Video Game Sales Drop Moderates In May, Holidays Critical

Game and game console sales have been extremely weak for a year-and-a-half as the recession sapped demand for consumer electronic devices. This has not been offset by price cuts for the Sony (NYSE: SNE) PS3. the Microsoft (NASDAQ: MSFT) Xbox 360, or Nintendo (OTC:NTDOY)Wii. All three companies recently upgraded the features of their consoles to bring in new buyers.

May’s sales figures for consoles and games were down from the same month a year ago, but the fall-off moderated compared with previous months.Research firm NPD reported that game hardware sales fell by 20%. The Wii sold 334,800 units for the month, while the Xbox 360 sold 194,600 units and the PS3 sold 154,500 units. The Wii kept its position in first place, but its sales have fallen quickly due to its aging platform and improvements in the products of its two rivals. As usual, Sony’s PS3 held the third and last position, a sign that it is a failure compared to the PS2.

Game sales improved somewhat. Revenue rose 4% largely due to the release of new titles including “Red Dead Dimension” and “Super Mario Galaxy 2.”  The numbers were below analysts’ expectations.

The industry’s challenge now is the holiday season which begins in October. Each company will release new consoles and that will be the critical factor in getting shoppers to buy the games–that and the economy.

A slow holiday season will probably mean another year of dismal sales for the industry

Douglas A. McIntyre