Non-Games PC Software Sales Were Flat in 2005

NPD: Weakness in Education, Imaging/Graphics, Operating System and Personal Productivity Categories Offset Strong Sales of Business and Finance Categories

U.S. retail sales of non-games software totaled $2.4 billion in 2005, an increase of less than one percent. Weak sales in the Education, Imaging/Graphics, Operating System and Personal Productivity categories offset the strong sales of the Business and Finance categories, which showed respective increases of nine percent and four percent over 2004.

In the Business category, the low-priced Microsoft Office Student and Teacher Edition was the best-selling title. The continued strength of this title in the U.S. retail channel shows that the price elasticity of demand for Microsoft Office was much more elastic than many had previously estimated.

With regard to Finance, in 2005, Personal Finance titles such as Intuit's Quicken and Microsoft Money were the best performing group, with dollars up seven percent over 2004.

The four non-games categories that experienced negative dollar growth include Education, Imaging/Graphics, Operating System and Personal Productivity, with respective declines of 17 percent, one percent, 11 percent and 14 percent.

The big surprise in 2005 was the abrupt slow down in the System Utilities category. Although units in the category were up 13 percent over 2004, increased competition led to lower prices, which led to a dollar total for the category that was flat in 2005. This is in stark contrast to past performance. Over the previous five years, dollars grew 27 percent compounded annually (2000-2004). Moreover, in 2004, sales of system utility titles increased 48 percent over 2003, as consumers reacted to the rapid increase in viruses, spyware and other malware threatening their PCs.

System Utility titles are without question some of the best-selling titles in the non-games software category. For example, in 2005, Symantec's Norton Antivirus 2005 and Webroot's Spy Sweeper Tech Bench were the second and third best selling software titles, overall. However, we identified a slowdown for System Utility titles in the second quarter of 2005, making it readily apparent that the new versions of both the high- and low-end security software titles weren't going to achieve the same levels of dollar growth as they did in 2004.

Education, the category with the lowest sales performance over the last five years, was again the worst performing category in 2005, with dollars shrinking 17 percent over 2004. This is somewhat of an improvement, however, as the category has averaged a decline of 26 percent over the preceding five years.

Annual 2005 Top 10 PC Software Titles, Ranked by Units Sold
Rank	Title	Publisher	Release Date	ARP
1	TurboTax 2004 Deluxe	Intuit	Aug-04	$40
2	Norton Antivirus 2005	Symantec	Feb-04	$13
3	Spy Sweeper Tech Bench	Webroot	Aug-04	$65
4	TurboTax 2004 Multi State 45	Intuit	Oct-04	$40
5	MS Office 2003 Student/Teacher Ed	Microsoft	Sep-04	$30
6	Norton Internet Security 2005	Symantec	Apr-03	$26
7	Norton Internet Security 2005/Password Manager 2004 Bundle	Symantec	Sep-05	$34
8	Norton Antivirus 2005 Upgr	Symantec	Sep-05	$66
9	Taxcut 2004 Deluxe	Block Financial	Aug-04	$64
10	TurboTax 2004	Intuit	Sep-04	$8
Source: The NPD Group / U.S. Retail Point-of-Sale Data

New technologies at more affordable prices gave people a lot of incentive to get the necessities and a little something extra last year. It’s the beginning of a trend that we should see continue through 2006, which will benefit not only the consumer, but the manufacturers as well.”

Non-Games PC Software Sales Publ 20060126