News Article

Latest Figures Show The Video Game Market Is Contracting

Posted by Andy Green

Satoru Iwata briefs investors and reveals many challenges for the industry

Nintendo is certainly having a good old time in Japan. The 3DS is dominating hardware sales in the region, so much so it has already surpassed the 10 million sales mark. However, things aren't looking as rosy in the overseas markets, namely the US and Europe, where Nintendo's consoles have done reasonably well against their competitors, but not to the level that the company would like.

As previously reported, Nintendo President Satoru Iwata held a Corporate Management Policy Briefing recently, where he met with investors and showed some disappointing results regarding Nintendo's performance in overseas markets, as well as the revealing trend that the video game market on a whole is shrinking.

The portable consoles market in the US, for example, isn't as healthy as it once was. The 3DS did gain some momentum with the launch of the 3DS XL as well as New Super Mario Bros. 2 in August, but the subsequent growth in sales was not sufficient. On the positive side the 3DS became the number one selling handheld in the US, but its year-on-year sales actually decreased, so much so that fewer units were sold in the US than in Japan - astonishing considering the size of the US market.

The US market, though still considerably large, has certainly shrunk in recent years. Last year the entire market contracted by 27% (on a year-on-year basis). Only two times more hardware were sold in the US than in Japan, this includes all platforms. Nintendo has sold 10 million units of hardware in the US for nine consecutive years, however in 2012 that ended with the company only shifting 8.5 million units in total.

It's not just the hardware market that's seeing a slump either, software sales have also dropped, with a 23% (on a year-on-year basis) decline in 2012. Nintendo points to the lack of "powerful" first party titles leaving gamers keeping their cash rather than buying new games. Digital distribution is another factor, however it has not grown anywhere near enough to explain a 23% drop.

Of the main three regions, Nintendo performed most poorly in the US last year. Nintendo says its recent downward revision of its financial forecast is largely down to the slow growth in US sales combined with a contracting market. Of the top 20 best selling games in 2012 only five were prominent on Nintendo systems: New Super Mario Bros. 2, Mario Kart 7, Pokemon Black Version 2, Just Dance 4 and Just Dance 3. This shows that people sure do love to dance but also that Nintendo lacked killer titles in 2012, resulting in poor sales.

Europe didn't fare too well either. As was expected Wii didn't have as much of a presence as it did in previous years, but probably most alarmingly for the company its successor, the Wii U, lost its momentum fastest in Europe. As with other regions the 3DS sold the most units in the handheld market, but similar to the US its sales peak was quite low and never reached the golden 300,000 units per week mark, which it previously had done.

Just as the US hardware market shrank, so too did the European market. In the last three years sales across all consoles and manufacturers decreased year-on-year, and in 2012 hardware sales dropped as much as 24% compared to the previous year. As Europe has many regions, Nintendo took data from the UK, Germany, France and Spain to get a rough picture of what was going on. Of those four markets France and Germany showed the most cause for optimism while the UK, on the other hand, did not.

Of all major countries Nintendo operates in, it performed worst in the UK. It is the largest market in Europe and yet only five titles made it into the top 20 best selling games for 2012: Super Mario 3D Land, New Super Mario Bros. 2, Mario Kart 7, Mario & Sonic London 2012 Olympic Games and of course Just Dance 4. Worryingly, most of these games found themselves languishing towards the bottom of the table. The 3DS is particularly suffering, experiencing its biggest year-on-year drop in 2012.

Nintendo's market share in Japan resembles clear dominance, but once the other regions get added all of a sudden it becomes much more of a level playing field.

These worrying figures certainly represent a challenge to the gaming industry. It is true that sales may well be expected to be low, with the Wii, PlayStation 3 and Xbox 360 all nearing the end of their product life cycles, but the way the market has contracted in the US and Europe will surely have people at Nintendo, Sony and Microsoft worrying about the future of their new hardware.

What are your thoughts on these slightly depressing findings? Do you think the gaming industry is on a decline? Let us know in the comments below.


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User Comments (50)




That's why I will move to Japan and find a kawaii waifu and we can play videogames all day in the land of the rising sun!



Auracle said:

I was afraid of this. The Wii U was the first home console to launch in this new economic landscape. Its sales and reception may also give us an idea of how the other next gen consoles will preform. Hopefully the industry will work its way out of this funk.



Bankai said:

One of the most obvious reasons for the contraction is the lack of new hardware. Yes, Nintendo has started its next generation. Sony and Microsoft have not.

