Note: Pretty Dire

It’s almost impossible to analyze incomplete data properly.

Unless you’re a professional analyst or work in retail and have access to NPD data, people like me who maintain an interest in the field are forced to rely on leaks from trusted (and anonymous) sources to get enough information to work with. Moving forward, these columns will be a lot less specific and a lot more observational based on information that I’ve picked up on or been given access to. If publishers and hardware companies don’t give out the data, as they’ll be doing less and less as we move forward, it’s best to draw conclusions based on what public data is available... and I’ll be doing the best I can to reflect on that.

What we know about August video game sales on the physical side is that YOY sales were down for a ninth consecutive month. This should be no surprise to anyone, given established trends so far in 2012. Overall revenue was down 20% for the month, posting a number of $515.6 million. Hardware sales continue to drag down the numbers, shedding 39% versus the prior year. Software sales were down by a smaller number, right around 11%.

We do know that the Xbox 360 led all platforms yet again in the hardware race, moving 193,000 units. That’s a 37% decline from 2011. Other than that, there is no public data to report. Sony and Nintendo declined to share specific data publicly. Best extrapolations - which cannot be confirmed - peg the PlayStation 3 in 2nd place, followed by the 3DS handheld platform. One source indicated that the PlayStation Vita sold fewer than 40,000 units for the month, which is another new low for the struggling device. In fact, the same source reported that The Last Story for the Wii outsold the Vita - not a good sign for a device that can’t seem to get any traction despite being the new system on the block.

Software is a tale of two charts. New Super Mario Bros. 2 was the best-selling individual SKU for the month of August, posting sales of more than 240,000 units. Kingdom Hearts 3D finished just behind Mario on the individual chart, moving more than 180,000 units. On the combined SKU chart, which is the chart shared publicly by NPD, Darksiders II took advantage of its release on multiple platforms to outpace the two individual leaders, which are 3DS exclusives. Darksiders II wound up selling 247,000 units. Other titles that made the Top 10 Combined chart include NCAA Football 13, LEGO Batman 2, Sleeping Dogs (over 150,000 sold, according to leaks), Transformers: Fall of Cybertron (105,000 units sold), Batman: Arkham City, Call of Duty: Black Ops, and The Amazing Spider-Man.

The good news for the industry is that we’re now in the busy season. Madden 13 is already over 1 million units sold as of this writing, and NHL 13 is hitting stores this week. Borderlands 2 is poised to sell well out of the gate. The number of new releases will gradually increase through September, October, and finally November. The hope is that, with the infusion of new games, consumers will come back to stores and start spending money again. There’s no guarantee that this happens, however. Even with strong Madden and Borderlands 2 sales, it’s going to awfully tough to match last September. Madden 12 sold 2.3 million units, and Gears of War 3 moved over 2 million more. In fact, combine those with Dead Island’s sales of nearly a million units, and that’s about 5.3 million. Even of Madden 13 manages to outpace last year’s game, Borderlands 2 will have to sell 2 million units for a shot at software sales overall to have a chance at breaking even... and I honestly don’t believe that happens. I do think Borderlands 2 will eclipse 1 million units, and maybe even 1.5 million units... but 2 million seems to be a stretch. Even then, what will this year’s Dead Island be? Perhaps it’s FIFA 13, though it releases at the tail end of the September reporting period. That’s really the only shot. Tekken Tag Tournament 2 and Dead or Alive 5 probably don’t combine for a million units.

In terms of hardware, unless price cuts come, I expect the trend of significant losses to continue. I don’t see 438,000 Xbox 360 units selling in September of this year like we saw last year. I certainly don’t see 365,000 PlayStation 3 units selling. Maybe the 3DS comes close to last year’s number of 260,000 units, though it’s not a given. The Wii is dead in the water, so that’s a decline of 150,000 units or more... and unless Vita sales turn around, that platform is no help to the overall number. Could we see another 35% decline in September? Sure. It could even be worse than that. Once we get into Q4 and the holiday period, we’ll see what Sony, Microsoft, and maybe Nintendo have in mind for pricing options. It can be argued that Microsoft doesn’t need to drop pricing, given its sales success at the current price point. Sony just dropped the PS3 price point last year, so another drop isn’t a given. As for Nintendo, it’s shocking that the company hasn’t lowered Wii pricing yet... and it’s far too late now.

I remain skeptical that sales trends will reverse over the rest of this calendar year, even with the Wii U shipping in November, as is expected to be announced this week. Rumored production problems may cause supply shortages, which would limit the effect that Wii U would have on the overall market. It’s likely that the Wii U unit sales number for November and December would have to be greater than 1.5 million in order to offset the YOY losses incurred by plunging Wii hardware sales alone. That doesn’t include any shortfalls if the Xbox 360 can’t repeat its 4.3 million number from September through December of last year, which is a probable scenario. Software sales in November may spike, given releases of Black Ops 2, Halo 4, and Wii U titles, but this probably won’t be enough to cancel out the hardware losses in that month.

If you want to know when this negative streak will end, it should be during either January or February of next year. Weak 2012 data for those months, combined with Wii U sales and a fairly impressive slate of new releases for Q1, should make it a bit easier for revenue to eclipse YOY numbers and - at least on paper-- turn things around. For now, the industry will have to ride out the streak, endure further losses and consumer migration to other entertainment forms, and see how the economy affects spending in the weeks to come.

Forgive the numerical gaps, but here's our best estimates for the Top Ten Hardware and Software sales for August 2012:

NPD’s Top Hardware Sales in August

01. Microsoft Xbox 360 (193,000 units, -37% YOY)
02. Sony PlayStation 3 (N/A)
03. Nintendo 3DS (N/A)
05. Nintendo Wii (N/A)
06. PlayStation Vita (less than 40,000 units)

NPD’s Top Ten Combined Software Sales in August

01. Darksiders II (360, PS3)
02. New Super Mario Bros 2. (3DS)
03. Kingdom Hearts 3D: Dream Drop Distance (3DS)
04. NCAA Football 13 (360, PS3)
05. Lego Batman 2: DC Super Heroes (Wii, 360, NDS, PS3, 3DS, PSV, PC)
06. Sleeping Dogs (360, PS3)
07. Transformers: Fall of Cybertron (360, PS3)
08. Batman: Arkham City (360, PS3, PC)
09. Call of Duty: Modern Warfare 3 (360, PS3, Wii, PC)
10. The Amazing Spider-Man (360, PS3, NDS, 3DS, Wii)