Video Game Sales Slide Continues

A 29% drop in video game sales from a year ago spells gloom, but Madden NFL 10 and other fall releases could turn things around, NPD says.
U.S. video-game industry declined for the fifth consecutive month in July, as the poor economy continued to take its toll on a market many observers once believed to be recession-proof.

Overall sales of video games, hardware, software and accessories fell 29% in July to $1.7 billion from $2.4 billion the same month a year ago, according to the latest figures from The NPD Group.. Sales in the first seven months of the year were down 14% to $8.16 billion.

Video-game sales alone fell 29% to $848.9 million from $1.2 billion a year ago, and console sales declined 37% to $280.9 million from $447.7 million.

July sales fell almost as much as in June, when overall revenue plummeted 31% from a year ago to $2.34 billion. The decline was the worst since September 2000, when monthly sales fell 41%.

With monthly sales falling since March, revenue for the rest of the year would have to be at least 11% higher each month year-to-year in order for the industry to come in flat or slightly up for the total year, compared to 2008, NPD said.

Such a scenario is unlikely, given the current trend. For example, hardware sales, which include the big three video-game consoles -- Microsoft's Xbox 360, Sony's PlayStation 3 and Nintendo's Wii -- have slowed considerably almost across the board. The Xbox 360 is the only console showing a unit sales increase year-to-date.

Despite the gloomy numbers, NPD said did expect to see some improvement during the rest of the year. "While year-to-date results are weak, there are some big titles set to be released over the next several months, including Madden [NFL 10 from Electronic Arts] this month, which should help spur sales," NPD analyst Anita Frazier said in the monthly report released Thursday.

Other new games expected to give a boost to the industry between now and the end of the year include "The Beatles: Rock Band," "Halo 3: ODST," and "Call of Duty: Modern Warfare 2."

During the first two months of the year, the video-game industry posted higher year-to-year sales while other retail categories plummeted in the economic downturn, leading some observers to believe that people were more likely to spend time at home playing games in cutting entertainment expenses. However, the steady decline in sales has shown that video game sales are not immune to the recession.

InformationWeek has published an in-depth report on managing risk. Download the report here (registration required).