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Video Game Sales End Sluggish Year 8% Lower

Chris Morris|Special to CNBC.com
Thursday, 14 Jan 2010 | 6:45 PM ET

2009 will be a year the video game industry would like to forget.

Modern Warfare 2
Source: Activision
Modern Warfare 2

The industry's sales were down 8 percent compared with the 2008 numbers, sliding to $19.7 billion.

The recession, combined with a steep decline in sales of music games, took its toll on gaming companies. Software sales were down 11 percent to $10.5 billion. Sales of video game systems rallied somewhat toward the end of the year, but were still down for the year.

The numbers come despite 2009 boasting the biggest game release in the industry's history. "Modern Warfare 2" has brought in over $1 billion in worldwide sales for Activision Blizzard since its Nov. 10 launch. It was, predictably, the year's best-selling console title. (NPD tracks only U.S. sales numbers.)

Industry representatives tried to find positive news amid the bad numbers.

"Clearly, 2009 was tough year for consumers and the national economy," said Michael D. Gallagher, president and CEO of the Entertainment Software Association, the video game industry trade association. "However, the bigger picture is one that underscores the industry's strength; 2009 and 2008 were the highest grossing years in our industry's history."

December, meanwhile, which is normally the industry's biggest month due to holiday purchases, was mixed. Game sales were off 7 percent to $2.58 billion — but hardware sales were up 4 percent over the same period in 2008.

Aggressive pricing by retailers could have affected the software sales numbers. Both Wal-Mart and Amazon deeply discounted popular games in a fight for customers during the holiday season.

Meanwhile, spurred by hardware price cuts earlier in the year, December sales of console systems from Microsoft, Nintendo and Sony were up 16 percent to $2.19 billion. Wii sales jumped 77 percent, while PlayStation 3 sales virtually doubled. Sales of the Xbox 360 were off slightly.

Nintendo, as it has in previous years, ruled the holiday season. Beyond the success of the Wii and Nintendo DS, it also published the three best-selling games of the month.

"New Super Mario Bros. Wii," "Wii Fit Plus" and "Wii Sports Resort" together racked up sales of over 7 million units. ("Modern Warfare 2" took the fourth and fifth spots for the Xbox 360 and PS3 versions of the game, respectively. If added together, the game would have been number two in the December rankings.)

With 2009 finally behind it, the video game industry is hoping to see some recovery in 2010. The first quarter is loaded with several major releases from Electronic Arts, Sony and Take Two Interactive Software.

Despite that, there is still a fair amount of skepticism about the year to come. Electronic Arts, in its recent earnings warning for the holiday quarter, noted that it was expecting industry sales in 2010 to be "flat" to down "mid single digits".

Lazard Capital Markets analyst Colin Sebastian seems to agree, saying in a note to investors, "We expect flattish console software sales in 2010. We continue to expect 2010 console sales to be down 1 percent … with overall content revenues up 10 percent, driven by ongoing strong growth in social networking games and mobile/smartphones."

Others disagreed, though.

"We are currently forecasting sales 2010 sales growth of +10 percent, and think that EA's forecast reflects a disaster scenario," wrote Michael Pachter of Wedbush Securities. "In our view, easy comparisons, lower console prices, new peripherals and a solid lineup of big games all but assures robust growth in 2010."

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