Video game industry takes a sales hit

By Alex Pham

June 12, 2009 12 AM PT

Consumers, daunted by the recession, hit the pause button on buying video games in May.

The game industry last month racked up $863.3 million in sales of games and consoles, the first time since August 2007 that monthly sales came in less than $1 billion, according to a report released Thursday from market research firm NPD Group Inc.

Sales of game consoles took a big hit last month, dropping 30% to $302.5 million from $433 million in May 2008. Sales of the popular Wii console, made by Nintendo Co., plunged by more than half.

“The hardware decline is the most troubling,” said Michael Pachter, an analyst at Wedbush Morgan Securities, “because that sets us up for bad performance overall in the industry going forward.”

Nintendo sold 289,500 Wii consoles, while Microsoft Corp. sold 175,000 Xbox 360s and Sony Corp. sold 131,000 PlayStation 3 devices.

Game publishers thrive when consoles enter more homes, giving companies more places to sell their titles. But when console sales slow, game sales do the same.

One possible explanation for the sluggish hardware sales is the anticipation of a price cut. The PlayStation 3 currently sells for $400. The Xbox 360 is $200. And the Wii is $250 -- the same price it was when Nintendo launched the console 2 1/2 years ago. None of the companies have indicated they plan to lower the price of their consoles.

“Consumers have been trained to expect price cuts,” Pachter said. “Each month we go without a price cut, more people will hold out and sales will continue to drop.”

One solid performer was UFC 2009 Undisputed, published by THQ Inc. in Calabasas. The fighting game, based on the popular Ultimate Fighting Championship license, sold more than 1 million copies. Its success is considered crucial for the financially struggling THQ.

Another game, EA Sports Active, sold 345,800 copies. The fitness game is a key title for its publisher, Electronic Arts Inc., which is repositioning some of its development efforts to attract more women and casual players.

Overall, however, game sales fell 17% to $448.9 million in May from a year earlier.

As for June, expect more gloom.

“There are some promising games coming out this month between the Sims 3, Prototype, Red Faction, Virtua Tennis, Ghostbusters, Transformers and Tiger Woods,” said Anita Frazier, an NPD analyst.

But she cautioned, “June comparisons will likely be tough.”

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Video game industry takes a sales hit

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