Video Game Sales Plunge Again in June

Analysts and industry observers were expecting June’s video game sales numbers to be pretty awful. Unfortunately, they were right.

Super Mario Galaxy 2
Super Mario Galaxy 2

Software sales tumbled 15 percent last month to $531.3 million, according to The NPD Group, which tracks retail sales of video games. A surge in hardware sales, spurred by temporary price cuts to the Xbox 360, salvaged the industry’s overall total, though it was still six percent lower than last year.

Only one title released in June made the list of Top 10 titles, though Take Two Interactive saw good catalog sales of “Red Dead Redemption,” which sold another 963,000 copies, and Nintendo saw good numbers for its “Super Mario Galaxy 2" game, which sold over 548,000 copies.

The software sales drop was in line with the high-end of analyst expectations.

Hardware sales were up five percent, as Microsoft saw a surge in demand for the Xbox 360, which introduced a revised model and discounted existing retail models, bringing the system temporarily down to as little as $149.

Year to date, the video game industry is nine percent off 2009’s pace, with sales of $6.66 billion. Last year was the first time the industry posted negative growth since 2002.

Even the most optimistic industry observers now say video game makers, on the whole, will be lucky to match last year’s results—with many looking for another drop in overall revenue.

Sentiment surrounding the industry is at “rock bottom,” says Colin Sebastian, an analyst with Lazard Capital Markets. And until the industry shows some sign of a sustained rebound, valuation multiples are going to remain flat.

The hope now is that the introduction of new peripherals from Microsoft and Sony later this year will give the industry a boost. But the generally unimpressive lineup of games for Kinect, formerly known as Project Natal for the Xbox 360, and PlayStation Move, as well as concerns about the pricing of both systems, has dampened that enthusiasm.

On the software side, publishers displayed several hot games at E3, the industry’s annual trade show, last month but nothing shown for this holiday season excited critics as much as titles that have already been released.

June is typically a light month for game releases, which is part of the reason Thursday's numbers were light, but 2009’s release schedule did not have many breakaway titles, which generally results in an easier comparison. Activision’s “Prototype,” a moderate hit that was essentially forgotten by gamers by the holidays, was the month’s top-selling title.

Notably missing from the Top 10 best-sellers was "Tiger Woods PGA Tour 2001," which many considered the month's most high-profile release. The game sold only 32 percent of what last year's version sold in its initial days on shelves, according to NPD. Whether that's because of the economy, game or Woods' own personal scandals is unclear.

So far in 2010, only March has shown any positive growth over 2009. Now, some analysts say, investors could punish game publisher stocks for June's light numbers.