PS3 vs Xbox 360: Is NPD misleading the industry with inaccurate sales data?

Every month the NPD, which claim to be the leading provider in reliable and comprehensive consumer and retail information for a wide range of industries including gaming, release monthly data for both software and hardware sales for all three consoles.

The group is properly organized and well respected in the gaming industry, respect we believe is well deserved. However we questioned whether the company's figures were accurate since it failed to collect some extremely important data, example DLC and MMO sales data. They conceded that DLC and MMO figures were unaccounted for, however, according to the group, this failure is not their fault but companies in the industry that keep an extremely tight lead on the information.

GamesThirst interviewed David Riley of the NPD, and the sheer amount of information he gave, shed some light on the situation, and a little secret of the industry.

Good afternoon David, thanks for responding.

It's my pleasure, I'm happy to be of any assistance.

We heard that your company [NPD] don't cover DLC figures in your monthly software sales data, is that true?

That's correct, we don't cover DLC. Our monthly sales data only include what sells through retail and e-tail channels. I often hear complaints from various uninformed bloggers that NPD doesn't tell the full story because NPD doesn't track full retail, either (e.g., Wal-Mart). To be clear, NPD projects to 100% of the market. Wal-Mart pulled out of all third-party market research firms many years ago, but thanks to historical sales references and NPD's 40-year track record, it is able to reliably estimate for that massive retailer within an extremely reasonable margin of error. No one disputes our figures, we collaborate with other firms both international and domestic to bring accurate information to the industry, firms from Canada and Australia. America represents close to 45% of nternational sales, so when there's a major shift in consumer behavior, we know about it. In regards to DLC, NPD is working closely with its partners to begin tracking various aspects of the DLC space. For example, we do provide various reports to our clients that capture topline sales information for online subscriptions. We don't release this into the public domain, but we do provide this to clients. DLC is an entirely different matter, primarily because of how it's defined, and what it's intended to capture. For sake of this conversation, let's stick to content specific to retail skus.

We understand, but since you don't account for DLC, etailers, and Walmart sales, do you think your monthly sales data is accurate, or is it misguided, since a good portion of the market is not accounted for?

Yes, millions of dollars go unaccounted for but it's not the fault of market researchers - the companies (publishers and manufacturers) keep a very tight lead on DLC, and other online sales information. Publishers and manufacturers alike don't like this information to be in the public for various reasons: the fear of losing their competitive edge; the general public misunderstanding this information and coming to conclusions that are far off the mark; etc. Back to your question,

NPD's data is not all-inclusive when the investment community and the industry plan for future opportunities. NPD's data is simply a piece of the strategic planning pie. So, for example, a publisher that releases a title that happens to include DLC will take NPD's sales numbers and marry those figures with their internal DLC sales figures, and use this information to make more informed business decisions. And, yes, these publishers do release overall sales figures, which includes any relevant DLC sales they feel will help their shareholders to have a 360-degree view of the landscape. They don't usually release it into the public domain, but they do release it to those in the business. Make sense?

So are the guidelines accurate, do we know for a fact that the industry was down year-on-year, I mean.... so much data gets neglected?

This is a mixed question, is it accurate? Well the industry has been growing by leaps and bounds for years, only seeing a small drop in 2004 during the transition from last-gen hardware to current-gen hardware, but it has climbed ever since. The recession affected not only the gaming industry but all business sectors suffered. The gaming industry is not recession proof, and so now you have companies feeling the effects. Sales are down all over the [gaming] industry. I mean, look at what's happened with Pandemic, and across Microsoft, as well as a myriad other industry players. The companies are feeling it. I live in New York, and I know New York is like a different world altogether but you walk into a retailer and ask how sales are doing, all they're saying is sales are down. This is where DLC can help to ease some of the pressure. People are looking for ways to extend the life of the games they already own. If they can't afford to buy a game for $60, why not go online for inexpensive DLC? Fallout 3 is a good example of this.

O.K. Thank you for your time David, this information will definitely influence our report.

It's no problem, I'm glad I was able to help.

11/19/09 Ernice Gilbert