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Video Game Sales Plunge: Activision Blizzard says Consumer's still Suffering

Activision
Activision

Activision Blizzard CEO Bobby Kotick wasn't kidding when he told me that the consumer still hasn't recovered.

I spoke to Kotick in an exclusive interview — he said Activision Blizzard's more modest projections for the current quarter were due to the timing of game releases.

That lack of new games is one factor behind the 22 percent drop in game sales in April from a year ago.

The fact that there are so many free options online can't be helping, especially when it comes to sales of pricier consoles. Console sales dropped 37 percent to $249 million from a year earlier.

A number of factors are putting pressure on the games industry — a $60 game is a major investment, especially when there are a slew of online games offered for free.

Plus, as we saw with April's sales numbers, the business is incredibly hit-driven.

Without a huge launch gamers lose interest, and this is particularly true when wallets are tight.

The real question is how much we're seeing a sea-change away from the traditional video game model, and towards free online games.

Kotick told me he considers everything competition for consumers'' time, whether it's games like Zynga's Farmville and Mafia Wars or time spent using instant messenger. He made the point that these free games, monetized through virtual purchases, are still a relatively small business — certainly smaller than the video game software business, which generated over $20 billion in sales last year. And Kotick was upfront with the fact that they're moving into these social games with their virtual goods model as a way to grow operating profits in the future.

What about the lawsuits Activision Blizzard faces from former employees over compensation for Modern Warfare 2? Kotick wouldn't reveal much, saying it won't hurt the company's business. But certainly as the industry reports such weak April sales, it can't be easy to also juggle suits demanding well over $100 million in compensation.