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Video Game Turnaround, but Stocks Slide

It's a great week for the video game industry — several pieces of positive news for investors in the game business. But despite the upbeat news, game stocks slid Thursday with Activision Blizzard down nearly 5%.

So what happened?

Halo Reach
Courtesy of Microsoft
Halo Reach

First, the good news: Microsoft's "Halo:Reach" lived up to all expectations, hitting $200 million in sales in the launch day alone. This translates into about 3 million games sold, which means the game will certainly be profitable for Microsoft .

(I'm blogging about the anatomy of a video game blockbuster later today so come back for details on exactly how much Microsoft will make).

Gamers turned out en masse for this big title, which means that they're still willing to spend on the right game. This bodes well for a turnaround in game sales, which sank 14 percent to the lowest August since 2006. Lazard Capital Markets Colin Sebastian wrote that this means that "core gamers" are alive and kicking, which should be good news for Activision Blizzard and Electronic Arts.

Plus, Sony said Thursday at Tokyo's game show that PS3 game sales are slightly better than expected. The console is on track to reach the company's target of 15 million sold for the year ending in March 2011. This news is a surprise, considering that console sales fell 5 percent last month.

GameStop shares surged 4.36 percent Thursday on news that the company will buy back $500 million in cash and stock. This is a positive for shareholders and indicates that management that the stock — still down 28 percent for the year — is cheap. It also doesn't hurt that after the retailer opened 4,000 stores Tuesday for the midnight launch of "Halo," the game had such huge first-day sales.

Now, the bad: Thursday Activision shares dropped 4.78 percent, Electronic Arts slid 1.6 percent, Take Two Interactive, the maker of hit 'Red Dead Redemption' dropped 1.2 percent, and Ubisoft's ADRfell nearly 5 percent to $1.85. The problem: the August game sales numbers were worse than expected and investors are still anxious about consumers' willingness to spend, concerned that gaming stocks will face tough comparisons next year. Plus, gamers still have questions about the future of ActivisionBlizzard's "Call of Duty" after the game's creators left in the midst of a lawsuit.

Questions? Comments? MediaMoney@cnbc.com