market, expectations will be higher! Ask Apple.


The Wii U needed to sell 5.5 Million in the first quarter. They sold 4M, and expectations were slashed in January. The ripple effects are still being felt across the market. Publishers aren't so keen on the idea of exclusivity.


But the problem is the innovation economy. We've been using roughly the same controllers for 15+ years! And now Nintendo, usually the source for outside-the-box thinking, has abandoned their attempts and adopted a similar gaming pad for the Wii U. The PS3 and Xbox360 already have very awkward-looking controllers. My parents think so, but how they love Smart Phones. In a world where Phones and Tablets are using speedy touch-screen OS systems, this particular market feels so retro and rudimentary. They need major innovation, or they lose a new generation to said tech.

KitsuneHazard
KitsuneHazard

Consoles aren't dying, they're constantly innovating and trying to redefine how we play and enjoy games. 

Maybe the game developers should stop making generic games that are garbage constantly...

wbeck314
wbeck314

Again with the "Only 3 million".. Who hires these people?

The Wii U's 3 million Sales in 2 months is the second fastest selling console on History! Only the Wii has ever Sold more Units Faster! For the love of god, learn what your talking about. Idiots..

ChrisBuchanan
ChrisBuchanan

This is all just hype to generate website clicks and points for comment/message board trolls. During the launch of the last generation of consoles, the highly successful Wii sold 3.2 million compared to Wii U's "dissapointing" 3 million in the same time period, while both PS3 and Xbox 360 sold even less than that. The new consoles, led by Nintendo and Wii U, are switching from CPU intensive architecture to GPU and memory based game design. This reduces production costs of AAA titles by a factor of 10. Nintendo's restructured it's entire company to take advantage of this and survive yet another Video Game Crash, just as it has for the past 30 years. Finally, Wii U's launch line-up compares quite favorably to what was offered by all three major consoles in the last generation, but the gaming press have awfully short memories, and trolls spread misinformation and outright lies by skillfully playing on "journalists" desire to write expose's and generate ad-revenue.

Korgoth
Korgoth

The advantage that consoles always have and will have is a unified platform which for a 5-6 year window all games released will be compatible.

The Wii U's launch is lackluster in comparison to what?  Nearly every other console in the past 7 console generations has had a launch similar or worse than the Wii U.  Sure there are a few outliers like the original Wii, but compared to nearly every other system the Wii U has been a huge success!  New systems never sell as well as older systems in their twilight years.

therantguy
therantguy

This was written by somebody who isn't a gamer and does not understand the market.

1) Everyone who wants a PS3 or XBOX360 has one. The PS3 is 5+ years old. The XBOX 360 is 5.5+ years old. Who exactly is supposed to be the market at this point? 

2) Wii U is expensive, has no games AND most importantly the vast bulk of Wii buyers went from WOW to MEH six months after buying it. I don't know a single Wii system owner who plays it much anymore. 

So you are declaring the death of a product category based on a market with two very old systems (10-12 year cycle my rear end, the lifespan is 5-6 years) and a new system that is the next iteration of the highest selling system in history.


Every economic analysis seems to forget that when people buy something, they no longer need to buy more of them.

magicalmatt42
magicalmatt42

The problem with people looking at consoles as their own market. The hardware does not sell the hardware. Software sells hardware, and the Wii U's underwhelming launch has everything to do with it's library. 

X-box console sales dropping has everything to do with nearly every household already having one, many having bought 2. 

Then in this next generation we will see less physical sales and less console sales, because of steam and steam like services that already have libraries and promise of most new releases where you want them, moving with you from computer to computer in your life, always backwards compatible.