Videogame sales show biggest drop in two years

Year-to-date, industry is up 26%

By Susanne Ault -- Video Business, 10/16/2008

OCT. 16 | Not immune to the current rough economic climate, the videogame industry suffered its first significant monthly decline in over two years in September, according to the NPD Group.

Overall game title and hardware sales fell 7% from September 2007 to $1.27 billion. By itself, software slipped 6% to $616.09 million. Hardware dropped 9% to $497.98.

NPD notes that this is the first true four-week decline since March 2006. Although January videogame sales were down from the same month in 2007, it’s considered an unfair comparison because January 2008 spanned one less week.

Despite the slide, NPD analyst Anita Frazier said she continues to believe that the entire industry will achieve impressive year-end results. Additionally, record-selling Halo 3 bowed in September 2007, skewing an apples-to-apples look between that frame and September 2008.

“It’s important to keep in mind that this month’s 7% decline is against a month that itself was up 75% from the prior September" in 2006, said Frazier. “Last year, Halo was released, and that game had a huge impact on hardware and software sales.”

She added, “Overall, the health of the videogames industry remains quite strong despite the rocky economic conditions. Tracking against typical industry seasonality, the U.S. videogames industry is positioned to realize $22 billion or more in revenues for the year.”

Also, year-to-date performances show growth across the board. Over that frame, hardware is up 16% to $4.22 billion, and software is up 36% to $6.07 billion. Combined, the industry jumped 26% to $11.82 billion.

The console horse race appears consistent with the year’s previous months. Top is the Wii, selling 687,000 units. Runners-up are the Xbox 360 at 347,200 units; PlayStation 3, 232,400 units; and PlayStation 2, 173,500 units.

Among handhelds, Nintendo DS sold 536,800 units, trumping PlayStation Portable’s 238,100 in unit sales.

Regardless of which console leads, NPD gives everyone a thumbs up.

“Compared to August, nearly all hardware systems realized an increase in unit sales in September,” added Frazier. “The [$50] price reduction on the Xbox 360 helped deliver a month-over-month unit sales increase of 78%. This increase, despite the acceleration of economic turmoil during the month of September, is a solid indicator of the health of the industry leading into the holiday season.”