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US digital games market update: August 2014

As expected, combined digital sales in the US market reached $819.6 million in August, down two percent month-over-month, reaching a low-point before its rebound toward the holiday season. With Activision’s Destiny available for pre-download in late-August, digital console experienced strong growth this month, showing an increase for both download sales and microtransaction revenue. Subscription-based MMO revenue rose to $42 million, and mobile gaming declined to $281 million for the month.

Digital console market

Digital sales help drive Destiny to $500M on first day

If you ask Bobby Kotick, the shooter game market just saw the birth of another billion dollar franchise. Activision announced that its much-hyped new shooter franchise, Destiny, totaled $500 million in combined sell-in across channels. Central to its first-day success was digital distribution as retailers aggressively marketed DLC content bundles titled the Destiny Digital Guardian Edition. By comparison, Activision’s Call of Duty: Ghosts generated roughly the same amount in first-day sales last year, but builds on the loyalty of its pre-existing fanbase. With the release of the new IP early in the next gen console cycle, during which gamers are generally more receptive to trying new titles to go with their new hardware, Destiny is well-positioned to become Activision’s third billion dollar franchise. Totaling an estimated five million units in sales across both digital and physical channels on its first day, Destiny lifetime install base is currently conservatively forecasted at around 16 million units, having already outperformed Ubisoft’s hit Watch_Dogs, which sold four million copies in its first week.

Pokémon to release on iPad. It’s super effective

After a period of disappointments, the announcement of Pokémon’s future tablet release is a ray of hope for the Japanese gaming giant. Previously, we speculated that Nintendo could possibly port some of its major franchises to mobile devices. Perhaps following the success of Hearthstone (Activision/Blizzard), Nintendo’s subsidiary The Pokémon Company is well-positioned to claim a piece of the $479 million market for digital collectible card games. It needs little explanation that mobile games have become one of the most important digital platforms for gamers and publishers alike, today accounting for one third of all monthly spending among digital gamers in the US alone. But as the mobile market has become crowded, the value of strong brands has gone up, allowing for an offset of increasing user acquisition costs. The franchise’s breadth in cross-channel branding, with no less than seventeen theatrical films, combined with the tremendous viral power that especially young mobile audiences wield, may just prove enough for Pokémon to become one of the few contenders capable of breaking into the frozen smartphone rankings.

Virtual reality about to get real as major publishers shun devices

Despite growing enthusiasm for virtual reality gaming following the Facebook acquisition of Oculus and, more recently, the unveiling of the Samsung Gear VR, major game publishers remain noticeably quiet on their virtual reality strategy. With the device announcement, Samsung also claimed to be ramping up a library of “100,000 music, live concert events and original programming,” all of which suggests that the new hardware will initially be one for spectators rather than gamers. This leaves game publishers in an awkward situation as development for the new line of devices is still difficult, with little evidence of a strong install base necessary to justify development cost. One of Ubisoft’s execs mentioned the need for “one million” sold units if the publisher was to move into the new hardware space, following initial difficulty with a port of Assassin’s Creed. Last week, Oculus Rift co-founder Nate Mitchell stated that EA’s FIFA 15 would be a “natural fit” for virtual reality, publicly offering to subsidize the effort. To date, about 120,000 dev kits for the device have been sold, but the content kings who can provide the killer app don’t seem convinced just yet.

European Big Media invest $500M in digital

With worldwide consumer spending on digital gaming set to reach $48.8 billion this year, media firms have earmarked a growing amount of money for interactive entertainment. Earlier this year, German media firm ProSieben acquired Aeria Games to enlarge its footprint in the gaming sector and expand its portfolio of licenses. This last part is especially key as big firms that own a large portfolio of well-known brands and franchises are increasingly eager to try their luck on mobile and online platforms. Kim Kardashian: Hollywood, a mobile game inspired by the Hollywood lifestyle of socialite Kim Kardashian, managed to generate an estimated $700,000 per day, driving developer Glu Mobile’s shares up more than 30 percent since the app’s release in late June. The trend in Europe follows the course set by several American media conglomerates, including Comcast and satellite broadcaster BSkyB, which was part of a $28 million investment in virtual reality company Jaunt. Overall, a growing number of large media firms are investing in, or acquiring, interactive entertainment companies, following the advent of digital platforms.