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November 2008 NPD Article (Gamasutra)

J

jvm

Gamasutra.
Gamasutra posted an article I wrote on the November 2008 figures released by the NPD Group.

Things of possible interest to sales-agers: Rock Band 2 did not make the top 10 on the Xbox 360, but was 10th on the PS3, LTD figures for EA titles (Madden, Burnout Paradise, Dead Space, and Mirror's Edge), industry expectation of hitting $22B for the year seems a bit high.

Direct link to Gamasutra article about November 2008 NPD.

Here's a graph from my article:
ea-sales.png


I also tried to use the "relative installed base" graphs, similar to what I've used previously, to show just what has happened between the big three consoles in the past two years. I'd be interested in feedback. Again, the main advantage of the way I've portrayed the data is that it removes the scale issues we see in the usual LTD graphs.

I have the top 10 lists for the month. Have they been released elsewhere?

As always, constructive criticism is welcome. If I made an error, kindly let me know and I'll get it fixed ASAP. Thanks, guys.

In case you'd like to review previous threads:
October 2008
September 2008
August 2008
July 2008
June 2008
May 2008
April 2008
March 2008
February 2008
January 2008
December and all of 2007
November 2007
October 2007
 
Shig said:
This angers me greatly.
Click to expand...
I didn't know what I'd get when I requested those figures. I tried to write about them dispassionately, and you can judge how I did.

However, on a personal level, I understand your anger. I thought Burnout Paradise was a fantastic game, and I thought Dead Space was very good. (I take issues with Mirror's Edge, but I can at least understand why people liked it and appreciate the changes it took. I did finish it, but was not a fan.) Seeing them struggling like this is uncomfortable, to say the least.

The Burnout Paradise figure, in particular, was surprising to me.
 
Very interesting write-up, thanks for sharing.
The only thing probably worth adding is, that the 360 sold more in November 2007 at a similar pricepoint than the PS3 in November 2008, what should be a warning point that the economical climate may bother the industry more than it currently expects.
Add to that that the industries growth yoy is mostly based on the runaway success of the Wii, which should be a warning sign for software devs to adjust their business models accordingly.
 
It's a real shame that Dead Space an Mirror's Edge didn't deliver on the sales front. Such a shame. Nice article though
 
jvm said:
Below 500,000 so far, including Xbox 360, PS3, and PC versions together.
Click to expand...
Well that doesn't sound terrible.

You know, people wonder why game developers and publishers go out of business left and right. Maybe it's because you can sell 500k copies of a game, generate about $30,000,000 in revenue, and that's "disappointing."
 
Draft said:
Well that doesn't sound terrible.

You know, people wonder why game developers and publishers go out of business left and right. Maybe it's because you can sell 500k copies of a game, generate about $30,000,000 in revenue, and that's "disappointing."
Click to expand...
I imagine the decision to close studios has little to nothing to do with commentary on sales at NeoGAF or Gamasutra.
 
Draft said:
Well that doesn't sound terrible.

You know, people wonder why game developers and publishers go out of business left and right. Maybe it's because you can sell 500k copies of a game, generate about $30,000,000 in revenue, and that's "disappointing."
Click to expand...


Time to cut cost and start making more 2d games :D .




Great read btw, I always look forward to it.
 
Draft said:
Well that doesn't sound terrible.

You know, people wonder why game developers and publishers go out of business left and right. Maybe it's because you can sell 500k copies of a game, generate about $30,000,000 in revenue, and that's "disappointing."
Click to expand...


Well, you have to take all the costs too. This is an HD game so it costs alot to develop. Also, its not like the publisher sees all of that money when the game is sold. First, the stores have markup from what they buy it from. They do not pay EA 60 for each game. Second, EA has to pay license fees. I'm not sure how much they are, but they eat into the profits. Third, advertising costs. The game has to sell enough to make up all the advertising costs to be close to considered successful. Lastly, they have to make up all those dev costs. This means salaries, equipment, etc. So, to say 500k is enough to make a profit is wrong. Not only that, they have to make enough profit to decide it warrants a sequel. Do they really want a new, large project if it netted almost no profit or only broke even? EA is a business and wants to make money.

