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Video Game Sales Fall Again, Despite 'Modern Warfare 2'

Chris Morris|Special to CNBC.com
Thursday, 10 Dec 2009 | 6:58 PM ET

The largest entertainment launch of the year wasn’t enough to push video game sales into positive territory in November, raising concerns about the overall health of the industry.

Modern Warfare 2
Modern Warfare 2

Despite blockbuster numbers for “Modern Warfare 2,” video game sales remained in negative year-over-year territory in November, down 3.1 percent compared to 2008, according to The NPD Group, which tracks video game sales. Game sales totaled $1.4 billion — with more than 25 percent of that coming from “MW2”.

The advance was notably lower than analysts had predicted. (Wall Street consensus had called for a 2 percent increase, though some analysts were looking for a jump as large as 7 percent.)

Activision’s blockbuster lived up to expectations with sales of more than 6 million copies — with over 4 million on Microsoft’s Xbox 360. Activision had previously announced the action title recorded sales of $550 million in its first five days. More than 8 million people worldwide played the game in that time — twice the number of troops in NATO’s 28 member countries combined. (NPD only tracks North American sales.)

Meanwhile, the early winter price cuts by the console manufacturers still couldn’t push sales of video game machines into positive territory. While each turned in vastly improved numbers compared to October, the year over year figures were significantly lower, down more than 13 percent, totaling just over $1 billion.

The Nintendo DS was, as usual, the month’s biggest seller with 1.7 million units, nearly quadrupling its October numbers. The Wii sold 1.3 million units, more than twice as many as it sold last month.

Microsoft saw a better than three-fold increase, selling 819,500 Xbox 360s. And Sony more than doubled its PlayStation 3 sales, coming in at 710,400.

Only the PS3 and Nintendo DS beat the 2008 numbers. Overall, video game hardware sales are still 16 percent behind last year’s pace.

While “Modern Warfare 2” was by far the sales leader, there were several other significant hits in November. Nintendo’s “New Super Mario Bros. Wii” sold 1.39 million copies and Ubisoft’s “Assassin’s Creed 2” sold more than 1.2 million. Valve Software’s “Left 4 Dead 2,” which was published by Electronic Arts, sold 744,000 copies, despite some fan complaints about the sequel’s early release.

With November surprising and disappointing so many observers, many are trepidatious about what December might hold. Even if “Modern Warfare 2” has strong legs at retail, most are expecting another disappointing month. (Industry sales have declined eight of the last nine months.)

Overall, the videogame industry is tracking 12 percent behind the 2008 numbers. Publishers, analysts and investors had hoped to end the year with just single percentage digit declines, but most acknowledge that seems impossible now.

“As 2009 draws to an end, it is clear that it will end as a horrible year for video game publishers,” said Michael Pachter of Wedbush Securities, who adds he expects December will once again slide into negative territory.

Others wonder if the strong of bad sales this year will finally convince publishers to lower the prices of mid-level games down from the current $60.

“Really good titles are selling — and they’re selling at premium prices, but consumers aren’t willing to pay $59 for second tier content,” says Colin Sebastian of Lazard Capital Markets. “I think that’s why there’s a concern for next year. What’s the right price for titles moving forward? ‘Halo Reach’ will get $59, sure, but what about games below that? I think you’ll start to see prices decay. The NPD data, along with the discounts we’ve seen at retail this holiday season, will push that issue to the front burner.”

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