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Video Game Sales: 'Halo' to the Rescue?

If all goes according to plan, the video game industry could see its first positive sales growth since March in September—but in a year that has been filled with disappointing results, game publishers and developers know any plan is tentative at best.

Analysts expect software sales to be up slightly in September, largely on the strength of Microsoft’s “Halo: Reach,” which took in $200 million in its first 24 hours. No one is expecting a blowout month, though. Wedbush Securities is forecasting a rise of just 2.4 percent compared to last year’s $649 million.

Others are even less optimistic. Kaufman Brothers' Todd Mitchell agrees that software revenues will rise—he’s predicting a 4 percent jump—but notes that hardware sales could be hit hard, leading to an 8 percent decline overall. (Sony cut the price of its PlayStation 3 console last September, leading to a sales rush.)

If software sales do beat the 2009 numbers, it will only be the third time this year the industry has managed to do so. And even then, it could be the last time that happens in 2010.

“Unfortunately, we do not see many catalysts for the software publisher group over the remainder of 2010,” says Michael Pachter of Wedbush. “We think that console and handheld software sales in 2010 will end up in negative territory, offset by an increase in PC software from the launches of ‘StarCraft II’ in July and ‘World of Warcraft: Cataclysm’ in December.”

While “Halo: Reach” will lead the pack, expect strong numbers for Electronic Arts’ “FIFA 11” as well. The company last week reported it had sold 2.6 million copies of the game through Oct. 2—a vastly improved performance over its predecessor.

With two solid hits launching last month, you might expect September 2010 to blow away the previous year. Comparable sales are difficult for September, though. Last September saw the launch of “Halo: ODST,” Viacom’s “The Beatles: Rock Band” and a new “Guitar Hero” game from Activision.

The music genre has generally flamed out, though, and likely will not contribute significant income to this year’s sales figures.

Year to date, the industry is 8 percent behind 2009’s pace. Software sales, which are generally looked to as the best barometer of the industry’s health, are down 8 percent as well. Hardware sales are off 12 percent.

This comes despite the fact that 2009 sales were lower than 2008. Last year was the first time the industry recorded negative growth since 2002. And although there have never been back-to-back years of lower sales historically, many industry observers say it’s a foregone conclusion that will occur this year. And that should prevent any momentum for video game stocks in the near term.

“Until we see a reversal of the negative trend, we expect investors to remain on the sidelines,” said Pachter. “We think that 2011 has the potential to be a bright year for the publishers, but we think that investors will have to be patient to see evidence of a rebound.”

Questions? Comments? TechCheck@cnbc.com

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