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Video Game Industry's Troubles Aren't Just in US

It’s no secret the video game industry is having a rough 2009 here in the United States — but that's not the only place it's struggling.

Wii
AP
Wii

A new combined survey by the NPD Group, Gfk Chart-Track and Enterbrain — three data tracking companies that focus on video games — shows third-quarter sales were down 6 percent in the world’s three largest gaming markets.

Year-to-date, Japan, the U.K. and the U.S. are 9 percent behind last year’s pace and seem unlikely to bounce back before the end of December.

Though much has been written about the negative trends of the industry in the U.S., things are worse in other markets. Sales in Japan are down 9 percent so far this year, while U.K. sales have plunged 13 percent.

Because so many of the industry’s top publishers, such as Activision and Electronic Arts, are based domestically, it’s sometimes easy to forget the importance of other markets.

To put things in perspective, consider this: Two of the top-five global selling games of the third quarter haven’t been released in the U.S. “Dragon Quest IX” from Japanese publisher Square Enix sold 3.9 million copies in Japan alone, making it the industry’s biggest game. “Pokemon Heartgold and Soulsilver” from Nintendo was another Japan exclusive, selling nearly 2.1 million copies — beating Microsoft’s hit “Halo 3: ODST,” which was sold in all three territories.

Those exclusives were a big boost to the Japanese marketplace in the third quarter. Sales were up 15 percent in the three-month period. (The U.S. was down 9 percent and the U.K. fell 19 percent during the same time.)

Nintendo, which has been struggling of late, did get some good news from the study. “Wii Sports Resort,” the company’s follow-up to the Wii’s best selling game, is doing well in all territories. More than 3 million copies were sold —mostly in August and September. (The game went on sale in late July.)

The U.S., U.K. and Japan represent about 65 percent of total global sales for the video game industry. (The U.K. makes up roughly 1/3 of total European sales.) The U.S. is the largest consumer of video games, followed by Japan, then the U.K.

2009’s declining numbers can be tied to a variety of factors. The recession and tough comparisons to last year are factors, but, perhaps more importantly, the impact of new types of gaming are finally beginning to be felt on game publishers as well.

“Lately, the impact of the recession and the proliferation of free gaming options (iPhone apps, Facebook games) is having more impact [than tough comparisons to 2008],” says Anita Frazier, toy and video game analyst for NPD. “The industry saw a notable expansion the last several years and … we know that the size of the gaming audience is increasing. But some of that increase has come from more occasional, or casual players. To the extent that their gaming ‘needs’ can be satisfied by a free game, that could be impacting the industry as well.”

The impact of Apple and Facebook is only going to grow — and publishers are beginning to realize the need to capitalize on it. Electronic Artsthis week released a free version of its hit title “Spore” that is customized for Facebook. And several publishers are ramping up production of iPhone games to establish footholds on that platform.

While most analysts have written off any chance for a sales increase in 2009, optimism is high for the industry in 2010—both domestically and globally. Highly anticipated games are slated to hit store shelves regularly throughout the year, while updates and enhancements are expected for each of the major consoles, which many feel could reinvigorate consumers.