New hardware generates interest and sales and generally leads to a growth market. I suspect once the next Sony and Microsoft consoles are released that the overall market will start to be look healthier.

For Nintendo, too. Competition from Sony and Microsoft will help drum up sales for Nintendo hardware and software.

The market's just a big stagnant right now, is all.



bezerker99 said:

I'm the only person I know IRL who plays video games. That's why I have to come to the internet to socialize with other gamers.



HandheldGuru97 said:

It is sad to see that mobile games are becoming people's choice for gaming. I myself don't even recognize half of those "games" as games! Still I will stick with my 3DS XL, Atari Lynx and Neo Geo Pocket Color for all my portable gaming needs.



FluttershyGuy said:

As I mentioned yesterday, there is little discretionary entertainment money in this lousy economy. Along with that, people are not only making less, they are doing so working more hours. Companies are trimming workers, and giving the remaining employees more hours. So, the time isn't there either. A friend of mine is working many more hours than she was, and she was just chewed out for taking ONE sick day because she was sick as Hell. This is a growing trend, treatment like this. With so many people out of work, slave treatment can be expected, because you are uber-replaceable.

I've read articles how the US is the most overworked country in the world, with the least amount of vacation time. All work (for peanuts, generally speaking) and no play for Americans!

I'm afraid articles like this will start to become commonplace, for not only Nintendo, but also all game makers. And many other industries.



NImH said:

@Bankai you're scaring me... Starting to sound like an optimist. LOL. But seriously I hope you're right.



cfgk24 said:

Just put simple Mobile phone - text and calls on Nintendo 3DS - hey presto! I don't need my Galaxy S3!!!! all the kids can have a dedicated gaming console/phone/browser! It's all I need - It;s all they need!



Neram said:

I think the reason the market is becoming stagnant is largely due to the fact that the next generation hasn't really started yet, and there just isn't general interest in video games right now. Yes, the Wii U is eighth-gen, but because Sony and Microsoft haven't even started generating excitement or really said anything at all about their next systems, that's sort of slowing things down for Nintendo as well, as it's affecting the industry at large.

Now the only problem I see is, will the next systems actually generate enough excitement and interest to bring the industry back into the shape it was 5 or 6 years ago? It's hard to say considering nearly every kind of digital service has been offered by what's already available, and the evolution rate of graphics is slowing down tremendously compared to when the Xbox 360 and PS3 came out. They're going to have to think of something truly innovative other than graphics and more multimedia options to be able to revitalize the industry again, that's just what I think.



Tate24 said:

Think it not down to games or systems etc. It's all down to fact that we don't all have money rush out buy new games or spend £300 pound new console even though we would love to. The way the government are going with all these increase's making people pay more money for bills etc. Were all beening more tighter With are money and rather go out and buy food or pay bill then spend 60 pound on new game. (That a lot money when haven't got it) Reason sales are down is that most of use can't afford it! Simply. I love Nintendo but come point were am in situation were I can't afford buy a Wii u As its far to expensive in my opinion and at moment. Bills come first and sure alot other people feel same way.



Sean_Aaron said:

Of course the games market is contracting, bloody national economies are contracting! The frigging unemployment rate in Spain is sitting at %26 right now!



SilentHunter382 said:

Well I can see sale starting again when Sony and MS announce there consoles but I don't think Nintendo will have much to worry about when they are announced/released. Yes I do believe they will be a more powerful system but not by much.

I can't see sony doing a PS3 again, I say they will make it as powerful as the wii u with there financial history atm.

I can see the xbox 720 being the more powerful system but since Microsoft has said that they are gonna be focusing on multiplats, I can't see them getting the sale numbers as they would have gotten if they focused more on getting more exclusives.



Bucbanzai said:

Video gaming is following the same path as the Movies, but instead of theater vs DVD/Blue Ray its Consoles vs Phone/mobile gaming. The big franchises keep coming out but people are slowly getting bored with them. Few people want to try new franchised unless they are at a budget price, and like theaters and DVD's a lot of people are happy simple cheap entertainment on the phone and don't feel home consoles offer enought of an upgrade to make it worth the cost of the games and systems. Add to that the fact that even new systems won't add a lot to the Graphics, there as good as a majority of the people feel they need and aside from the Wii U there is no inovation in control, there is just no incentive for non core gamer to invest.
Games and consoles witll go on just like movie theaters go on but the audience will shrink except for the bid franchises just like the movies.



