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NPD August sales data reviewed

Posted by Brian Shiau at 5:25PM on September 13, 2007

This month's trading appeared to feature an interesting phenomenon. Market expectations for many video game hardware and software SKUs were more closely in line with actuals in early August trading, but were skewed upward following rumored sales results. As a result, this month's expectations ended up overly bullish.

Growth in the video game industry came inline with market predictions. Total video game software sales grew 22% from $399 million to $488 million. Final trading on The simExchange prediction market expected $502 million, just 2.87% above actual.

Sales of Microsoft's Xbox 360 slightly beat the market's expectations, selling 276,700 units while the market expected 262,900 units. The market had correctly anticipated the price cut's effect on sales growth. The remaining hardware sales underperformed the market's bullish expectations, with Sony's PS3 and PSP underperforming the most.

Trading on the simExchange in early August had predicted that Sony's price cut on the PS3 would not carry additional momentum through the month of August. Sales came in at 130,600 units. The market had predicted 140,000 - 150,000 units in early August but rumors of stronger sales in late August pushed the prediction much higher, closing at 172,600 units. Sales of the PSP came in at a disappointing 151,200 units. The market had expected 211,900 units sold.

The market traded forecast for Nintendo's Wii were also heavily affected by mid-month rumors. The forecast had traded around 370,000 units until August 23 when rumors of strong sales shot the forecast to the 430,000 unit range. Actual sales were 403,600 units. Nintendo DS was expected to sell 436,800 units, actual sales came in at 383,300 units.

As with hardware expectations, the prediction market was overly bullish on individual software SKUs this month. Interesting is that many of the early August forecasts were in line with actuals. As with the hardware sales, many forecasts shifted significantly upward following rumors of strong game sales in mid-to-late August.

Madden NFL 08 (Xbox 360) traded in the 780,000 unit range but rocketed to 1.1 million units following sales rumors. Actuals came in at 896,600 units. A similar trading pattern can be seen with BioShock (Xbox 360), which had traded in the 450,000 unit range but jumped into the 550,000 unit range in late August.

The following tables compare market expectations on the simExchange and actual results as reported by the NPD Group. We will no longer compare the prediction market's expectations with those of individual analysts due to the confusion and mischaracterization of the simExchange's trading data as analyst forecasts.



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.

Please provide you readers some context of what the simExchange is and how our forecasts work, example: "The simExchange is an online virtual stock market in which gamers, developers, and investors trade stock to predict how games will sell."