NPD July sales data reviewed

This is the fifth month the simExchange video game prediction market has traded contracts on console hardware and the second month, the simExchange has traded contracts on 10 software SKUs. Contracts are settled against the NPD Group's monthly unit sales data.

Sony's PS3 sales came in line with market expectations at 159,000 units. The simExchange market expected 168,000 units to be sold in the month of July. PSP sales were also inline, coming in at 214,000 units, the market expected 209,000 units. Both Nintendo's Wii and Microsoft's Xbox 360 surprised the market with 425,000 units and 170,000 units sold respectively. The market had only expected 353,000 units for the Wii and 137,000 units for the Xbox 360. Sales of the Nintendo DS disappointed the market, coming in at 405,000 units. The market had expected 473,000 units.

It appears the market was originally correct when it had forecast the Xbox 360 to outsell the PS3 despite the PS3's price cut. The market sold off the Xbox 360 July future from the 160,000 units range after believing the leak of the Xbox 360's upcoming price cut would deter potential buyers, which in retrospect was an overreaction.

Sales of Electronic Art's NCAA Football (Xbox 360) lead software sales, though actual sales were below the market's expectations. Activision's extension to the popular Guitar Hero franchise, Guitar Hero Encore: Rock the 80s (PS2) including Guitar Bundle, came in second with sales also below market expectations. Nintendo's Mario Strikers: Charged (Wii) also debuted below the market's expectations without even making the Top 10. Sales of Take-Two's All Pro Football 2K8 (Xbox 360) were very disappointing.

Overall, July software sales came in below the market's expectations at $419.2 million. The simExchange had expected sales about 12.8% higher, between $459 - $487 million. It appears traders were generally bullish this month, expecting 16.79% more in total units for all software SKUs tracked in July.

The following tables compare market expectations on the simExchange and actual results as reported by the NPD Group. Expectations by leading analyst Michael Pachter of Wedbush Morgan are also presented for comparison purposes.

US Hardware in July 2007

US Software in July 2007

How exactly does this work?

Gamers and developers sign up on the simExchange for a free trading account. Using virtual currency called DKP, players buy virtual futures contracts that are under-predicting sales and short sell futures that are over-predicting sales. This concept is widely known as "the Wisdom of the Crowd" and this system is known as a "prediction market."

About the predictions

Predictions on the simExchange should become more accurate over time as (1) the diversity of the pool of traders increases and as (2) more accurate players are rewarded with more virtual currency for their accuracy (thereby enabling them to form more predictions) and less accurate players lose virtual currency (thereby discounting their ability to form more predictions).

Copyright and reprinting

The simExchange, LLC retains the right to the content of this article but permits the reprinting of this article with proper credit to the simExchange. Sales data published here includes data disclosed with permission by the NPD Group exclusively for the purpose of settling futures contracts on the simExchange.

* NPD Group sales data
** The simExchange trading data
*** Games Industry, August 20, 2007