Report: Games Make Record $10.3B in 200230 Jan, 2003 By: John Gaudiosi
The official numbers are in for 2002 and according to data from NPD FunWorld and conversations with several video game analysts, U.S. sales for video games, peripherals and hardware raked in a record $10.3 billion, a 10 percent increase from 2001's total.
Thanks to the lower price points of the next-generation consoles, revenue for hardware sales in 2002 declined 4 percent, to $3.5 billion (down from $3.7 billion in 2001), but software sales, boosted by a larger installed base, rose 21 percent, to $5.5 billion. (PC video game sales accounted for another $1.4 billion in sales, down from $1.75 billion in 2001.)
“Given that we were in the middle of a recession, I think that the games growth, especially on the software side, was very good,” said Schelley Olhava, program manager at research company IDC. “The dip in hardware sales reflects the trends of past hardware cycles as systems enter the middle years of a cycle.”
Sony is once again the clear winner in the five-year life cycle, but Microsoft has leapfrogged Nintendo to steal second place. Sony sold more than 8.5 million units of PlayStation 2 in 2002, bringing its total domestic installed base to 15.9 million units.
“The numbers for 2002 were a little bit disappointing, as they came in on the low end of initial projections,” said James Lin, managing director and senior analyst for holding company Jefferies & Co. “After Sony, there's no clear number two in the hardware business. You basically have a huge gap after PS2, and two number threes with GameCube and Xbox.”
No. 2 is Xbox. Buoyed by its $199 Sega software bundle, which included two free games, Microsoft sold 3.2 million Xboxes in 2002 (more than 1 million of which were the Sega bundle), bringing its total installed base to 4.6 million units.
Despite the lower $149 price, Nintendo sold 2.35 million GameCubes in 2002, for a total installed base of 3.6 million. But the Japanese giant didn't have a poor outing overall. While 70 percent of hardware sales in 2002 came from consoles (Xbox, PS2, GameCube), the remaining 30 percent came from Game Boy Advance (GBA). Nintendo sold 7 million of the portable game players in 2002, bringing the total installed base to 11.7 million.
On the software front, Sony made use of its large installed base and lower game price (an average of $40 per game versus $45 for Xbox and GameCube) to sell 64 million PS2 games in 2002, with a tie ratio (games bought per unit of hardware) of 7.5-to-1. Microsoft sold 17.3 million Xbox games in 2002, for a tie ratio of 6-to-1. Nintendo sold 13.2 million GameCube games (tie ratio of 5.6-to-1) and 24.3 million GBA games (tie ratio of 3.5-to-1).
While Sony had strong software numbers, the company relied on third-party publishers to push exclusive games like Take-Two Interactive's Grand Theft Auto and Grand Theft Auto: Vice City, and Infogrames' Dragon Ball Z. Sony came in fifth in the software publishing business and second among the three console makers.
Nintendo's strong first-party games, like Super Mario Sunshine and Metroid Prime on GameCube as well as Zelda on GBA, earned the company the No. 2 slot for game publishers and the No. 1 slot of the Big Three console makers.
Without a new Halo and with several big game delays until 2003, Microsoft didn't make the top 10 list for 2002, ranking 14th overall and a distant third among the Big Three.
Electronic Arts (EA) rode the success of its unstoppable “Madden” franchise, as well as excellent sales from The Lord of the Rings: The Two Towers and James Bond 007 Nightfire, to the No.1 publisher position for 2002. With more than 18.6 percent of total game sales for 2002, EA eclipsed its closest competitor, Nintendo, which had an 8.8 percent market share. Take-Two came in third, with an 8.7 percent market share, as its ‘Mature'-rated games accounted for 70 percent of its sales and finished in the No. 1 and No. 2 positions for the year. Activision, which had strong sales with Spider-Man and Tony Hawk's Pro Skater 4, came in fourth place for the year. Sony finished in fifth.
Looking ahead, analysts see consolidation for 2003 and the near future. Microsoft is talking with Vivendi Universal Interactive about acquiring part or all of its games division and is also in the hunt for Sega's Visual Concepts, creator of the 2K3 sports titles.
“I think you'll see the big companies get bigger and the smaller companies get acquired, and some of the medium-sized companies will simply go away,” Lin said.
Slow game growth of about 10 percent is expected in 2003, although the audience will grow as Sony and Microsoft drop the prices of their consoles to less than $150 and Nintendo slashes GameCube to $99. According to analysts, PS2 has already outsold PS One at each price point. When the game hardware hits the mass market price of $99, next-generation video game penetration is expected to near 50 percent of U.S. households.
Top 10 Games of 2002
1. Grand Theft Auto: Vice City (PS2, Take-Two Interactive)
2. Grand Theft Auto III (PS2, Take-Two Interactive)
3. Madden NFL 2003 (PS2, Electronic Arts)
4. Medal of Honor: Frontline (PS2, Electronic Arts)
5. Kingdom Hearts (PS2, SquareEA)
6. Spider-Man -- The Movie (PS2, Activision)
7. Halo (Xbox, Microsoft)
8. SOCOM: U.S. Navy Seals (PS2, Sony)
9. Super Mario Sunshine (GameCube, Nintendo)
10. Tony Hawk's Pro Skater 4 (PS2, Activision)
Top 10 Game Publishers
1. Electronic Arts
3. Take-Two Interactive