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Video Game Investors Brace for More Bad News

The holiday season can’t get here quickly enough for video game publishers.

July sales number for the industry will be released roughly two hours after the market closes Thursday – and analysts expect good news to be in short supply. Consensus is fairly wide this month, but the year over year drop in sales is expected to be between 7.5 percent and 15 percent.

The numbers, however, will be lacking one major contributor to the industry’s health in July:

StarCraft 2
Courtesy of Activision
StarCraft 2

The release of PC-exclusive “Starcraft II” from Activision-Blizzard.

The NPD Group’s figures focus exclusively on console sales, since sales of new PC games are generally a small part of the industry’s overall revenue.

“Starcraft II” is an exception, though. Activision has previously announced that 1.5 million copies of the game sold within the first 48 hours.

July has the easiest dollar comparison of the year, but 2009 did have one strong title – Nintendo’s “Wii Sports Resort,” which included a new peripheral that made the Wii controller more accurate. July 2010 lacked any significant releases.

The top sellers for the month are expected to include Electronic Arts “NCAA Football 11,” Microsoft’s “Crackdown 2” – with the year’s bestseller so far, Take Two Interactive Software’s “Red Dead Redemption,” likely having a decent showing as well.

Year to date, video game software sales (the most closely watched number of the monthly reports) are down 8 percent. To match last year’s disappointing sales numbers, every month, including July, would have to have a growth rate of better than 3 percent.

That’s unlikely. Most analysts are expecting flat to negative growth overall in 2010.

And publishers, they say, may only have themselves to blame. The rise in games with deep, engaging multiplayer components could be preventing people from buying new games.

"To match last year’s disappointing sales numbers, every month, including July, would have to have a growth rate of better than 3 percent." -Tech Check, CNBC, Chris Morris

“Multiplayer online game play is as strong as ever, with an estimated 15 million people spending an average of 10 hours a week playing games such as ‘Call of Duty: Modern Warfare 2,’ ‘Halo 3’, ‘Battlefield Bad Company 2’ and ‘Red Dead Redemption’,” says Michael Pachter of Wedbush Securities. “While downloadable content (DLC) sales have been strong … revenues from DLC are insufficient to offset the declines in packaged goods sales.”

The best chance of a bright spot will be in hardware sales. Nintendo has lured buyers into stores by adding a second free game to the Wii’s bundle and Microsoft’s introduction of a redesigned Xbox 360 (and clearance sale of older models) has sparked sales as well. Demand for Sony’s PlayStation 3, meanwhile, has been higher most of the year, with the release of several big franchise titles.

The summer months are typically weak ones for the gaming industry, but things generally start to pick up in August. The annual release of EA’s latest “Madden” game marks the beginning of the fall gaming season.

September will see the launch of “Halo: Reach” – the last game franchise creator Bungie Studios will make for the series – as well as PlayStation Move, Sony’s entry in the motion control market.

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