Video Game Sales Drop, But Nintendo 3DS a Hit

The NPD Group reported increases in digital forms of content distribution offset declines in retail sales of software.

Although Nintendo's portable, 3D-without-glasses-capable 3DS console moved an impressive 400,000 units since its launch on March 27, the video game industry posted an overall decline in sales of 4 percent from the same period last year, according to NPD Group. The industry sold $1.53 billion worth of hardware, software and accessories in March, down from $1.58 billion in March 2010.

Hardware sales accounted for $494.5 million in overall sales, up 12 percent from the same period in 2010, while sales of software fell to $735.4 million, a noticeable 16 percent drop from the same period last year. Sales of video game accessories rose 13 percent in this interval to $241.3 million.

"While new physical sales of video game hardware, software and accessories are down 1 percent in the first quarter of 2011, the trends we've measured with regard to growth in digital formats like full game and add-on downloads, micro-transactions, mobile apps and social network gaming will likely result in net industry growth when we release our full measure of the first quarter consumer spend on games in June," said NPD analyst Anita Frazier.

Frazier said the 3DS launch compares "quite favorably" to that of the best-selling dedicated handheld gaming platform of all time, the Nintendo DS.  "While the 3DS sold about 100,000 units less than the DS did in its launch month, we must consider that the DS launched in November and had holiday seasonality and a price differential of about $100," she noted. "Because of the price differential, the 3DS generated greater revenues than did the DS in its launch month in November 2004. In addition, the 3DS was launched in an environment where there are more devices that can support the portable gaming experience such as tablets and smartphones."

The Nintendo 3DS features two screens: The top screen displays 3D images without the need for special glasses, while the bottom screen is touch-sensitive. It also has three cameras-one inner camera points at the user, while two exterior cameras let users take pictures of others in 3D or 2D. It weighs approximately eight ounces and is available in Cosmo Black or Aqua Blue for $250.

The Sony PSP and PS3 platforms each enjoyed a unit sales increase over last March, as well as Microsoft's rival Xbox 360 console, the company noted. The PSP benefited from a $40 per unit price reduction, which occurred at the beginning of the reporting period. NPD reported the No. 1 accessory for March 2011 was the $20 PS3 Network Card, which is the second time since its introduction in June 2008 that it has ranked first. Frazier said this was another indication of digital growth across consoles and how physical retailers are participating.

"We found that increases in some digital forms of content distribution offset the declines in new physical retail sales of software," she said. "2010 saw a consumer spend on games content of $15.9 billion, which was essentially flat [down less than one half of one percentage point from] 2009."