Casual bubble deflating game industry - Analysts

EEDAR's Jesse Divnich, Wedbush Morgan's Michael Pachter say weak October sales due to nontraditional gamers not returning to retail, hardware price cuts giving fleeting lift; Activision CFO concurs.

True to analysts' predictions, the gaming industry was not able to lure consumers in increasing numbers to retail in October. As detailed in The NPD Group's US retail sales report yesterday, industry sales were down a cringe-inducing 19 percent from October 2008 to $1.07 billion. Hardware took a particular thumping, dipping 23 percent to $381 million, while software slipped a greater-than-expected 18 percent to $573 million.

Mass-market audiences didn't latch onto DJ Hero.

According to a pair of analysts, October sales indicate that casual gamers are largely at fault for the continued decline in industry sales. As noted by Electronic Entertainment Design and Research's Jesse Divnich, casual gamers haven't returned to buy more gaming goods this year. Further, he believes this group will continue to stay away until the arrival of new hardware from platform manufacturers, such as Microsoft's Project Natal or a new DS from Nintendo.

"The lack of sales continues to be driven down by non-traditional and casual gamers who have failed to make follow-up purchases," he said. "We believe it will take the introduction of some new style of gameplay or peripheral before we see a resurgence in the casual and non-traditional markets, which is why we strongly believe that Nintendo may launch a successor to the Nintendo DS in late 2010. Additionally, we believe Project Natal will create a resurgence in excitement for motion-based gaming, not just among the core market, but casual and non-traditional gamers as well."

Wedbush Morgan Securities' Michael Pachter concurs, pointing to the continued weakness of the rhythm-game genre. "The more mass market titles did not perform as well, with the music genre demonstrating the overall weakness we've seen all year. Total music game sales in October (including the newly-launched DJ Hero) totaled only $46 million, compared to $121 million a year ago. The decline in music genre sales was responsible for 60% of the year-over-year sales decline in October."

The analysts' opinions echo sentiments expressed by Activision Blizzard CFO Thomas Tippl. At the BMO Capital Markets 17th Annual Digital Entertainment Conference yesterday, Tippl said, "Longterm growth prospects for interactive entertainment are intact despite the near-term macroeconomic headwinds from a weak consumer and a deflating casual games bubble. While we acknowledge the recent trends that suggest shorter retail product lifecycles for more casual products, we also see a thicker and more profitable tail developing on our core franchises with the core audiences."

Hardcore gamers had no problems dropping cash on Uncharted 2, though.

With games like DJ Hero and Guitar Hero 5, Activision has stood at the forefront of the rhythm game genre, which has traditionally appealed to the casual and nontraditional gamer crowd. According to Pachter, the music genre contributed to 60 percent of the year-over-year sales slip in October.

Some companies still see opportunities in the casual space. Earlier this week, GameStop announced it had acquired a majority interest in casual gaming portal Jolt Online. Shortly before saying it would be laying off some 1,500 employees, EA announced Monday that it had acquired social gaming specialist Playfish for $275 million.

Divnich and Pachter also addressed the continued weakness in hardware sales, which were expected to see a substantial uptick following price reductions of the Xbox 360, PS3, and Wii. "We thought that the console price cuts in September would spark demand for next generation consoles (which had tracked down 38 percent in the five preceding months)," Pachter said in his note to investors. "However, we were disappointed that the strength in console sales was short-lived, with a year-over-year decline of 21 percent in October."

"We believe these declines represent a current video game economy that is driven by promotions, discounts, or temporary sales," Divnich said in his own note. "Once the excitement of a bundle, discount, or permanent price drop retreats, so do sales." The analyst went on to note that the Wii will likely continue to lead sales for the remainder of the year, with "PlayStation 3 sales declining much faster post-price drop than the Xbox 360."

On the bright side for Sony, Divnich believes that the PS3's new marketing campaign has been a factor in the console's recent resurgence. "I would rank these new PlayStation 3 commercials among the best in the entertainment industry and I have no doubts that the recent boost in PlayStation 3 sales can be attributed to more than just the price drop," he said. "I believe these entertaining and informative commercials have played a large role in driving sales."

