Kinect Cannot Save The Video Game Industry

The Kinect version of Xbox 360 sold eight million units the first 60 days it was on the market. Kinect sales should have improved as the holiday season progressed. That did not happen because Microsoft ran low on the product.

December video game and video game consoles sales were poor despite the demand that the fourth quarter of the year and December often bring. Research firm NPD reported sales of software for video game consoles in the U.S. fell by 8% in December. Revenue from hardware sales fell by 16%.

Despite the problems with inventory, the Xbox 360 posted its best month of sales ever– 1.9 million units. It was also the only system to post a year-over-year increase in unit sales. Nintendo’s DS still led  hardware unit sales for the month, pushing its US lifetime-to-date sales to 47 million and surpassing the PlayStation 2. Nintendo’s success came even though sales of its Wii console and DS handheld fell by 40% and 24%, respectively

The data on the Kinect is depressing because it shows that while one of the three console companies does well, another can do very poorly. This may keep total unit sales from a the broad improvement that last occurred when the Xbxo 360, Sony (NYSE: SNE) PS3 and Wii were launched within a few months of one another.

Spotty console sales also make it difficult for video game sales to rise. A game may do well on one platform, but those developed for more than one often suffer.

The success of the Kinect comes as the PS3 and Wii age. It may take several months or longer for the upgrades to these machines to significantly help sales.

In the meantime, much of the game business has moved online to PCs and to portable devices and smartphones like the Apple (NASDAQ: AAPL). That means whatever improvement Nintendo, Sony, and Microsoft make to their consoles may come too late. The smartphone has begun to become the platform of choice for many video game players.

Douglas A. McIntyre