The Overall Market

With March 2008 finished, we can now compare the first quarter of 2008 to the first quarters of the prior five years.



The real effect of the transition from the last generation of hardware to the current generation can first be seen in the 50% growth of 1Q sales between 2006 and 2007. Between 2007 and 2008, first quarter revenue is up 27%, which is still impressive given the widespread belief that the American economy is either in or headed for a recession.

For the moment assume that consumer concern over a recession in the U.S. economy is actually holding back videogame purchases to at least some extent. Then it raises the question: Just how much better could the industry be doing were the economy doing well and consumer sentiment higher? Would we be looking at a $5.0 billion first quarter instead of a “mere” $4.2 billion one?

Software sales in March nearly topped $1 billion. To put this figure in context, we can compare it to March figures from previous years:



Software revenue is up over 63% from 2007 and almost 90% since 2006. It should be noted that this does not mean people are buying 90% more games in 2008 than they were in 2006. If we examine average sale prices of software over the same time period, we see that consumers are paying nearly 33% more for their games today than they were two years ago.



Using the figures we have, it becomes clear that unit sales of software are up around 40% from two years ago – a far cry from the 90% increase in revenue during the same period.

As for the industry as a whole, it has generated as much revenue in three months as it did in four months in 2007.



What is perhaps more astonishing is that the first three months of 2007 included an extra week – a so-called “leap week” – that NPD uses to keep its retail calendar aligned with the real calendar. Put another way, more revenue has been generated in the first 13 weeks of 2008 than was generated in the first 18 weeks of 2007.

Acknowledgments

As usual, thanks to the NPD Group for its public data releases. Additional data was obtained from monthly figures published by the simExchange and Wedbush Morgan's Michael Pachter.