Bankai said:

@NImH I am always optimistic.

I don't buy this "economies are shrinking so should the games industry," argument. As we saw with the great recession the games industry held up quite robustly because games are a relatively cheap form of entertainment, and so what little discretionary spend people had tended to go into games rather than overseas holidays, trips to the cinema for the family and so on.

I see no reason to think this trend will not be repeated with the upcoming global recession version 2.



Will-75 said:

I think who wants to get a system and then wait months and months for good games there are to many other options and I think the 3DS would do alot better in the US and the UK if we had half the games Japan has for the system I mean look at just one example , Animal Crossing has been out in Japan for how long now ? why does everyone else have to wait so long ?



WingedSnagret said:

Well if our stupid government keeps acting the way it is (and due to there being no change in leadership) it's only going to get worse.



rjejr said:

Gonna lend my support to the "its not video games that are contracting, its the worlds collective pocketbooks and wallets that are contracting". Heres a good example - the US didnt raise workers tax rates this year, but all our paychecks went down 2% due to SS. Oh and gas (ie petrol) has been going and up for years. And my wifes employer is still paying the same as it was in 2007. Shes looking for a new job that wont pay her even less. Yet videogames all went up from $50 to the $60 5 years ago and Nintendo just joined in?

Videogame sales are down? No duh.



Void said:

@Will-75 Because translating games and taking out stuff you wouldn't want to be seen in other markets takes lots of time and money.



KAHN said:

ditto. here in [a US state name goes here], everyone i know is a red-neck, which isn't particularly why cup of tea, if you get what i mean. i have to go online in order to socialize with people.



MakeMyBiscuit said:

The economy is still recovering. How do they expect people to spend more money on games when people are just trying to make sure they have food and shelter?

(1) They have to re adjust their goals to take into account the economy. Sometimes this is hard because for many of these "super rich" investors there has been no recession. To them it's life a usual.

(2)If they want to sell more 3DS XL systems here in the U.S. they have to try harder. It is no wonder they are selling so many in Japan, they cater to the market. Look at how many different colors and exclusive versions of the console is available there. Here in the U.S. they only have red and blue. Even the high end Wii U is in black. I'm sorry, but the colors they have here make the system look like a pre-school toy not a cutting edge portable gaming platform. If they are really serious, they need to release the 3DS XL black. I can tell you this is the real reason why I have not upgraded my 3DS. If I'm going to fork over that kind of money in this kind of economy, in the very least the color of the hardware should be appealing to me.



dizzy_boy said:

Games have become either far too serious or far too gimmiky over the past few years, they need to go back to being fun again.
Last gen was ok, the last time I actually enjoyeg a game properly was the gamecube and GBA era.



AugustusOxy said:

I want a world where it doesn't cost 15-30 million dollars to make a game.

The video game market was over-saturated this current generation and people will eventually grow tired of all the Killzones and Call of Duties, just like guitar hero and rockband burn themselves out, so will everything else.

Sony and microsoft are banking on some sort of new hardware to take precedence but in reality, its just going to further plummet them into the dust.



Kiyata_Hamasaki said:

If they would RELEASE THE GAMES WE WANT, then we would BUY THEM! But they refuse to do it and the gaming industry is going to all out collapse if this keeps up. It will be like the video game collapse in the 80s. They could prevent it if they stop being lazy and make the games that the gamers want, and SELL THEM TO US! Like Animal Crossing, for instance! Why has it taken 3+ years to make that game? Really!!!



MysticX said:

Of course the market's contracted ATM, the portable side is doing decently but lacks the big-name "Shut up and take my money!"-titles that sell 3DS-units and people are taking a "Wait and see what the others come up with"-strategy with the Wii U (As well as the game-issue there)

And apparently there's this little economic thingie going on, as well...



Sean_Aaron said:

The only games I see which qualify as "cheap" entertainment are the kind of games I get on my iPad. Even a £30 3DS game looks like a lot of money to me right now. I do plan on getting my daughter a 3DS so she can enjoy the newest Pokemon title when it releases, but other than a £25 eShop card, I'm not planning to buy any software.

Yes people are still buying iPads and iPhones, but you can still get that kind of thing on a payment plan direct from Apple or your mobile company with a heavy subsidy attached (my iPhone 4S was only £60 up-front or I wouldn't have upgraded). Unless Nintendo is going to start offering financing themselves the main thing they're going to struggle with is the initial outlay for the device. Not saying that the 3DS and Wii U are overpriced, but most folk aren't likely to spend that kind of money casually any more.



cornishlee said:

Finally I see an article which focuses on the contraction of the games market instead of poor Nintendo performance.