316 Comments

  • Merl57

    Posted Nov 19, 2009 11:01 am PT

    well there are some funny ps3 commecials its the price cut, new hardware design, and uncharted that are selling it not the marketing good things sell themselves

  • Triton

    Posted Nov 18, 2009 3:50 pm PT

    I blame it on the Wii - All of the VFWs and nursing homes are finished, now its back in the hands of the real folks that built the industry and support it.

  • MuffintopX

    Posted Nov 17, 2009 1:42 pm PT

    Still waiting for PS3's hardcore gaming motion peripheral. Natal will grab some casual gamers but I don't see much potential for great games on Natal aside from turing the 360 into a high-graphics Wii. We want to swing our own sword at monsters and see actual blood, its 2010 already.

  • DFBTG

    Posted Nov 17, 2009 10:22 am PT

    About time they're realizing that all these shovelware casual games aren't going to help. It's like the friggen stimulus bills; they're nothing more than one night stands that help for a little bit, but never works (or helps) in the long run. Personally I blame the Wii, whose very existence inflated the casual market exponentially. With any luck these casual games will die off and make more room for quality games to get the money/sales they deserve (instead of Guitar Hero 23). It's not that I hate casual games (I just don't like them... a lot), but over saturating the market with them and ignoring hard core games isn't going to boost sales. Casual gamers are just that; casual, you honestly can't expect them to go and buy every casual game out there? Especially at full price.

  • capitalthoughts

    Posted Nov 17, 2009 9:02 am PT

    @kvan33
    According to my calculations, we should be entering the last stage of the Wii fad right about....now.

    Wow...if I had a penny for every time a PS3 and X360 fanboy for the past 4 years 06,07,08,09 I would be a very rich man. According to my calculations, you are just another fanboy who hates seeing an underpowered system run laps around yours.

  • ParisSun

    Posted Nov 17, 2009 8:16 am PT

    The industry tried to build an empire on casual gamers. All this crap games flooded the market and they didn't cater to the core gamers who buy year round and now they are paying for it. It was obvious that profits would decrease from last year once kids and grandma got tired of their Wiis and casual games on all platforms. Now get back to making great games for the people who are going to buy multiple games throughout the year.

  • angelGP32

    Posted Nov 17, 2009 6:15 am PT

    @ jetstopia: I too have owned every Nintendo system from NES to Wii and all portables. I've been gaming since the days of the Atari2600. So how you can say Nintendo has been "delivering" on it's product and look at the numbers. Yes, I believe Nintendo since the N64, has been in last place the last 2 generations. And how you can compare the Wii to the NES and the greatest system of all time SNES is beyond me. I don't recall the NES or the SNES, hell, I don't recall the N64 or the Gamecube being a shovelware dumping ground. Sure they had bad games, all systems do, but when you look at the ratio of good to bad games, the Wii has to be the worst, and that is directly linked to casual gaming and getting away from core gaming. So when you look at the software line ups from every other Nintendo system, can you really say the Wii "delivers" this generation compared to every other generation of system, hell no. I could only wish the Wii had the software line up and diversity as the SNES.

  • valcrist09

    Posted Nov 17, 2009 12:22 am PT

    the market is dropping cause I am sick and tired of rehashed games over and over again!!!!!! Madden, Call of duty, guitar hero, halo ect... NO innovation and good qaulity games anymore!! everything is either really rushed, or super hyped and end up incomplete.. But yet even incomplete games still sell to make a profit and until we stop doing that companies will continue to produce half assed software majority of the time!

  • Evil_Robo

    Posted Nov 17, 2009 12:09 am PT

    That article doesnt make too much sense, after all, its not like hardcore gamers have stopped playing games, we are still buying them. Perhaps if Nintendo advertise the Core games they have, and MS and Sony work on their variety - instead of nearly every big game being a shooter - then more people will buy games across all machines.

  • Jettero-Heller

    Posted Nov 16, 2009 9:34 pm PT

    Bears mentioning that perhaps Non-traditional gamers may have been responsible for an "INFLATING" of sales at some point in the recent past??

