Video Games Industry Grows Digitally

Spending on video games went up to $5.9 billion in the U.S. during the first quarter, an increase of 1.5 percent over the same period in 2010, according to market research firm the NPD Group. That’s obviously good news for the entire industry, but it’s worth noting that the amount that went toward physical copies of titles to be played on game consoles and PCs actually declined.

The overall increase is mainly in game rentals, subscriptions, digital full-game downloads, social network games, downloadable content and mobile phone games. NPD found software sales dropped by 6 percent in 2010 and are down about 5.7 percent for the first five months of 2011 compared to the same period last year. Consumers spent $2.03 billion on new video game console and PC software in the first quarter, compared to $2.26 billion a year ago.

When asked if NPD expected to see a trend of these digital video game revenues continuing to increase at the expense of physical games, NPD analyst Anita Frazier told VentureBeat, “The space is evolving too rapidly to anticipate any future trends except for the fact that the rate of change is more on the sudden end of the scale than gradual.”

First quarter is traditionally a slow sales period for video games, as the industry begins building anticipation for its tentpole releases in the fall. However, three anticipated titles — “Legend of Zelda: Ocarina of Time” for the Nintendo 3DS, Duke Nukem Forever from Take Two Interactive, and Red Faction: Armageddon from THQ – did not meet critical or sales expectation when they were released in June. Marketwatch reported a client note from Doug Creutz of Cowen & Co. said, “We expect significant double digit year-over-year declines in both July and August due to the release slate and soft recent trends.”

Related Links:

Marketwatch post: http://tinyurl.com/63a4end

VentureBeat post: http://tinyurl.com/5s3sydr