Even Microsoft's (Nasdaq: MSFT ) highly anticipated Halo: Reach and a trio of annual EA Sports powerhouses from Electronic Arts (Nasdaq: ERTS ) couldn't save the gaming industry last month.
Market watcher NPD Group claims that its channel checks show an 8% year-over-year decline in industry sales last month. Hardware sales slumped 19%, with software taking a more modest 6% hit. Accessory sales did inch higher -- likely the result of Sony (NYSE: SNE ) introducing its new motion-based controller -- but once again I find myself chronicling the gradual fade of the video game industry as diehard gamers know it.
It's been nearly two years since the industry turned lower. It may not have kicked in with investors immediately. After all, niche retailer GameStop (NYSE: GME ) continues to expand its small-box universe. Blockbuster titles still sell well, with Activision Blizzard's (Nasdaq: ATVI ) Call of Duty: Modern Warfare 2 breaking initial sales records last November when it sold $550 million during the first five days.
However, something clearly is amiss. NPD doesn't cover all of the industry sales. It doesn't track digital distribution, used game sales, and rentals -- all areas that are likely growing. Even Best Buy (NYSE: BBY ) is diving into the used game market these days, and Blockbuster is trying to take on GameFly with mail-delivered rentals. Those metrics don't necessarily help developers, though. They don't receive any money on hand-me-down resales, for example.
There is potential with digital distribution, as long as you're not GameStop or the other physical retailers. The rub there is that price points are substantially lower in that space.
When will the industry turn the corner? It probably won't be this month. Negative reviews have gunned down this week's EA release of Medal of Honor. It probably won't be next month either. Yes, Activision Blizzard is going to have a winner in Call of Duty: Black Ops, but it's going to be pitted against last November's franchise smash.
One can argue that the video game industry isn't dying, but leadership is clearly moving away from the conventional console makers and perhaps even the software giants. No one should have been surprised when Nintendo warned investors about soft results this year. Beyond Take-Two Interactive's (Nasdaq: TTWO ) surprising profit in its latest quarter, the trends continue to point to casual gamers moving on to other diversions.
Satisfying diehard gamers is noble, but when the goal is mainstream growth it's simply not enough anymore.
Do you think the traditional video game industry will bounce back? Share your thoughts in the comment box below.