  • jetstopia

    Posted Nov 16, 2009 5:52 pm PT

    Just looking at all these comments and its seems (as usual) the wii is to blame so its nintendo's fault the gaming industry is failing. all caught up. the whole casual/hardcore gamer thing i dont really get. I own a wii and only a wii does that automatically make me a casual gamer i really dont care either way. dose it matter that iv owned every Nintendo product since the nes and buy the neweset thing nintendo has to offer becuase the are a trusted name and have been delivering for 20+ years. the xbox and ps should be so lucky to still be doing good business (look at the numbers) when they get to be around as long as nintendo has. yeah nintendo now has turned its back slightly on the core gamers to try and bring other people into the industry. but at some point a new market was needed to keep the console games going because your wrong if you think hardcore gamers alone are going to push the market to bigger and better things.

    i will say if i could afford another console i would go a PS3, from what i see it and the xbox are pretty much interchangable where the ps3 has a blue ray player and better graphics. i expect this type of comment will annoy the majority of people that take the time to look at this after all i am a supporter of the wii and hence an evil consumer on the gaming industry.

  • gnrlstuart

    Posted Nov 16, 2009 5:32 pm PT

    i think he has a fair pointwith the ps3, but imo sony's marketing is obscure and random at the best of times,(weird psp adverts,and stupid random drawings all over the place) however it did highlight the whole 'everything you need in one place, but now cheaper and smaller vibe'.
    i think its fair to say november's analysis will be very different to this one though.

  • HonorOfGod

    Posted Nov 16, 2009 4:09 pm PT

    Tauu + Pachter = same = ima kick your @$$ PACHTER GTFO!!

  • HonorOfGod

    Posted Nov 16, 2009 4:06 pm PT

    Aww what these people are mad at us for not buying the crap they recently made and try to sel us? TO BAD!! we put them in there positions becouse we made a deal with them.. they give us good GAMES and we pay.. btw we dint want to pay hundreds but yeah.. and what d they do after a wile? stop making them... so we stop buying.. no game no money noobs! is that so hard to understand MS,N and Sony? and evryne eals sniffing your @$$ ..err Pachter. To tell you the truth compared to the NES, PS1 and PS2 days this is by far the worst time in life to be a gamer becouse ... NO GAMES!!! evrything cost to much and they keep coming up with crap to fast for the money, PSP..PSP2000,3000,DS,DSL,DSi,DSLX WTF!! is this crap!!

  • Tauu

    Posted Nov 16, 2009 3:52 pm PT

    Michael Pachter is pure greatness. It's always a pleasure to hear his expert analysis.

  • angelGP32

    Posted Nov 16, 2009 2:23 pm PT

    @ NightHawk64: I don't believe it for a second. #1. you dont' have to pay for Xbox live, there is a silver membership, and 99.9% of the 360 game library does have single player modes or multiplayer that doesn't include online only. If you pay $60 per game that's your problem then, I mean, I'll glady go buy a used version of a game for a fraction of the cost just by waiting a few months. A lot of great games can be had for less than $20, and is it really that different from paying $50 for a new garbage Wii game? $10 difference. So you honestly got rid of your 360 for a wii because of the cost of online?? I'm sure you are much happier with the Wii's online service.

  • NightHawk64 posted Nov 16, 2009 2:08 pm PT (does not meet display criteria. sign in to show)

    NightHawk64

    Posted Nov 16, 2009 2:08 pm PT (hide)

    All this "hardcore" BS makes me sick. At least the "poisonous casual gamers" actually BUY games, because if you "hardcore" types could get away with pirating every game and not buying a single one, you'd do it in New York minute. Maybe if Activision didn't release like 5 Guitar Hero games every year, they wouldn't have this issue. Maybe if developers actually gave a damn about making good Wii (or PS3 or Xbox 360) games and actually ADVERTISED them, they may sell better. If nearly EVERY major release is an FPS with online multiplayer, do I really need to buy ALL OF THEM? Maybe Modern Warfare 2 is more of a bad thing? Because, you know. nearly ever publisher was so afraid of competing with it that they delayed their games till next year. So basically for most people, the only game to get this year is MW2, and if first week sales are any indication, everybody that wanted it already has it.

    And yes, I only have a Wii. I could not afford to keep an Xbox 360 due to online costs, DLC, $60 games, and my part time job with dwindling working hours. Sorry if that somehow makes me less of a gamer and I have to turn in my "hardcore gamer" card, as if I had one to begin with. I'm sorry MW2 has no appeal to me; I spent 6 years in the military, and I really don't wanna be reminded of a life I left behind because I didn't like it when I did it for real.

