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Video Game Sales Have Smaller Drop in May

After a surprising—and staggeringly bad—April, the video game industry showed fledgling signs of life in May—but nothing that’s going to cause investors to cheer. Take Two Interactive Software, though, may finally have a hit franchise that will divert investor focus away from “Grand Theft Auto”.

Screen capture of "Red Dead Redemption"
Source: Rockstar Games
Screen capture of "Red Dead Redemption"

Overall industry sales for the month were down 5 percent to $823.5 million, according to the NPD Group, which tracks video game sales. Software sales, which investors and industry observers track more closely, were up 4 percent, however, to $466.3 million. The software numbers were slightly lower than analyst expectations, which ranged from 5 percent to 11 percent increases.

The sales give investors a look at the state of the gaming industry’s health, which has been questionable through much of 2010. Many observers entered the year expecting a more significant rebound after 2009’s weak results.

The numbers aren’t particularly encouraging, since last May had relatively light sales (and thus, was an easy comparable). Still, any increase in software sales is a welcome one.

The real test will come when NPD releases June sales figures. (May’s numbers were delayed, due to the E3 trade showand some changes within the company.) If those results show another increase, optimism for the turnaround investors have been waiting for may start to increase.

Year to date, the video game industry is 10 percent off of last year’s pace. Software sales are still down 6 percent in 2010.

While the celebration for the industry at large is muted at best, the May figures were a boost for Take Two , whose “Red Dead Redemption” sold more than 1.5 million copies. That’s significantly lower than the 5 million that the company announced had been shipped in mid-June, but is still a strong start. (Again, analysts are waiting for the June numbers to see how strong the game’s legs are at retail. Some checks have shown a noticeable drop off in sales, but those are inconclusive measuring sticks.)

The Xbox 360 and PlayStation 3 versions of the title were the month’s top and second best selling titles.

If the game does hold up in the June figures, it could become a tent pole in Take Two’s collection. The company has been seeking games that can help support it in years where it does not release a “Grand Theft Auto” installment—and it’s hoping “Red Dead Redemption” could be part of that solution.

Hardware sales had another rough month, falling 20 percent to $241.5 million. While mid-year sales tend to be relatively light, that’s still a precipitous drop.

Nintendo once again topped hardware sales, with the handheld DS unit selling nearly 384,000 units. The Wii was second, moving roughly 335,000 units. Microsoft’s Xbox 360 was next, selling 195,000 devices and Sony sold 154,500 PS3s.

The real question now is: Will the slate of new hardware launching later this year help the hardware sector recover. Sony will launch the PlayStation Move motion controller on Sept. 19 and Microsoft’s Kinect gesture recognition device will go on sale Nov. 4.

Beyond Take Two’s “Red Dead Redemption,” Nintendo was the big winner among software companies. “Super Mario Galaxy” was the month’s third best selling title, with nearly 564,000 copies sold. (That number may be even stronger in June, given the popularity and longevity of Mario games.) THQ’s “UFC 2010: Undisputed” sold 413,000 copies combined on the Xbox 360 and PS3. That sounds impressive until you realize the game’s 2009 edition sold over 1 million copies in its first month.

Meanwhile, Microsoft’s “Alan Wake,” which was considered to be a tentpole event, appears to be a flop. The game ranked eighth in the monthly sales figures. NPD did not provide sales figures for the title.

Other high-profile titles, including “Prince of Persia” from Ubisoft, “Blur” from Activision and “Split/Second” from Disney failed to make the Top 10.