The NPD Group recently reported that games industry consumers spent $3.33 billion in Q4 2011 in areas outside of physical retail. These other areas were listed as “used games, rentals, subscriptions, digital downloads, social games, mobile games and DLC.”
Of the $3.33 billion amassed, U.S. customers spent the most at $2.04 billion. In Europe’s three major markets, U.K. customers spent $508 million, Germany spent $461 million, and France spent $320 million.
European industry analyst Sam Naji said the following regarding the data:
“Now that we’ve established our Europe based service covering the UK, France, and Germany, we can begin working directly with clients to help them dissect at deeper levels how the unique market drivers specific to each country can help them understand the increasingly global nature of the games industry.”
NPD Group analyst Anita Frazier made an additional comment:
“It’s fascinating to see the nuances in consumer behavior across geographies… Clearly these other forms of content acquisition do not follow as consistent of a trend as we see with the established box product business in the U.S.”
Disclosure: The revenue numbers were first found on Gamasutra and later confirmed through GamesIndustry.biz.
Analysis: Simply put, physical retail is in trouble. With the rise of digital distribution and various online games—many of which are either really cheap or following a freemium model—there’s less of a need for costumers to go out and grab a game at a store like GameStop. It’s precisely because of this that GAME UK has filed for administration and why analysts keep wondering how much longer old brick-and-mortar retail is going to last, if they haven’t declared that it’s on its death throes already.
Granted, the report says some of that $3.33 billion came from the sale of used games. How much exactly has gone unstated, but that’s not the point. Customers can buy their games through Xbox Live, the PlayStation Network, Steam, or some other online distributor; they don’t have to go to a retail store for that anymore. Even game rentals can be done online. Moreover, other companies are trying their hand at making their own versions of Steam (e.g. EA’s Origin). Regardless of how successful any of those distribution platforms are, the bottom line is that they’re on the rise and they’re going to cut into the sales of retail stores even more than they do currently. This will bite GameStop and the like hard because much of their revenue comes from the sale and distribution of used games.
Will this eliminate retail completely? That’s still hard to say on the games industry front, but it’s true that dedicated game retailers won’t be as relevant as they once were to the average gamer. How can they be in the face of the convenience that is downloading a game onto a computer or a console? At this point, physical retailers will either have to figure out how they’re going to adapt or go the way of GAME UK. They don’t have any other options no matter how long they can stay afloat.