Video game sales slide 10% in June
By Alex Pham
Video game sales plunged again in June, dropping 10% from a year ago, as consumers greeted some new releases with a yawn and as sales continue to erode for Nintendo Co.'s once-popular Wii console.
Sales of games and the consoles required to play them were $1.03 billion last month, compared with $1.15 billion in June 2010, according to the NPD Group, a market research firm. The decline followed a 14% slide in May to a four-year low for the video game industry.
The lower numbers do not necessarily spell doom for the entire sector. An increasing portion of the industry's sales now come from digital outlets such as Apple Inc.'s iTunes, Facebook Inc. or Microsoft Corp.'s Xbox Live online marketplace. Such sales are not included in the monthly NPD sales reports.
John Riccitiello, chief executive of game publisher Electronic Arts Inc., estimated that digital distribution, which accounts for 25% of the industry's sales, could reach 50% of overall game revenue within five years.
Still, traditional games sold at retail outlets as discs continue to be a vital component of the $40-billion global game industry. And monthly fluctuations such as the drops seen in May and June aren't an indication of how the year will play out. That's particularly true for video games because the bulk of the industry's sales occur in the months leading up to Christmas.
June's result partly reflected weak sales of titles that launched last month, including Activision Blizzard Inc.'s Transformers: Dark of the Moon, THQ Inc.'s Red Faction: Armageddon, and Ubisoft Entertainment's Child of Eden — none of which made the list of top 10 selling titles for the month.
Sales of Nintendo's Wii console also continued to slide, said Michael Pachter, an analyst with Wedbush Morgan Securities. And its new handheld 3DS console is facing tough competition from Apple Inc.'s iPhones and iPads.
U.S. Mobile Advertising To Hit $1.2 Billion In 2011
By Mark Walsh
A new J.P. Morgan report predicts U.S. mobile ad spending will roughly double to $1.2 billion this year, fueled by growing mobile usage.
That forecast is in line with an eMarketer projection that U.S. mobile advertising will reach $1.1 billion in 2011. The Internet Advertising Bureau estimates that mobile ad dollars totaled in the range of $550 million to $650 million last year.
In an analysis focusing on top Internet companies, JP Morgan analyst Douglas Anmuth says the firm expects mobile to be the single biggest factor accelerating Web growth for the next several years. He points out that mobile data traffic is already three times the level of the wired Internet globally in 2000. In addition, the build-out of next-generation networks will increase connection speeds tenfold by 2015.
The J.P. Morgan report estimates mobile ad revenue in 2011 comes to $7 or $8 per user -- well below the $35 per Internet user during the post-bubble days of Web advertising in 2002. (The roughly $600 million in mobile advertising last year was equal to only a fraction of the $26 billion in Internet spending.) The smaller real estate of phone screens and limitations on ad creative also present obstacles to higher spending.
Driving demand for faster mobile data delivery is the spread of smartphones.
Despite rapid growth, the report points out that global penetration will only approach 30% this year, indicating that there is still plenty of room for expansion. (A Pew study released this week estimated U.S. smartphone penetration at 35%.) Worldwide, IDC predicts smartphone share will reach 45% in 2015.
Even so, Anmuth argues that advertising on smartphones and tablets will ramp up much faster than on the PC-based Web, especially given the established online ad market. And based on the growth of mobile users and location-based services, mobile advertising could ultimately become larger than Web-based advertising.
When it comes to major Internet companies, Google has been among the most aggressive in pushing into mobile through Android, search and mobile payment initiatives like Google Wallet. Mobile likely accounts for 5% of the company's gross revenue in 2011, according to the J.P. Morgan report. Google earlier this year said revenue from mobile operations had reached $1 billion on an annualized basis.
Anmuth noted that Yahoo has a stronger mobile presence overseas through a host of carrier deals, including with operators such as Vodafone. But mobile texting represents a threat to Yahoo's traditional strength in email, which represents about half of its page views. Likewise, the rollout of mobile app versions of key properties like Yahoo Finance and Fantasy Football could undermine the portal model the company is built on.
In the online retail sector, eBay is viewed as well-positioned for mobile. The company is on track to generate $4 billion in mobile transactions this year, while payments unit PayPal will do $3 billion in mobile. eBay this month also acquired mobile payments provider Zong for $240 million to add carrier-based billing to its payments arsenal.
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