Digital Videogame Sales Rally as Physical Revenues Expect More Declines

Consumer spending on digital games, such as mobile, social and downloads, still falls short of more traditional formats, like PC and consoles, but the gap is beginning to narrow.

The NPD Group reports today that in the first quarter of the year, digital revenues totaled $1.85 billion, coming in just below traditional sales of $2 billion.

The estimates were released today ahead of its monthly report coming out on Thursday, which is expected to show another weak period for traditional physical sales due to a lull in big game releases and the less than stellar demand for Nintendo’s new 3DS handheld, according to MarketWatch.

Unlike the estimates released today, the Thursday report only accounts for sales made at retail for hardware, software, and accessories — and not the digital format content distribution, which is currently seeing the most growth.

Zynga’s IPO may be the biggest example of this trend.

The San Francisco company, known for such games as CityVille on Facebook and Words With Friends on mobile, reported revenues of $235.4 million in the first quarter of this year. None of those revenues would be accounted for in the traditional physical channel because they come primarily from microtransactions inside online games.

“While the new physical retail channel still generates the majority of industry sales, our expanded research coverage allows us to assess the total consumer spend across the growing number of ways to acquire and experience gaming, including mobile apps and downloadable content,” said Anita Frazier, an analyst at the NPD Group.

MarketWatch reports that two analysts expect more declines in June after sales slid 19 percent in May compared to the same month the previous year. Doug Creutz of Cowen & Co. wrote in a note to clients that he believes sales will decline 12 percent; Michael Pachter of Wedbush Securities predicted a drop of six percent.

New game releases for June include Duke Nukem Forever from Take-Two Interactive, which received disappointing reviews.

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Another gadget you don’t really need. Will not work once you get it home. New model out in 4 weeks. Battery life is too short to be of any use.

— From the fact sheet for a fake product entitled Useless Plasticbox 1.2 (an actual empty plastic box) placed in L.A.-area Best Buy stores by an artist called Plastic Jesus