This is the biggest decline since September 2000 when the industry declined 41 percent.
Hardware sales were off 38 percent to $383 million in June and are currently 13 percent behind last year’s pace.
Unsurprisingly, the drop was higher than analysts were expecting.
The industry, as a whole, is now 12 percent behind the 2008 mid-year numbers, with sales of $7.3 billion.
“The first half of the year has been tough largely due to comparisons against a stellar first half performance last year, but still, this level of decline is certainly going to cause some pain and reflection in the industry,” says Anita Frazier, an analyst at NPD.
Comparing 2008 to 2009 is not exactly an apples to apples comparison. Last year saw several blockbusters — including Nintendo’s “Mario Kart Wii” and Take Two Interactive Software’s “Grand Theft Auto IV” — released early in the calendar year, which boosted the numbers.
The drop, though, underscores the effects of the economic crisis on an industry that prides itself on being recession resistant.
“This is one of the first months where I think the impact of the economy is clearly reflected in the sales numbers,” said Frazier. “The size of the decline could also point to consumers deferring limited discretionary spending until a big event (must-have new title, hardware price cut) compels them to spend.”
There was some good news hidden amidst the data. While hardware sales are down compared to a year ago, all of the major platforms showed month over month increases, compared to the May numbers. The Xbox 360 also saw a year-over-year sales increase, the only platform to do so.
The Wii continues to dominate hardware sales, with nearly 362,000 sold in May Microsoft sold 241,000 Xbox 360s and Sony sold 165,000 PlayStation 3s.
Industry observers are a bit more optimistic about the back half of 2009, but the improvement will be slow. Analysts say they do not expect any dramatic improvement in July, as pre-orders for Electronic Arts’ “NCAA Football” have been soft, according to retailers.
More worrying is the number of high profile games that publishers have been moving out of the 2009 holiday season. Take Two has delayed “Bioshock 2,” “Mafia II” and “Red Dead Redemption,” for example, and Sony has postponed the release of “Heavy Rain”.
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Those delays, say Frasier, and rumored others to come, could turn what was expected to be a flat year for the industry into a down one.
“"Even with the industry down 12 percent year-to-date, with a strong back-half performance, full year sales could still be flat to slightly up to 2008's record-breaking performance. Of course, that could be put further at risk if more highly anticipated titles move out of 2009 into 2010 or later."
Activision’s “Prototype” led software sales in June, selling 420,000 copies. The more notable news, though, was that for the first time in its 29 month history, Nintendo’s “Wii Play” was not among the top 10 selling games.
The title’s run in the chart was an industry record.