This is why I think that HD development, as a whole, is unsustainable. The cost is high and you have to sell AT LEAST 500k units to break even, often more. So we see some big highlights, some good titles that break 1mil but then we have a ton of titles that don't even come close to making the cut, such as VC or here, Mirror's Edge. The risk/reward ratio is too low, they cannot keep it up.
 
Poor BurnOut - only 600K LTD on both consoles even after a price drop and so much free content ? :-/
People said Boom Blox flopped with +500K sales ( i know worldwide - but still)
 
MotherFan said:
Well, you have to take all the costs too. This is an HD game so it costs alot to develop. Also, its not like the publisher sees all of that money when the game is sold. First, the stores have markup from what they buy it from. They do not pay EA 60 for each game. Second, EA has to pay license fees. I'm not sure how much they are, but they eat into the profits. Third, advertising costs. The game has to sell enough to make up all the advertising costs to be close to considered successful. Lastly, they have to make up all those dev costs. This means salaries, equipment, etc. So, to say 500k is enough to make a profit is wrong. Not only that, they have to make enough profit to decide it warrants a sequel. Do they really want a new, large project if it netted almost no profit or only broke even? EA is a business and wants to make money.

This is why I think that HD development, as a whole, is unsustainable. The cost is high and you have to sell AT LEAST 500k units to break even, often more. So we see some big highlights, some good titles that break 1mil but then we have a ton of titles that don't even come close to making the cut, such as VC or here, Mirror's Edge. The risk/reward ratio is too low, they cannot keep it up.
Click to expand...
No, I understand that's not $30,000,000 in EA's pocket. What I'm saying is that when you care out the publisher's return on 500k sold, if you aren't at least breaking even at that point, maybe there's a fundamental flaw in the business of game development.
 
cw_sasuke said:
Poor BurnOut - only 600K LTD on both consoles even after a price drop and so much free content ? :-/
People said Boom Blox flopped with +500K sales ( i know worldwide - but still)
Click to expand...

USA sold vs shipped worldwide
 
Draft said:
No, I understand that's not $30,000,000 in EA's pocket. What I'm saying is that when you care out the publisher's return on 500k sold, if you aren't at least breaking even at that point, maybe there's a fundamental flaw in the business of game development.
Click to expand...

Indeed. I would agree with this. This is why I do not get mad at the numbers. The market is saturated with good games, so not all of them are going to be bought obviously. The business models these companies are employing are, to be honest, bad. They have not responded to the amount of games on the market or to the higher development costs. EA finally is by decreasing/canceling some projects. SE did by releasing FFXIII on both HD consoles and moving DQ X to wii. I doubt this will be the last time a big release does not make a profit this generation. And, unlike the others, a failure on a big budget game this generation makes a MUCH bigger loss, and offsets the smaller profits they make on the other, successful titles.
 
Great article as always. Any chance you can get hold of the updated ASPs for the 360 and PS3? I'm quite interested to see if there have been any fluctuations in the demand for particular models.
 
Man, I wish Dead Space would have sold more, although it didn't do terrible either. Sleeper hit of the year IMO.

Hope we still get a sequel someday.
 
Wow Rock Band 2 was not even in the Top 10 for the 360 and dead last in the Top 10 for PS3 (which if the top sales of the PS3 were hovering between 141-200k then jesus that is pretty low)
 
Draft said:
Well that doesn't sound terrible.

You know, people wonder why game developers and publishers go out of business left and right. Maybe it's because you can sell 500k copies of a game, generate about $30,000,000 in revenue, and that's "disappointing."
Click to expand...
Thats $60*500K. How much of that goes to the developer again?
(BTW, Dead Space is not a bomba, there's worldwide sales as well)
 
M3d10n said:
Thats $60*500K. How much of that goes to the developer again?
(BTW, Dead Space is not a bomba, there's worldwide sales as well)
Click to expand...