  • -Celeste-

    Posted Nov 16, 2009 1:51 pm PT

    Casual gamers are just more money concious then hardcore gamers. Only hardcore gamers purchase the new sport games every year, or games that get a slight refresh and nothing more. Casual gamers play games casually and don't feel the investment in droping another 60$ this year for the same game they bought last year for 60$.

    You don't need to innovations in gameply peripherals (sp?), you just need developers to stop milking games for all they are worth. Casual gamers powered the music game genre, and after god knows how many minor tweaks, revisions, and new SKU's, they are getting old of the same crap for 60$ a pop.

  • stereotype14

    Posted Nov 16, 2009 1:34 pm PT

    This article is like pravda. Is Game Spot and other so called popular game sites truly independent websites or just a mouthpiece for the game industry. So much for a free press.

    The game industry is in denial. Quit being narcissistic.

  • CharlieFubar

    Posted Nov 16, 2009 1:33 pm PT

    wait so the summary is "non gamers that bought game consoles (wii) didnt buy games" well the wii gimick is still strong (for some reason) and sice all nintendo has is shovelware... this report is no suprise... if you took nintendo out of the eqation completely, i bet ps3 and 360 are easily one-upping last year.

  • Petruvai

    Posted Nov 16, 2009 1:29 pm PT

    @Rottenwood

    That is probably the most rational assessment of the gaming situation that I have ever read. Bravo!

    I have a ton of games myself, and I don't honestly know where I would fit categorically speaking. I have too many jobs to play for ten hours a day, but I do usually play at least a little each day. But who cares where I fit, or where anyone fits. If you enjoy games, then go enjoy them and don't worry about putting a label on it or labeling others. Great job.

  • Jak_Napier

    Posted Nov 16, 2009 1:10 pm PT

    i think that they should stop making garbage games like most movie licensed games and such that obviously arent obviously popular. This is my one complaint every time im browsing through video games either for a rental or just looking.

  • bonereaper69

    Posted Nov 16, 2009 1:09 pm PT

    Haha the wii is part of the problem, a gimmick system, most owners of it are casual by wii fit and nothing else and for hardcore gamers its played several times then collects dust, grats Nintendo

  • Grampy_Bone

    Posted Nov 16, 2009 1:09 pm PT

    Its funny how Pachter has been blowing the price cut horn for years now while claiming that as soon as the PS3 was reduced in price it would fly off the shelves at sonic speed... nope, didn't happen. So he's been wrong now for 3 years in a row... does anyone call him on that? Nope.

    This article is sad. The 'casual customers' are at fault for 'not making follow-up purchases?' What does that mean? Maybe the products are not worth buying?

    Activision floods the music game genre with obscure niche titles and the market implodes... clearly the customers are at fault here.

    This article blames Nintendo (the market leader) in all but name for everything, but then goes on to say Natal (Microsoft) will turn things around. Gee, I wonder who Pachter is hoping will pay for his 'analysis?'

  • SimulationStim

    Posted Nov 16, 2009 1:06 pm PT

    And here I thought that companies were catering to the casual gamer. Isn't that why there are so many shoddily made games on the market. Make better games, they will come. I don't think gimicky peripherals will sell more games, cause most of the shoddily made games won't support them. It's a vicious cycle.

  • sportwarrior

    Posted Nov 16, 2009 1:02 pm PT

    @omnislash

    er... Yes, the Wii can be considered a fad. Why? Because despite it's huuuge advantage in units sold, it still seels an extremely unimpressive number of new titles. Basically, people buy the thing because they want to play Wii tennis. Sure there are some real gamers out there on the Wii. There are also some casual gamers that buy a few games every once in a while too. But there are also a huuuge number of people that buy the system and a game or two and that's it. They don't reinvest in the market.

  • facetious_ca

    Posted Nov 16, 2009 12:58 pm PT

    "We thought that the console price cuts in September would spark demand for next generation consoles"

    ... I hate to burst this guy's bubble, but it's the current generation of consoles, not the next. The next generation of consoles haven't been officially announced.