"Good," I think to myself. "Maybe now people will stop blaming price/games/Iwata/latest excuse and realise that the global economy is the principle factor effecting this industry."

Then I scroll down and read the comments. How old are you people? Do you all just have great jobs or do you all still live at home and not have to pay bills? Sometimes I find the internet an exasperating and depressing place.



Zombie_Barioth said:

The only really cheap games are PC game sales (steam, Amazon, GOG, ect.) digital only, F2P, or older titles. Yes, you can measure a source of entertainment by a money to hours spent ratio but there are still upfront costs involved like anything else and that makes people more selective when choosing which games to buy.

Theres no hype for the next gen consoles and that might change when Sony and MS release theirs, but at the same time many people might not have the money to be hyped about anything.



Gamer83 said:

Poor economy, sequel after been there, done that sequel, no originality (lets face it, every company is run by fools who think all we want are shooters), terrible advertising across the board... There's lots of factors and sadly I don't see things getting better any time soon. Even if the economy drastically improved it doesn't solve the other problems.



Zetchzie said:

yea that sums it up. i have allot of games id like to get but cant afford it at all thats why we have pirates



element187 said:

"The Wii U was the first home console to launch in this new economic landscape."

@True_Hero Exactly right. Its going to be fun to watch Sony fanbois spin to explain why the PS4 isn't flying off the shelf at 400-600$ per console (depends if Sony goes for broke or decides to put a budget console together to stave off bancruptcy)



element187 said:

"Playstation has gotten a lot more powerful since the first Playstation, but the overall sceme of the console hasn't changed a bit."

@Five-seveN The fastest console rarely wins the coveted prize of most sales.... Gamecube was the fastest console when it released and it was awarded with lousy sales.... PS3 was the fastest of this past generation and it flopped big time its for 3-4 years (still hasn't made Sony a single dime).

Nintendo has no motivation to win the processor wars, why? Just for bragging rights? I'm sure Nintendo doesn't want another Gamecube on its hands... Hardcore snob gamers, or PS3 owners, whichever you want to refer to them as, thinks if a company doesn't cater specifically to them, they hope they fail and cheer their bad luck.... its actually a sick show to witness.



RunningWolf said:

Microsoft and Sony better price their new consoles accordingly. If they price their new consoles above and beyond what the average consumer can afford, they will be in the same boat as Nintendo. However, if the prices of the new consoles offered by Microsoft and Sony are substantially more expensive than the Wii U, then Nintendo may have the upper hand with the more less expensive console.



RandomNerds said:

Perhaps gross sales are shrinking, but gaming only gets bigger, unless of course it's "crashing" like it did two decades ago which it is not. I just think its harder to track this kind of data because of free to play models and pay to play models. Not to mention the enormous amount of ways to game. I bet if you added up all this data you'd find the market is still growing, as in adding new gamers. Though it may be at the expense of traditional methods of gaming.



Jellitoe said:

The new price on Wii U games is high, At $60 dollars a game, there is no way I will buy a game because I might like it, I have to be convinced I will. This keeps my money in my bank. Drop the price of game to 39.99 and I will buy more games. Keep the price high and I will be extra selective.
And truth being said, Nintendo has not released squat worth buying.



Cengoku said:

There's no question about it. I sold my european 3ds to buy a japanese 3ds xl! Nintendo doesn't care about us in Europe. So I bought the japanese console. I'm playing Animal Crossing (250 hours gameplay until now). Nintendo should make some efforts about the localisation of Fire Emblem and Animal Crossing for the end of the year.
Level 5 releases a lot of games in Japan but just Layton 5 (which was released the 3ds release day there in Japan). Level 5 is lazy. The same for Rune Factory 4. There are a lot of examples of why you need to buy a japanese 3ds instead an european one. You need to look at all these eshop and VC released games. The 6 Megaman games are already released since 2 months. They have SMB3. Capcom should first release Extroopers in America and Europe instead in Japan. So, if they continue like this, they'll never have again the success of the DS.



DaemonSword said:

60 bucks for a Wii U game is pretty steep, and only the best games will be bought. If I get a Wii U now, until the economy really turns around, most of the games purchased from me will be from the eShop, sadly. Haven't they learned from Shyster Sony that overpricing doesn't work, and their own system, the original low-risk Wii dominated from the get-go, selling at a reasonable price (at least until HDtv's became affordable)?



