Video game sales plunge, but innovation beckons

Music downloads from games are bright spot, but it will take fresh approach to rejuvenate sector

By TheWrap Feb 16, 2010 9:59PM

After a decade of growth and two consecutive years of record-breaking grosses, sales of video games -- which at first seemed immune to the Great Recession -- are finally falling.

More like avalanching, actually.

A host of advances and all-new revenue streams are on the horizon, some coming as early as this year, that industry insiders hope could turn things around.

But the beginning of 2010 delivered the industry a body blow of economic reality.

Game sales dropped nearly 9 percent in 2009 from the previous year, dipping to $20.2 billion from $22.11 billion, according to digital entertainment market researchers NPD Group. Then a stellar December -- a record sales month, thanks to holiday spending -- seemed to be a sign that things were rebounding quickly.

They weren’t.

Last month’s sales were off 13 percent from January 2009, according to the NPD Group.

While there was some good news in accessory and controllers sales being up 2 percent, software declined 12 percent and hardware sales took a devastating hit, sliding 21 percent from a year before.

Last week Electronic Arts (ERTS), one of the industry’s largest game publishers, saw its share prices hit hard. And layoffs have come to the seemingly untouchable industry: After tough third-quarter declines, Activision (ATVI) announced that hundreds of employees would be laid off, and its Los Angeles-based game studio Luxoflux would close.

Across-the-board price cuts to the existing Xbox, Wii and PlayStation 3 consoles, meant to stimulate sagging prices, didn’t help the bottom line, either. And some analysts believe supply problems – especially in the case of the Wii – hurt overall sales.

Much of the trend has to do with the decline of the once-roaring music genre -- which last year declined 46 percent over 2008, according to NPD.

Despite the release of some big names like “Beatles: RockBand,” the music sector peaked, dragging game sales dramatically down.

On the plus side, downloads from those games continue to surge. Since 2007, more than 60 million tunes, ranging in price from 99 cents to $1.99, have been downloaded from “RockBand” and “Guitar Hero” games.

Read more at TheWrap.

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TheWrap ( is a unique primary news source focused on the business of entertainment and media. Offering its readers original reporting, exclusive contributions from industry readers and curated news from around the globe, The Wrap is led by award-winning journalist and author Sharon Waxman, with a team of veteran entertainment writers and editors including Josef Adalian, Lew Harris, Josh Dickey and Dylan Stableford.



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