  • amill68

    Posted Nov 16, 2009 12:11 pm PT

    @rottenwood
    nope, ive never been asked that, though i guess they could be following me home after i go to the store, and studying my habits. though i have to admit that the psychic powers seem more likely. i have no idea what the hell this divinovich guy (or however you spell his name) thinks is going on. i think that the line between "casual" and "true" gamers has become so blurred, that judgements on the various happenings in the gaming world cant be pinned on either class. i know that i, being in vet school, vary from one group to the other depending on the time of year. i have always considered myself a true gamer, but i guess that at this point, i'm a casual gamer--and i don't even own a Wii
    @ Mr Tweedy
    i disagree, i think that going after the casual gamer is exactly why nintendo will do just fine. yeah they are in a rough spot, but really, who isnt? as long as nintendo can keep up the fads (as a previous poster called it, then they will still sell their systems. keep in mind that both sony and microsoft has copied quite a bit off of nintendo, so they must be doing something right

  • teknic1200

    Posted Nov 16, 2009 12:04 pm PT

    It looks like they are blaming this on guitar hero and dj hero more then wii.

  • dr-venkman

    Posted Nov 16, 2009 11:53 am PT

    It's their fault because the didn't buy the crappy games? Oh gosh, this has to be a new low for fanboys everywhere. Ya, and I'm destroying the film industry because I didn't see the new crappy blockbuster 2012... make better games, and people will buy them. Don't blame the consumer for a crappy game. They sure didn't make it!

  • omnislash_13

    Posted Nov 16, 2009 11:50 am PT

    Firstly, the Wii can't really be considered a fad if it's outsold the other consoles combined since pretty much day one. Sure the majority of the games on it suck, but it'll keep selling until every family in the world has one... ok not quite.

    Secondly I'd imagine music games aren't selling as well because why does a casual gamer want to get Guitar Hero 5 or Band Hero when they have Guitar Hero 4? To them the fun is in the experience, not the particular set of songs the game comes with and if they've already bought it they simply don't want the newest version unless it offers something groundbreaking. Just my opinion.

  • StolyVanilla

    Posted Nov 16, 2009 11:29 am PT

    So people are finally canceling their WoW accounts and Activision/Blizzard is calling for a bailout?

    Don't believe what they say. They are still bringing in millions from the WoW fanboys who are still addicted to it.

    And btw, its the recesion, People rather spend their hard earned money on Uncharted 2 or Modern Warfare 2 than on crappy games.

  • Heshertonfist

    Posted Nov 16, 2009 11:24 am PT

    I always knew casual gamers were evil!!

  • angelGP32

    Posted Nov 16, 2009 11:12 am PT

    @ TripSe7en: even the days of NES, the first party games have NEVER been hardcore, it's the 3rd party games. And again, you had the Nintendo Seal of Approval. They do not have to let the garbage be on the system if they don't want it, but they don't give a crap. And the 3rd party support this generation has been terrible, but it's Nintendo themselves that have caused it to be that way. And then the fact they don't listen to core gamers that have been asking for a storage solution, which probably a simple software upgrade would fix, they won't do.

  • kvan33

    Posted Nov 16, 2009 11:01 am PT

    @capitalthoughts Most fads experience periods of intense popularity, even with those who normally wouldn't be interested. Then they are followed by a cooling period where the popularity drops off quickly. Finally, those still clinging on to the fad are are mocked.

    According to my calculations, we should be entering the last stage of the Wii fad right about....now.

  • Mugen76

    Posted Nov 16, 2009 10:59 am PT

    And that's what happens when you don't make any worthwhile games and the vast majority of your gamers don't know what they're playing. The Wii was indeed a fad, and even I was sucked in. I'm glad I cashed mine in for a PS3 last year, the decision is paying off big time. Wii still barely has anything, while the PS3 is coming out with major stuff, and I can also play my imports (Pro Yakyu Spirits 6 FTW!)

  • E2Ek1eL

    Posted Nov 16, 2009 10:58 am PT

    expensive. this game looks like a ton of fun, just can't afford it.

  • capitalthoughts

    Posted Nov 16, 2009 10:56 am PT

    @Hoikensnogin Posted Nov 16, 2009 6:18 pm GMT Lol. I will summarize:
    - The Wii was a fad (surprise!) It's over.

