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In this post, I publish my initial results for a study of publicly available data on digital publishing in the video game industry.
The video game industry's transition from pure retail distribution to a mixture of digital and retail distribution has obscured our understanding of the health of the industry. Whereas a retail tracking company like The NPD Group used to be able to provide a reliable external measurement of sales, digital sales often happen completely external to the retail channel. And the magnitude of those digital sales is clearly now significant enough that a retail-only view simply is not sufficient.
Yes, The NPD Group does provide some digital estimations with their monthly reports, but we have not seen the industry coalesce behind them. The same can be said, I believe, for players like SuperData and NewZoo, both of which I believe are doing their own independent work to provide some insights into the larger video game market.
Below, I've provided the results of some data collection I've done on my own using public records. Specifically, I've pulled data from the documents provided in the investor relations areas of 20 company websites.
Let's go through them in groups.
We now have four major, traditional Western publishers that break out their digital sales for the public: Activision Blizzard, Electronic Arts, Take-Two Interactive, and Ubisoft. When you see their digital revenues, you realize that the first two are in one league while the latter two are entirely in another.
Below is a graph of the trailing-twelve month digital revenues for each of these four companies. That is, the number at each point represents the total revenue for the twelve month period leading up to that date. This type of measurement smooths out seasonality (e.g. a very lucrative quarter might dwarf the one immediately after it) and permits us to focus just on longer-term growth or contraction.
Four years ago, Activision Blizzard had annual digital receipts of around $1.6 billion, and the company's fortunes have waxed and waned largely in time with the release of World of Warcraft expansions and, I believe, successful DLC releases for Call of Duty. Today they are at $2.2 billion in annual digital revenue.
During that same period, just look at the steady expansion of the digital business for EA. They've gone from just over $800 million per year in digital revenue to the same $2.2 billion figure that Activision Blizzard just hit.
I do wonder if the steady rise in digital revenue for each of these two companies, especially in the past 15 months, is tied to the rapid uptake of the new consoles from Microsoft and Sony. Both consoles are aggressively pushing digital sales, and both Activision Blizzard and EA are ideally placed to benefit from the shift to digital on consoles.
During this same four-year period, Ubisoft has gone from being a $50 million per year digital company to almost $500 million per year. That's an amazing rate of growth, but it likely isn't sustainable and they're still quite far behind Activision Blizzard and EA in terms of total digital revenues. Take-Two is ahead of Ubisoft at this point -- up over $600 million per year in digital revenues -- but again still significantly behind EA and Activision Blizzard.
For traditional Japanese publishers, the picture is quite different. Specifically, some companies are growing and others are stable, while still others have even seen their digital revenues in contraction. The figure below shows the TTM revenues for Capcom, Konami, Nintendo, Sega, Square Enix, and Tecmo Koei.
Konami has been in the news recently for its mixed messages on future development plans. In the data I've examined, they were one of the more perplexing cases, not for what they were developing but for how they've reported their data. Several years ago they were much more forward-looking and broke out some details of their digital revenue, showing that they had a very robust digital income stream. However, 2.5 years ago they simply stopped breaking that data out in their public documents. Why stop when they were looking quite strong? Why announce intentions for a stronger push toward mobile when they've publicized very little information that would suggest this is a sound plan?
Sega and Capcom are also interesting cases, because they've shown some contraction in their digital businesses in recent quarters. In fact, Capcom has been in decline for almost two years. With the recent releases of their Resident Evil games on digital platforms, however, I think they've begun to turn their results around.
On the other hand, Nintendo and Square Enix are showing very strong growth in the past four years. Nintendo's revenues have tripled while Square's revenues have doubled. Given Nintendo's reluctance to embrace digital in the first place, it's good to see that they're coming around and finding a receptive market. With their new initiatives with DeNA (on mobile) and GungHo (Puzzles & Dragons games on Nintendo platforms), they should begin to see even more digital revenue coming in quite soon.
However, all of these publishers have digital revenues that are behind the #3 traditional Western publisher. The highest recent public data we have for a traditional Japanese publisher's digital revenue is $602 million per year, from Square Enix. In the same twelve-month period, Take-Two has earned $616 million in digital revenue.
In future posts, I'll be breaking out the same kind of data from purely digital publishers, and comparing them with these traditional publishers.
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