Software Market Holds Its Own in Tough Times

Research by NPD INTELECT found that, despite continued softness in the retail computer hardware market, the retail computer software market remained stable when comparing the first half of 2001 with the first half of 2000.

In the overall software market, retail unit sales of software titles approached the 70 million mark in the first half of 2001, gaining 0.2 percent over the same period in 2000. Revenues from retail software sales improved 1.2 percent, approaching $2.8 billion.

“This year’s second quarter retail software revenue of $1.23 billion represents a 1.9 percent increase compared to the same period last year,” said Steve Koenig, senior software analyst at NPD INTELECT. “As is typical in the software market, overall retail software sales slowed in the second quarter of 2001, with revenue down about 20 percent compared to first quarter results. The drop last year was 21 percent.”

Two software categories that experienced significant revenue growth during the first half of 2001 were finance (up 12.5 percent) and business (up 7.7 percent).

The finance category was driven by tax software, which comprises almost three-quarters of the finance titles sold through retail sales channels. Unit sales of tax titles increased 19 percent during the year-to-date period. While most of the new tax software titles shipped later in the tax season than usual (January 2001 instead of December 2000), retailers sold more than 1 million more tax software titles in the first half of 2001, compared to the same period in 2000.

“Tax software sales have steadily gained momentum over the past several years as the software has become more comprehensive, faster and easier to use,” said Koenig. “Year-to-date unit and dollar sales in the finance category are up 16.2 percent and 12.5 percent, respectively, making it the fastest growing software segment this year.”

Growth in the business software sector was led by the strong sales growth of virus detection and communication titles, unit sales in the business software segment (not including operating systems) improved 7.7 percent during the first half of 2001.

Retailers sold 750,000 more virus detection titles during the first half of 2001 than the first half of 2000, which translates into a 29.2 percent unit sales increase over the same period results for 2000. Due to slightly higher average selling prices, revenue from virus detection titles improved 32.3 percent. Unit sales of communication software, such as email programs, improved 35.9 percent with revenue from these titles jumping almost 11 percent.

In the operating systems segment, the Microsoft Windows ME operating system propelled dollar sales in the segment 25.9 percent higher during the first half of 2001. Retail revenue from the Microsoft Windows operating system increased 31.5 percent, while dollar sales of the Linux operating system declined by more than 40 percent. Helped by the release of OS X, Apple Computer’s operating system sales improved over all nearly 20 percent during the first half of 2001.

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