Video-game sales expected to bounce back

[17 June 2009]

By Dan Gallagher

MarketWatch (MCT)

SAN FRANCISCO — The video-game industry has seen its sales slump for the past three months, but analysts widely expect a strong slate of holiday releases to help the sector bounce back later this year.

Late Thursday, the NPD Group reported that sales of game software fell 17 percent during the month of May compared to the same period last year. Hardware sales fared worse over the same time frame, sliding 30 percent, with a surprising decline in sales of the Nintendo Wii — the next-generation console with innovative motion controls that retailers could barely keep in stock for its first two years on the market.

So far this year, total industry sales are lagging behind last year’s record-setting results. Year-to-date sales of game software and hardware have totaled $6.1 billion — about 7 percent below sales for the same period in 2008, according to NPD data.

“The continuing weakness signals that tough year-over-year comparisons are having an impact on retail sales,” wrote Michael Pachter of Wedbush Morgan in a note to clients Friday. “We expect heightened investor concern, with three straight months of double-digit negative sell-through implying that the video game consumer has ‘rolled over.’”

On Friday morning, shares of game publishers Electronic Arts, Activision Blizzard, THQ and Take-Two Interactive were trading lower. Retailer GameStop was off 3.4 percent.

The weakness in sales for the past three months is widely blamed on tough comparisons. Last spring saw the release of the year’s best-selling game titles, including “Mario Kart,” “Wii Fit,” “Super Smash Bros: Brawl” and “Grand Theft Auto IV.”

The lack of popular games this spring has also crimped hardware sales — especially for the Nintendo Wii. Sales of the console have slid by more than 60 percent over the past three months in the U.S., according to NPD data.

May saw the first notable release of a Wii game this year: a boxing title called “Punch Out!!,” which sold nearly 157,000 units to rank as the eighth best seller for the month.

Big games usually help sell gaming hardware, especially when a game title is exclusive to a particular platform.

Sony Corp., for instance, had a nice surprise in May when strong sales of an action-shooter game called “Infamous” sold nearly 176,000 titles and gave a boost to sales of the PlayStation 3, which was the only next-generation console to see sales grow between April and May.

But compared to past exclusive blockbusters such as “Halo 3” for the Xbox 360, “Metal Gear Solid” for the PS3 and “Wii Fit” for the Wii, this year’s titles have not moved the needle by much.

“While there were a few console exclusives this year (Infamous/PS3, Punch Out/Wii), but these were not big drivers of hardware demand, and we do not see any upcoming titles in June helping reaccelerate hardware sales,” wrote Justin Post of Bank of America in a report Friday.

Post and other analysts expect Sony and Nintendo to cut the prices on their game consoles ahead of the holiday season. The Wii still sells at its original $250 price point, and the PS3 costs $400, making it the most expensive console on the market.

“We still expect hardware price cuts on Sony (and maybe Nintendo) between August and October,” Post wrote.

This year’s biggest game titles are not slated to come out until fall. “Call of Duty: Modern Warfare 2” from Activision is widely expected to be the year’s biggest seller, along with the company’s newest “Tony Hawk” skateboard game and “Bioshock 2” from Take-Two. Fall will also see the launch of big exclusive titles such as the multi-player shooter “MAG” for the PS3 and a new “Super Mario Bros.” for the Wii.

But analysts warn that the summer months may not show solid gains over last year, due to the unpredictable release slate for the period.

“We expect comparisons for upcoming months to be lumpy as well, depending on the timing of new launches, but we continue to expect software dollar sales to post a positive comparison for the year, and also anticipate the hardware price reductions could spur additional hardware, and software, demand,” wrote Edward Williams of BMO Capital Markets in a note Friday.

Published at: http://www.popmatters.com/pm/article/95265-video-game-sales-expected-to-bounce-back/