June Not Much Fun for Video Game Makers

Though the video game industry weathered several months of relatively healthy sales despite a troubled overall economic climate, declarations that the sector is recession proof may have been premature.

Video game industry sales fell 31 percent year-over-year for the month of June, totaling US$1.17 billion dollars against the $1.7 billion racked up in June of 2008, according to a report from the NPD Group.

The Painful Breakdown

Video games hardware sales were the hardest-hit category. They fell 38 percent year over year (YoY), from $617.25 million in June 2008 to $382.62 million last month.

Next came video games software sales, with YoY sales declining 29 percent. They totaled $625.79 million last month, compared to $875.75 million in June 2008.

Sales of video game accessories dropped 22 percent YoY, from $202.83 million in June 2008 to $158.2 million last month.

Overall, June saw the greatest year-over-year monthly decline since September 2000, when industry sales fell 41 percent, NPD analyst Anita Frazier wrote.

That’s because purse strings are simply tightening. “In general, people are staying away a lot from discretionary purchases,” Carl Howe, a research director at Yankee Group, told the E-Commerce Times.

Not Too Much Gloom, Please

Although June saw the fourth straight monthly decline in year-over-year sales, the results were still better than those of April.

Rankings were different back in April, too. Then, software sales were the hardest hit, totaling $510.74 million; and video game accessory sales came in second, totaling $129.45 million.

Hardware sales were impacted the least in April, and totaled $391.63 million. This is the only category in which April’s figures were better than June’s.

Overall, industry sales in April totaled $1.03 billion.

Top 10 Games

June was first time since Nintendo’s “Wii Play” was launched in the U.S. in February 2007 that it did not make NPD’s Top Ten list of games. “Wii Play’s” 29-month rule was “an astonishing record” for the industry, Frazier said.

For June, the top spot went to “Prototype” from Activision Blizzard. Xbox 360 games took four of the top 10 slots, led by “Prototype.”

“Prototype” is available for the Xbox 360 and Sony PlayStation 3. It is also available for Windows XP and Vista PCs. It sold 419,900 units on the Xbox 360, according to NPD’s figures, and about 600,000 units across all platforms.

“UFC 2009 Undisputed,” from THQ, which came in second with 338,300 units sold, also runs on the Xbox 360.

Games running on the Wii took the third to fifth places and the eighth place. Games for the Sony PlayStation3 took the remaining two slots.

No Money, No Fun, No Sales

Understandably enough, the recession is impacting sales. “This is one of the first months where I think the impact of the economy is clearly reflected in the sales numbers,” Frazier wrote.

However, the cost of hardware and the lack of good game titles also contributed to the sales slide.

“While the aggregate of content may not be as strong as what we saw in the first half of last year, and while the consumer base willing to spend dollars on hardware at the current price points may be thinning, the size of the decline could also point to consumers deferring limited discretionary spending until a big event — must-have new title, hardware price cut — compels them to spend,” Frazier wrote.

“I haven’t seen many titles so far that make me sit up and say ‘Wow!,'” the Yankee Group’s Howe said.

Hope Springs Eternal

Still, things might just take a turn for the better. NPD’s Frazier said more than 4 million new players have entered the games market since last year.

If sales in the second half of the year pick up, the total figures for 2009 could match or even exceed last year’s record-setting numbers, Frazier contends.

That could very well happen, Yankee Group’s Howe said. “A lot of people buy games during the holiday shopping season, so release cycles are tied to that quarter,” he said. “If you have a hot new game, it comes out in December.”

Games did very well during the holiday season last year, Kurt Scherf, principal analyst at Parks Associates, told the E-Commerce Times. “Games as a gifting purchase ranked very highly among electronic products,” he said.

The industry needs a miracle to match or exceed last year’s sales, Scherf said. “If it were something super-cool like a 3-D game, that might help. Otherwise, to match last year’s numbers after we’ve done so badly in the first half of this year seems difficult to me.”

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