    What are you basing that on considering it is still the top selling system?

  • im-a-roustabout

    Posted Nov 16, 2009 10:55 am PT

    Two words......mon tage!

  • kvan33

    Posted Nov 16, 2009 10:52 am PT

    Funny, I would consider someone who purchased DJ Hero much more hardcore than someone playing Uncharted 2. I mean you have to be pretty hardcore about rhythm games to want to buy an expensive DJ sim.

  • volcomstoner180

    Posted Nov 16, 2009 10:51 am PT

    i believe its also due to that nintendo (casual gamer central) hasnt released too much worthwhile stuff...sure a new mario game is good, but where are the others? and no online support = fail

  • Mr_Tweedy

    Posted Nov 16, 2009 10:40 am PT

    This is why Nintendo will fail.

  • FlashCharge

    Posted Nov 16, 2009 10:26 am PT

    Maybe part of the problem is the continueous rumors of more new hardware systems that often makes consumers wait for the next best thing. It has a lot to do with whether I buy a system now or wait.

  • maxsteel86

    Posted Nov 16, 2009 10:20 am PT

    This was bound to happen. Forget 'casual gamers', its just an oversaturation of the type of games they've been making. How many times can you sell the same game with a new sound track? Companies who devoted so much of their resources to this kinda stuff are going to feel the sting finally (or so I hope)

  • Hoikensnogin

    Posted Nov 16, 2009 10:18 am PT

    Lol. I will summarize:
    - The Wii was a fad (surprise!) It's over.
    - "Next generation consoles"...are you kidding me? Those things are 5 years old now and nobody wants one.
    - The market is absolutely saturated with music games that are all the same. Consumers aren't buying anymore.

    A tip for the analysts and CEO's:
    - PC gaming started it all
    - We have money. You make a good game FOR THE PC, we will buy it regardless of the economy.
    - We've been playing games since computers could play games, and we'll play games until they pry the mouse out of our cold, dead fist.

    But don't listen to me. Go ahead chase the next fad suckers.

  • VespertineStar

    Posted Nov 16, 2009 10:15 am PT

    They're called casual gamers for a reason. If they aren't continuously fed a stream of "next big things" they aren't bothered. They won't buy games based on reviews they had to go and look for, won't buy peripherals if it's not part of a bundle and they sure as hell won't care that companies make more off loyal returning customers buying extra hardware and software.

  • master_hookshot

    Posted Nov 16, 2009 10:10 am PT

    And we are all that remain. MUAHAHAHAHAHAHAHA!

  • Rottenwood

    Posted Nov 16, 2009 10:10 am PT

    @amill68

    You seem like a rational individual; perhaps you can help me here. When you purchase a game, does the clerk ask you if you're a hardcore or casual gamer, and then send that information to the Big Analyst Database that produces reports like these? Because I've never seen this phenomenon, yet carbon wastrels like Divnich seem to know the lifestyle of individual software consumers by what games they purchase. I must study this in further detail. Perhaps psychic powers beyond our comprehension are afoot.

  • dok_dx

    Posted Nov 16, 2009 10:04 am PT

    Casual Gamers not buying games during a (world-wide) recession... Who would have thunk it? I think these Analysts have a direct line to baby Jesus. I think if the gaming Dev., CO., and Publishers had a brain they would realize that it's the Core gamers that's their meat and potato. Make good games and gamers will buy it, e.g., Demon's Souls, MW 2 (yes it's a great game!), U2, DA:O and etc. They should think of casual gamers as desert, nice to have when times are good, but you might want to pass on them when times are tight.

  • Sleepysmoo2

    Posted Nov 16, 2009 9:59 am PT

    Also, the gaming industry's answer to all this is to release new systems? That's going to bring the "causal gamer" back into the fold, when they barely play to begin with? If they don't sink 60 bucks or whatever into new games, and are hence bursting the bubble, what makes anyone think they are going to sink 400 plus dollars into a new system? They've been doing this for years. Remember when the 360 and ps3 were coming out? How they talked endlessly about the gaming possibilities, the new options, how they could do "so much more" now? And yet...here we are. @ Rottenwood Yep, good point.

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