Hard Numbers

The reality of the situation is poor news for retail, yet fantastic news for the games business. Once the dust has settled and we can look back on this era with full clarity, I firmly believe that the games industry will have grown through this recession - just as it grew through previous economic downturns, buoyed by a strong underlying growth curve which can presently only be slowed, not halted or reversed, by macroeconomic conditions.

For that to be true, one simple condition must be met - the growth of revenue from digital transactions must be outpacing the loss of revenue from traditional sales. Hard figures on this are tough to come by, of course, as not every publisher gives a useful breakdown and not every digital upstart gives any details at all. Right now, however, most of the evidence suggests that the slow decline of retail sales is being comfortably replaced by explosive growth in digital.

Some of the retail decline is, of course, due to the recession. The rest is probably cannibalisation of the existing market by the new markets. The well-worn and still fairly solid argument being that while players aren't necessarily tired of familiar boxed games (the continual breaking of opening weekend sales records puts paid to any argument of that nature), the reality is that someone satisfying their gaming urge with Angry Birds, World of Warcraft, DLC for an older game or Minecraft is someone who may still be interested in the next big boxed game, but who has less time to spend on that kind of gaming. Consequently, the player spends less money on it. Thus, the cash walks away from boxed games, and finds itself a home elsewhere in the business.

This is a trend which is only going to accelerate. Many pundits predict that the successors to the Xbox 360 and PlayStation 3 will be digital-only devices, lacking any physical media distribution options. I'm not sure I agree, as yet - I think that it's a fairly blunt reality that the kind of high fidelity gaming experiences which Microsoft and Sony will want to wow consumers with simply won't fit through the lowest common denominator broadband connections sported by many homes, even in advanced nations. A further generation down the line, killing off physical media entirely may make sense, but in the next generation, any attempt to do so is likely to be commercial suicide.

That being said, it's fairly obvious which direction things are taking, even if we can still argue over the velocity with which said things are moving. It's not hard to envisage a future - a not too distant future - in which physical sales are a rump of the industry, remaining important in niche markets and among traditional consumers who aren't ready to move to digital (for which there are any number of great reasons, I might add, starting with DRM concerns and right of first sale issues), but no longer constituting anything close to a majority share of revenues.

Given this trend, what has happened with NPD's figures was inevitable. We have mature, well-developed ways of measuring retail sales, and nothing even beginning to approach a consensus or an understanding of how to measure digital revenues. As such, the industry is going to project an image of decline for a while, as the bit we know how to measure drops in importance, replaced and outpaced by revenues which everyone recognises to exist, but nobody can quite quantify.

Rather than complaining about what NPD has done - almost certainly in reaction to heavy pressure from publishers and retailers who have a nervous eye on their own share prices - what the industry as a whole needs to do now is to think about how we go about quantifying our success. Things are immeasurably more complex today than they were five years ago. No longer do cash registers ring every time the games industry earns revenue; no longer can point of sale systems give us an accurate picture of success or failure. Unless we can figure out how to bring together the cloud of numbers which now surrounds us into a meaningful set of statistics, the bleak reality is this - we'll never again have an annual growth figure for the global games business which means anything at all.