That's the point. The game makes 30Mil in revenue and still cannot make a profit. The model is broken.
 
EA made a fatal mistake of putting all of their big releases this season within weeks of each other. That's the issue they have. This is a different playing field EA. You can't expect to put a bevy of titles and dominate. Not with the other publishers doing the same with better product.
 
bad-joey said:
It's a real shame that Dead Space an Mirror's Edge didn't deliver on the sales front. Such a shame. Nice article though
Click to expand...
I imagine the decision to do sequels despite those sales will bear fruit, though. It'll probably be like Prince of Persia last gen; the first game doesn't do well off the bat but snowballs over time through word of mouth, then the sequels reap the rewards.
 
markatisu said:
Wow Rock Band 2 was not even in the Top 10 for the 360 and dead last in the Top 10 for PS3 (which if the top sales of the PS3 were hovering between 141-200k then jesus that is pretty low)
Click to expand...

I think the market is saturated with these games. It doesn't help that Activision releases a GH several times a year.

They probably make good money on DLC.
 
Psychotext said:
Great article as always. Any chance you can get hold of the updated ASPs for the 360 and PS3? I'm quite interested to see if there have been any fluctuations in the demand for particular models.
Click to expand...
Pachter said Xbox 360 ASP is at $270. Unless he's just rounding to the nearest $10 increment, that's a drop from what I'd estimated before ($275 in Sep and Oct).

I will double check PS3 when I get home. My main concern there is that I suspect (but can't prove) that the PSP ASP has gone up a few dollars, and I don't have a good grasp on the PS2 ASP with the Batman bundles possibly skewing it slightly higher. I can try, though.
 
Draft said:
Well that doesn't sound terrible.

You know, people wonder why game developers and publishers go out of business left and right. Maybe it's because you can sell 500k copies of a game, generate about $30,000,000 in revenue, and that's "disappointing."
Click to expand...
Well, consider that the developer and publisher sees what 1/3 of that? So 10 million, you're getting awfully close to the cost of development for a PS3/360 AAA title.
 
MotherFan said:
That's the point. The game makes 30Mil in revenue and still cannot make a profit. The model is broken.
Click to expand...
Exactly. What is the break even on your average HD game? Must be more than 500k. 750k? A million? How insane is a business model that needs to move a million units before mark downs to put any money in your pocket?
 
Great article, as always, and count me in the "angered by graph" group. Good lord, that looks painful. EA tries to do something fresh, and they get slapped across all cheeks for it. BAD PRECEDENT! BAD! :(
 
Draft said:
Exactly. What is the break even on your average HD game? Must be more than 500k. 750k? A million? How insane is a business model that needs to move a million units before mark downs to put any money in your pocket?
Click to expand...

And that is why Nintendo is dominating.
 
Lathentar said:
Well, consider that the developer and publisher sees what 1/3 of that? So 10 million, you're getting awfully close to the cost of development for a PS3/360 AAA title.
Click to expand...

10 million? You have a source for that? We know MGS4 cost what, 50mil +? Now obviously most AAA titles will not cost this, but I would say they are at least 35-40% of the cost, maybe a bit less. So, for AAA title 15 mil minimum. I would say the break even for most "AAA" titles is 750k-1mil units.
 
Draft said:
Exactly. What is the break even on your average HD game? Must be more than 500k. 750k? A million? How insane is a business model that needs to move a million units before mark downs to put any money in your pocket?
Click to expand...
It's different on a number of variables. Mostly though it depends on the game development. And the developer that makes it. Some developers can achieve a lower break even point than others in the field given how they utilize their development resources. Also would depend on the publisher as well and the concessions they can make in comparison to others for game development support.
 
Shadow Moses said:
Stupid graph.

