Videogame biz sets new revenue record

Total hardware, software sales grew to $12.9 billion in 2006

By George T. Chronis -- Video Business, 1/12/2007

JAN. 12 | The videogame industry ignored the traditional travails of a major console hardware transition in 2006 by posting a bold 19% gain in revenue to $12.9 billion, compared to $10.5 billion last year. During December, retailers raked in $3.7 billion, an increase of 28%.

The robust new domestic record in total videogame hardware and software sales was achieved despite Blu-ray technology-related production problems that led to a nine-month delay in releasing the PlayStation 3. Consumers purchased the Xbox 360, PS3 and Wii when and where they could, but they didn’t hesitate to purchase the older PlayStation 2 or the restyled Nintendo DS Lite handheld as alternatives.

During December, console hardware sales grew 131% to $1.1 billion. For the year, console sales totaled $2.9 billion, up 88%. When handheld hardware sales are included, total hardware sales in December were $1.6 billion, a 59% increase. For the year, $4.6 billion in videogame hardware was sold, up 43% over 2005.

Videogame software sales in December grew a respectable 5% over 2005, at $1.7 billion, and 115% better than November’s take. Handheld games had the greatest increase, up 18.8% to $521.6 million. For the year as a whole, total game sales grew 6.4% to $6.5 billion.

There was a note of concern, however, in the 19% year-over-year decline of PS2 software sales during December despite strong sales of the console.

“While it is possible that the greater-than-expected decline of PS2 software sales was primarily due to greater excitement about next-generation consoles, we are at a loss to fully explain the decline,” Wedbush Morgan Securities managing director of research Michael Pachter said in a note. “The sales pattern over the last few months had suggested to us that consumers are less concerned about the transition than they have been in prior console cycles. However, the precipitous decline in PS2 software sales concerns us. Now that PS3 and Wii hardware are beginning to show up at retail, we wonder whether the decline in PS2 software sales will continue.”

Each of 2006’s 10 best-selling games sold more than 1 million units, with Madden NFL 2007 on top, at 2.8 million units sold. Microsoft’s Gears of War was the third best-selling game for the year, with 1.8 million units sold since Nov. 7. The title also was the No. 1 selling SKU during December, at more than 815,000 units.

Source: NPD Funworld