The truth about March (and April) video game sales

A jump in software sales surprised some, but the trend lines -- including April's action -- are obvious.

By InvestorPlace Apr 16, 2010 11:18AM

video game sales stocksAfter steep declines in February video game sales, we learned late this week that March video game sales were up 6% over last year, breaking the steep declines seen after the holiday season.


According to the NPD Group, video game sales hit $1.52 billion for the month and featured a more than 10% jump in video game software sales -- much better than the +3% gain that was expected.

Some folks were surprised by this -- but that’s because they don’t know the industry. If you read the March video game sales preview on InvestorPlace.com, you will find almost all of the details there ahead of time -- lower hardware sales for consoles like the Sony (SNE) PlayStation 3, Microsoft (MSFT) Xbox and Nintendo (NTDOY) Wii. Stronger software sales due to easier year-over-year comparisons. Even the top titles among the software picks -- "God of War III," "Final Fantasy XIII" and others.

 

So why should you care that we got it right? Well, because so many people got it wrong for March and expected a rough month -- and those same folks are about to get it wrong again when forecasting April video game sales. Here’s what’s REALLY going to happen when numbers for this month are formally released:

 

I expect continued weakness in hardware sales in April. Though Nintendo continues to push ahead with ambitious plans to bring video games to the classroom and to implement 3D video game technology, but these are very long term developments that won’t catch on quickly -- and certainly not in the next few weeks.

Software sales should also slump because … there simply aren’t any good video games out there! It’s all a bunch of tired sequels. While I’m a massive "Final Fantasy" fan -- I still own the original and still break it out on my old school Nintendo on occasion -- the fact is that more sequels fall short than succeed, simply because they have become a revenue machine instead of a creative vehicle.


Take game stock Take Two Interactive (TTWO), which is rolling out a dozen reincarnations of its runaway hit "Grand Theft Auto" franchise in April. Worst of all, many of these sequels have actually already been released for other systems – for instance "Grand Theft Auto IV: The Lost and Damned," released April 13 for the PS3, was out in February for the Xbox.


It’s sad that the most exciting thing for Take Two in recent weeks is that TTWO stock got Carl Icahn as a dominant player. You’d think they could come up with a game that would grab more headlines than an old guy in a suit.

There could be some rays of hope in April. The blowout success of Activision Blizzard (ATVI) and video game sales online were certainly noteworthy in March. But still it was still generated from add-ons to an existing title -- a game that was actually already a sequel before the add on, "Call of Duty: Modern Warfare 2." And the higher interest in Electronic Arts’ Tiger Woods golf video game was more about the golfer’s scandal than about video games.

 

That doesn’t bode well for April sales.

 

So don’t be fooled by the headlines. Granted, most video game companies save their blockbusters for the beginning and end of the year anyway since nice weather and family trips cut into time in front of the tube. But pundits who were “surprised” by the March sales surge may foolishly think that pent up demand is going to send kids to the store with money in hand, or that consumer spending is back and better than ever.

 

The bottom line is that it’s all about the quality of video games out there. And in April, we’re scraping the bottom of the barrel.

 

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