1000 thousands?
Click to expand...
1,000 thousands is a million. It gives a better perspective that its sold 600,000 when it's over half the way to 1,000 than if it's just 1, 2, 3, 4.
 
Revelations said:
EA made a fatal mistake of putting all of their big releases this season within weeks of each other. That's the issue they have. This is a different playing field EA. You can't expect to put a bevy of titles and dominate. Not with the other publishers doing the same with better product.
Click to expand...

So they have managed to create a market where you have to time the release of your game because if you're off by a month you'll lose a huge amount of money - same if you don't invest another bunch of money in a sophisticated marketing campaign. The whole market is retarded. This is what the big publishers wanted, they have control now and not the actual creative segment of the industry. This'll only get worse :-)
 
jvm: Great article - I always look forward to your analysis. For next time, would you be interested in doing an analysis of front-loaded v. evergreen software sales? Looking at the top 12 titles in Oct NPD (because we were fortunate to get GHWT numbers) and tracking their performance in Nov NPD:

Code: 
Oct NPD Rank	Title		Sales	Nov NPD Rank	Sales		Total
1		360 Fable 2	790k	19		184k		974k
2		Wii Fit		487k	4		697k		1184k
3		360 Fallout 3	375k	12		est 272k	est 647k
4		Wii Mario Kart	290k	5		637k		927k
5		Wii Play	282k	3		796k		1078k
6		360 Saints 2	270k	>20		max 183k	max 453k
7		PS3 SOCOM	231k	>20		max 183k	max 414k
8		PS3 LBP		215k	>20		141k		356k
9		360 NBA 2K9	202k	>20		max 183k	max 385k
10		360 Dead Space	193k	>20		max 183k	max 376k
11		360 GHWT	191k	15		est 234k	est 425k
12		Wii GHWT	183k	6		475k		658k

"est" means I used a linear interpolation between the known Nov sales of Wii AC (284k) and 360 Fable 2 (184k). "max" means I used 1k less than the known Nov sales of Fable 2 (183k)

This gives a 2 month total for titles that charted in the top 12 in Oct:
360 = 3260k
Wii = 3847k
PS3 = 770k

If we include newly charted titles in Nov in the 2 month cumulative (using same "est" and "max" method):
360 = 6413k, newly charted titles = 49%
Wii = 4687k, newly charted titles = 18%
PS3 = 1752k, newly charted titles = 56%

Would you be interested in pursuing this type of analysis for next month? I'd be very interested to see what you could come up with given your access to data and your historical archives.

Thanks for your consideration!
 
Draft said:
Exactly. What is the break even on your average HD game? Must be more than 500k. 750k? A million? How insane is a business model that needs to move a million units before mark downs to put any money in your pocket?
Click to expand...

I've heard from a few places that the breaking even point is usually around 1 million units sold WW for the average HD game. So for a game like Mirror's Edge unless it suddenly does some big numbers, has nintendo like legs, or puts up really impressive numbers in Europe, it's not breaking even.

I would imagine Dead Space has a fair chance of breaking even. If it can do some decent numbers in December, and match its US sales in Europe it should be ok.
 
Both Deadspace and Mirrors Edge have no online multiplayer.


Left 4 Dead does.



Don't get me wrong, a game can sell with just strong single player (Bioshock), but it is getting harder to do.
 
IIRC at the beginning of Wiis ascent the number of 500k ww sales for a HD game was thrown around as break-even point by some japanese pub. This, of course, is heavily dependant on the devs, the location, the publishing deal, and loads of other factors, so I guess you can't just establish a fixed "limit".
Luckyman said:
Mirror's Edge biggest bomba of recent history?
Click to expand...
I see someone hasn't heard about Valkyria Chronicles sales. What was it, 33k? Something around that number. Failed to get into the Top100 or something. Freaking OUCH. That's not even a bomba, that's a fizzle. I weep for you, PS3 owners.
 
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