Exclusive: U.S. Sales Analysis Reveals Slowing Growth

Author: by Matt Matthews, Staff

[Ahead of Gamasutra's full NPD analysis on Monday, an exclusive graph shows the story behind its record revenues -- that year on year growth rates are dramatically slowing as we move into 2009.] According to figures released yesterday by the NPD Group, U.S. video game industry revenue in 2008 grew by 19% year-on-year and reached a record total of $21.3 billion. These figures confirm that the industry is still strong and growing, but when compared to early growth rates, it is clear that the expansion has slowed substantially. This Gamasutra-created graphic shows year-on-year hardware and software revenue change. As can be seen, the industry entered a period of rapid growth in late 2006 that peaked in 2007, and has subsequently cooled throughout 2008. Several factors contributed to the vigorous growth in the last six months of 2006: the popularity of the newly-released Nintendo DS Lite, a strong second year of software for Microsoft's Xbox 360, the release of Guitar Hero II for the PlayStation 2, and then the launch of Nintendo's Wii and Sony's PlayStation 3. During the first half of 2007 strong Xbox 360 software sales, including its own version of Guitar Hero II, along with gradually ramping Wii supplies helped increase revenue. Then from July to December of 2007 a series of hit software titles like Halo 3, Guitar Hero III, Assassin's Creed, Super Mario Galaxy, and Call of Duty 4 pulled in software revenue at record rates. The 36% growth in 1H08 over 1H07 was driven by several factors, among them increased sales of the relatively expensive PlayStation 3 hardware, the release of Grand Theft Auto 4 on the Xbox 360 and PlayStation 3, several key Wii titles like Super Smash Bros. Brawl and Mario Kart, and the release of Metal Gear Solid 4 for the PS3 in June. The comparison against the previous year for the second half of 2008 was always going to be a difficult one, given the extraordinary sales of late 2007 titles like Halo 3 and Guitar Hero III. And given that the United States economy went into recession in December 2007 and economic conditions have only worsened since that time, it is compelling that the video game industry still managed 10% growth during the last six months of 2008. But as can be seen, this is the slowest period of growth since the first half of 2006. Gamasutra will have more in-depth researched takeaways from the key December NPD information in its customary full analysis, debuting Monday.