Video Game Sales Slide for Fifth Straight Month

Video game sales continued their downward spiral in July, the fifth consecutive month of declines in an industry many have referred to as "recession resistant."

Consumers bought 26 percent fewer games last month than they did in July 2008, with sales falling to $437 million, according to the NPD Group. So far this year, software sales are tracking 14 percent behind last year’s numbers.

AP Wii

The drop is considerably larger than the 16 percent decline some analysts were predicting.

With five months left in the year, the industry is tracking 14 percent behind 2008. Analysts and investors have predicted that 2009 will be, at best, a break-even year for the video game industry, due to the economy and an unprecedented series of delays for high-profile games.

But, as NPD analyst Anita Frazier notes, to even reach that point, the industry is going to have to end things with a bang.

"In order for the industry to come in flat or slightly up for the total year, the back five months of the year have to come in 11 percent (or more) higher than the last five months of last year," she says.

While the numbers are dire, the comparisons to 2008 are tough ones. Last year saw an early rush of blockbusters—such as Nintendo’s "Mario Kart Wii" and Take Two Interactive Software's "Grand Theft Auto IV". The first half of 2009 was devoid of any big hits.

The good news for video game publishers is the slow part of the year may finally be coming to a close. August typically marks the beginning of an upswing in sales, with Electronic Arts' juggernaut franchise "Madden NFL" hitting store shelves Friday.

"While year-to-date results are weak, there are some big titles set to be released over the next several months, including 'Madden' this month, which should help spur sales," says Frazier. "The worst [month to month comparisons] should be behind us."

Hardware sales, predictably, slid noticeably in July, falling 37 percent overall, with sales of $281 million. This is the third month in a row that hardware sales have fallen by more than 30 percent.

That could spark further calls for hardware price cuts. Sony is widely expected to lower the price of the PlayStation 3 before the end of the year and Nintendo may either cut the price of the Wii or bundle the hardware with a newer game to boost its sales.

Even Microsoft , which was not expected to cut prices, may be changing its mind. Photographs of sales circulars have appeared online in recent days that indicate the company will discontinue the $299 Xbox 360 Pro unit and drop the price of the Xbox 360 Elite by $100 (to $299) by the end of August. The Elite comes with a larger hard drive and a HDMI port and cable, allowing high end TVs to see games in 1080p.

• CNBC Slideshow: 2009's Top Selling Video Games

In July, Nintendo continued to dominate hardware sales, with the Nintendo DS selling nearly 539,000 units. Wii sales, though, were down 30 percent from June, with 252,500 units sold. Microsoft sold 203,000 Xbox 360s and Sony sold a dismal 122,000 PlayStation 3s.

The Wii numbers are noteworthy, as one of the company’s big games of 2009 apparently failed to move additional hardware units. "Wii Sports Resort," a sequel to the system's best selling game, topped the charts, selling more than 508,000 copies in July.

In terms of raw units, EA's "NCAA Football 10" sold the most—with 614,000 copies sold on the Xbox 360 and PS3. (NPD breaks out the sales by platform, which was how "Wii Sports Resort" topped the list.)

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