DaveC said:

I don't think it has to do with economics it has to do with the fact that the Wii U came out and it really didn't look any better than the Xbox 360 or PS3. Those consoles are on their way out. They are antiquated. Why would anyone buy something with graphics on par with a 6 year old console? The Nintendo name and tablet gimmick wasn't enough to do much sales wise. It is like an Xbox 360 with no games. The new consoles should have more advanced power and will do ok if they show a leap from current gen.



DaveC said:


Sony will make the PS4 as powerful as the Wii U? Huh? The Wii U has a 1.2 GHz CPU. The Wii U is not that powerful, probably only a little better than current gen. It has more RAM and a newer GPU than current gen but the CPU is a dog. At the end of the day is comes out a slight bit better than a wash with current gen. Ninyendo put the money into the tablet controler and skimped on the CPU/Graphics. The PS4 and 720 will be far more powerful than the Wii U.



DaveC said:

Of course the 3DS is doing bad outside of Japan, they don't support it very well. There are very few retail game releases. Look at the titles out for the holiday season. There really weren't any big ones. The couple they had were delayed. If they are content to forgo big AAA retail titles in favor of e-shop iOS port shovelware then sales will continue to fall.

They have big game releases in Japan, it sells. They don't do much elsewere, it fails. Not rocket science. You need games to sell a game system!



Zombie_Barioth said:

@DaveC Hate to burst your bubble but the rumored specs for both PS4 and "720" is a 1.6 GHz 8-core amd CPU, CPU speed and number of cores doesn't matter so much as the architecture and utilization of said cores. If the extra cores are intended for multitasking few game are likely to even use them all (most current games don't even use half that).



diavu said:

as many people point out, software on the wii u is a bit lacking.

but personally i've been focussing only on the PC for the last 2-3 years, although i have a Wii and a library of 15 games plus downloadable titles.
now that the wii u has arrived, my attention is once again directed towards the consoles and i am looking forward to aquiring a Wii U.

but the prices for games is close to scaring me away, on the PC games are cheap, and they are easily downloadable. normally you can buy some of the best games avaliable for 5, 10, or 15€. on the wii u, every game at the moment is 40€+. even on the old wii, zelda and super mario galaxy 2 is 30€+. this makes it very expensive to expand your library, and it's not something you just "do". you take care and attention into what you are buying instead of just going "oh, this looks cool. adds to cart". i am fairly certian this harms the sales alot, too.

it is pretty diappointing aswell. i remember 4-7 years ago the latest releases cost 50€, then slowly dropped down untill maybe 30€. this is 2013, and everything is still this expensive? it's insane.



alLabouTandroiD said:

The industry as a whole seems to grow in Europe though. Smartphones and tablet devices are the ones profiting from it. At least if this report here can be trusted and i'm reading it right.



ShortSleevedNook said:

I think a few of the problems here have to do with mobile gaming: many casual gamers don't need a video game system anymore, or a handheld, for that matter, because all of their gaming needs can be found on a smartphone, tablet, an iPod, or even on Facebook, and to top things off, games on those services are much cheaper, or even free! You see, back in the day with the GameBoy, the GBA, the DS, and maybe even the Wii at it's launch, this smartphone-gaming market didn't really exist. Games on cellphones usually consisted of Solitaire and other boring stuff (Don't get me wrong, love solitaire! ), which meant that casual gamers had to buy a GameBoy, an N64, a PlayStation, or whatever if they wanted a good gaming experience besides the one on a PC. However, today, that's not that case. Smartphones can do everything, including casual gaming, so that entire market doesn't need a Nintendo DS to have video games on the go. In fact, why bother when you can carry your entire video, music, and photo library as well as all of your games on one device? Sounds like the perfect casual gaming machine!

So basically, this could explain the shrinking market. That, and I think Nintendo would probably get some more sales if they put to death Emulation. Seriously, they claim to be doing so much to prevent it, but I could go on Google and easily find 15 different sites where I can download Super Mario Bros. and find a step-by-step tutorial on how to play it on my PC. It's just sad.



DaveC said:

"the rumored specs"

That says it all. Rumors are just that. I have heard other rumors that the CPU was power PC based. Even if your rumors are true, 8 1.6GHz cores are still better than 3 1.2 GHz cores.

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