October Video Game Sales Paint Troubling Holiday Portrait

At least one video game publisher and one video game console manufacturer are having an excellent November. Activision Blizzard (NASDAQ: ATVI ) is riding high after last week’s release of Call of Duty: Black Ops brought in $360 million after just 24 hour’s on the market. Microsoft (NASDAQ: MSFT ) is also enjoying brisk sales of its new Kinect hands-free controller and interface for the Xbox 360. The company announced on Monday that 1 million Kinects have been sold during the device’s first ten days on the market. The success of these products are encouraging for investors hoping that the holiday shopping season will breathe new life into the sagging video game industry. The month of October, however, may dampen those raised spirits as data compiled by industry analysts and NPD Group reveal continuing declines during a month that is traditionally one of the biggest revenue generators of the year. Game hardware took the heaviest blow in October, with revenue generated by both home and portable consoles dropping by -26% overall. Microsoft’s Xbox 360 led the home console pack with the company’s community manager Larry Hryb reporting 325,000 consoles sold during the four week sales period, a drop down from the 483,989 systems sold in September, but still a year-on-year increase. Microsoft has sold 3.5 million Xbox 360s in 2010 to date, outselling Sony ‘s (NYSE: SNE ) Playstation 3 and so far outselling Nintendo ‘s (PINK: NTDOY ) former powerhouse Wii. According to USA Today , the Wii sold just 232,000 units in October, a shocking drop of -54% in year-on-year sales. The Playstation 3′s sales declined -22% from the same period in 2009, selling just 250,000 units, indicating that the company’s new Move motion control peripheral is not driving new sales of the console. Wedbush Morgan analyst Michael Pachter highlighted the declines in the portable game hardware market as the most concerning for game manufacturers and investors alike. Though the Nintendo DS was the overall best-selling hardware in October— USA Today also claimed 342,000 in sales for Nintendo’s handheld device—the device was down -34% year-on-year, continuing its steady decline over the course of 2010. While consumer anticipation of next spring’s glasses-free 3D system, the Nintendo 3DS, has undoubtedly deterred some potential Nintendo DS customers from buying the system this fall, Pachter believes that outside forces are impacting DS sales. “We believe the iPod Touch is cannibalizing dedicated game handheld hardware sales, and expect weakness in handhelds to persist until the 2011 introduction of the Nintendo 3DS,” said the analyst to website Gamasutra . News that Apple Inc. (NASDAQ: AAPL ) is finally realizing its ambitions in the video game space should be good news to investors in the Cupertino, Calif. company. Others invested in Nintendo and publishers like Activision Blizzard, Electronic Arts (NASDAQ: ERTS ), THQ (NASDAQ: THQI ), Take-Two Interactive (NASDAQ: TTWO ), and others whose software previously thrived on the DS will be none too happy that the holidays may not improve the DS’ fortunes.
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