Game industry sales drop 17%

By Alex Pham

May 15, 2009 12 AM PT

Video games, once considered recession-resistant, are showing signs of economic strain.

Game prices are coming down, and so are sales. Hot titles like Guitar Hero are feeling the pressure. Even sales of Nintendo Co.’s popular Wii consoles are down.

Overall, industry sales in the U.S. stumbled 17% in April over the previous year, with console sales dropping 8% and games sliding 23%, according to a report released Thursday from tracking firm NPD Group Inc.

Console sales fell to $392 million in April from $427 million a year ago. Game sales slipped to $511 million last month, down from $660 million in April 2008. Nintendo’s Wii console sales tumbled 50% from a year earlier.

With Wii, “software sells hardware,” said Nintendo spokeswoman Denise Kaigler. “And last year we had Super Smash Bros. and Mario Kart to help drive Wii sales.”

Part of the decline in industry revenue can be attributed to widespread discounting of games by stores such as Best Buy and Wal-Mart to lure reluctant shoppers, leading to a 19% drop in the average price of games, said Michael Pachter, an analyst with Wedbush Morgan Securities.

That’s affected top titles, including Guitar Hero games from Activision Blizzard Inc. in Santa Monica, which sold for an average of $83 in April 2008 but only $53 last month, Pachter said. Average prices for another hot franchise, Rock Band, fell to $96 from $155 over the same time frame.

“Those are huge drops,” Pachter said. “At some point, we’re going to have to ask ourselves whether we’re just going to have a bad year. We’ll see.”

On the flip side, consumers benefited from the price drops. This April, for example, 25% of games for Microsoft Corp.’s Xbox 360 console were priced below $20, compared with just 9% of titles a year earlier.

Tepid game sales can also be chalked up to a weaker slate of releases, said Jesse Divnich, director of analyst services at Electronic Entertainment Design and Research in San Diego.

“April’s significant decrease really has to do with release schedules,” said Divnich, who noted that Grand Theft Auto IV and Mario Kart both debuted in April 2008. But this year, many publishers are saving their powder for the fall season heading up to Christmas, he said. That, however, could lead to an opposite problem -- overcrowding.

There’s hope that the sector could still come out ahead, said NPD analyst Anita Frazier.

“Our monthly consumer spending indicator study still shows that video games is the category that consumers tell us they’re least likely to cut their spending on in [the] coming months,” Frazier said.

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Game industry sales drop 17%

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