For video games, a not-so-bad December

While other sectors hit the reset button during the bleak holiday season, the video game industry rang up a 9% increase in U.S. sales during December as consumers hunkered down at home, many with their Wii game consoles.

The gain was led by a 15% uptick in sales of games, including Call of Duty: World at War, Wii Fit, Mario Kart and Guitar Hero World Tour, market research firm NPD Group Inc. said Thursday.

For the year, sales of games, consoles and accessories grew 19% to $21.3 billion, from $18 billion in 2007. The pace slowed from a 44% increase the previous year, but the tally was better than many expected, given the brutal economy.

“Yes, the recession is having an impact,� said Michael Pachter, an analyst with Wedbush Morgan Securities. “But it’s not too dramatic. People are still buying this stuff.�

The relatively rosy numbers are a stark contrast to the layoffs and studio closures made last year by THQ Inc. and Electronic Arts Inc., two of the industry’s biggest players.

EA, based in Redwood Shores, Calif., said last month it would lay off 1,000 employees, or 10% of its workforce, by the end of March. THQ, based in Calabasas, said two months ago it would close five studios and eliminate 250 jobs, or 17% of its development staff.

“This is not a case of the rising tide lifting all boats,� said NPD Analyst Anita Frazier.

Among the winners was Nintendo Co., whose Wii and handheld Dual Screen consoles continue to sell out in stores. Nintendo sold more than 2.1 million Wii consoles in December, while Sony Corp. sold 726,000 PlayStation 3s and Microsoft Corp. sold more than 1.4 million Xbox 360s.

“Nintendo saved us in the back half of 2008 from feeling the full wrath of the recession,� said Jesse Divnich, an analyst with Electronic Entertainment Design and Research.

Among software titles, Guitar Hero and Call of Duty, both of which are franchises from Activision Blizzard Inc. in Santa Monica, were among the best-selling games in the crucial December month.

EA eked out a single spot among the 10 best-selling games of 2008 with Madden NFL 09. THQ was a no-show on the top 10 list.

For 2009, analysts are expecting a more subdued performance.

“We project around 5% growth for game software this year,� said Colin Sebastian, an analyst with Lazard Capital Markets. “But that’s driven primarily by the cyclical dynamics of the video game industry rather than the weak economy. The business is starting to peak.�

--

[email protected]