The games of retail: What U.S. shoppers have bought in 2012

Last week I focused on the first half of 2012: the U.S. retail video game industry sliced into its three primary segments (hardware, software, and accessories) and the big three platform owners (Microsoft, Nintendo, and Sony). Today I want to look at software specifically, and offer a comment on what I see as an important battle that will play out later this year. First, I want to look at the U.S. top 10 retail game sales chart for June 2012 as released by the NPD Group. This covers the five-week period from May 27 through June 30. While I don't have precise figures for all these titles, I can offer some bounds that give us a general idea of how well things are selling in terms of units. The top-selling game for the month was LEGO Batman 2: DC Super Heroes, a new release which sold around 450,000 units across seven platforms. The LEGO game series has a solid reputation, turning out licensed games that consumers consistently enjoy, and LEGO Batman 2 appears to be continuing that tradition. Note that when platforms are listed, the order given indicates the ranking of the individual versions of that title. So the notation "360, PS3, PC" means that the Xbox 360 version was the top-selling version, followed by the PlayStation 3 version, and finally the Windows PC version. I would point out however, that the Xbox 360 has become the lead platform. Look back to last year's LEGO Pirates of the Caribbean and you'll see that the Wii led in sales from May through August. Then in September LEGO Star Wars III: The Clone Wars launched and, as expected, the Wii was the lead platform. That's changed now, and either because the Wii is dying or the Xbox 360 is surging (or a bit of both), the LEGO games now appear to be doing better on Microsoft's platform. Three May releases continued strong sales into June: Ghost Recon: Future Soldier from Ubisoft, Diablo III from Activision Blizzard, and Max Payne 3 from Take-Two Interactive. With the NBA finals between the Oklahoma City Thunder and the Miami Heat running throughout June, it is no surprise that NBA 2K12 from 2K Sports also made the monthly top 10. Rounding out the chart were two June releases and three late 2011 releases, including another Batman title and two combat shooters. The June releases were Pokemon Conquest for the Nintendo DS (and the compatible Nintendo 3DS) and a game based on the newly released Amazing Spider-Man reboot. The NPD Group also told Game Informer that Lollipop Chainsaw from WB Interactive Studios sold over 107,000 units across the Xbox 360 and PlayStation 3. That allows us to also observe that every title on the chart above sold over 107,000 units in June 2012. The NPD Group also provided me with two more charts that I want to share with you. The first shows the top-selling games for the first half of 2012. Here it is. This chart reveals that, despite a decline in sales relative to Black Ops during a comparable period, Call of Duty: Modern Warfare 3 is the top-selling game so far in 2012. Given the history of Call of Duty sales and suggestions that the latest iteration is down about 50 percent from last year and the fact that it leads Mass Effect 3 for the year, I'd estimate that Modern Warfare 3 has hit over 1.3 million units just in 2012. That gives us a rough ceiling for the chart above. On the bottom of the chart is Max Payne 3, whose sales were over 440,000 in its launch month and probably well over 110,000 in June, putting its total sales at over 550,000. I'd estimate they're actually well over 600,000, and that would help put a minimum on the year-to-date chart. For the titles in between, I'd estimate that Mass Effect 3 is well over 1.2 million units while sales of Diablo III is in the neighborhood of 1 million units (note that Diablo III is also a strong seller on Battle.net, on which NPD does not report). That makes for a great half-year for NBA 2K12, which appears to have sold over a million units so far in 2012. The other big winner that I see in this group is Activision's Skylanders: Spyro's Adventure, which I expect has sales of around 650,000 units. Granted, it is on five platforms, but the software sales don't tell the full story. According to figures provided to me by the NPD Group, the video game-toy tie-in Skylanders has sold over 1.8 million units of software at a value of over $113 million since its launch in October of last year. (That means, incidentally, that it was a million seller before the end of 2011.) Moreover, 11 million units of Skylanders accessories have been sold, or an average of over 1 million units per month since launch. According to its first quarter conference call, Activision Blizzard reported that it had sold 20 million Skylanders figurines worldwide. That's a tremendous amount of what I suspect is high margin revenue to pile on top of the profitable software. So here's a big question for later this year: What will be the leading platform for Skylander Giants, the sequel due in October? While the Wii U is a natural fit for the game, that platform probably won't even be out in October when Giants launches. I believe that leaves a huge opening for Microsoft, and to a lesser extent Sony. With Kinect and its lower entry-level price, the Xbox 360 is primed to attract casual users leaving the Wii platform. And, as the chart above shows, the Xbox 360 is second only to the Wii for Skylanders software sales. There's no chance to tie up exclusivity, but I do think it would be very interesting to see Microsoft pitch a Skylanders hardware bundle during the last quarter of this year. Combined with its grasp on the hard core market, a bundle like that for casual consumers with kids would do quite well indeed. There is, of course, no reason that Sony couldn't do the same thing, and I would in fact love to see them get a bundle out there instead of Microsoft. With what I expect to be a lower price in about a month's time, Sony could blaze into the holiday season and scoop up a good deal of casual consumers with a Skylanders bundle. In the interest of fairness, I want to point out that I may be alone on this score. When I asked Wedbush Securities analyst Michael Pachter about the future of Skylanders this year, he commented that "the Wii base [would] continue to support the game" but that he "[did]n't see it growing on the other consoles." Perhaps he's right. Finally, I did mention in my last column that Pachter believes that hard core game consumers are still buying software like they used to, and I wanted to tie that back into a final chart for the first half of the year. If we focus only on all the titles that launched in 2012, the top five new releases of the year looks like this, again directly from the NPD Group. With all the big titles from late 2011 removed, the new releases so far in 2012 are all M-rated games. It's a bit of a logical shortcut, but I'd argue that this is reasonably good evidence that hard core gamers are by and large still in the console market and still buying the titles that the industry is offering them. I realize that some key hard core titles aren't on here - The Witcher 2, Dragon's Dogma, Street Fighter X Tekken, Soul Calibur V, and many more - but the ones that are here were clearly intended for consumption by the core game consumer. That wouldn't have been true from 2007 through 2010 when titles like Wii Play, Wii Fit, Mario Kart Wii, and New Super Mario Bros. Wii were burning up the sales charts. What did 2012 have to offer those consumers? As I've said before: the hard core gamers are out there, and they'll continue to buy software. The key question for the traditional console and handheld industry is whether they can get the casual players to give them another try. [Thanks to Liam Callahan of the NPD Group for providing additional information and context for this column.]