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The video game industry had a rare month of gains in November.
Market watcher NPD Group claims that its channel checks show an 8% increase in year-over-year sales last month, fueled by the debut of Microsoft's (Nasdaq: MSFT ) Kinect motion-based controller and the record-breaking success of Activision Blizzard's (Nasdaq: ATVI ) Call of Duty: Black Ops.
Console and handheld system sales climbed 2%, with new software inching 3% higher. How does that combine to deliver 8% growth? Well, the real driver this time was accessory sales, soaring 69% as folks snapped up Kinect add-ons and -- to a lesser extent -- Sony's (NYSE: SNE ) PlayStation Move controllers.
Microsoft's Xbox 360 was in a good groove even before Kinect's release, but the $150 camera-based accessory still helped it land its sixth consecutive month of market leadership over its PS3 and Wii rivals.
Consume the data carefully. For starters, video game sales tanked 8% last November, so we're essentially back to where we were two years ago. There's also the lingering fear that while die-hard gamers will always be around, more mainstream casual gamers are spending their gaming hours on smartphone and Facebook apps. At the very least, the proliferation of free or dirt cheap diversions will keep console title prices in check.
There is some light at the end of the tunnel that has kept industry sales down through most months over the past two years. Analysts see Electronic Arts (Nasdaq: ERTS ) , Activision Blizzard, Take-Two Interactive (Nasdaq: TTWO ) , and bellwether retailer GameStop (NYSE: GME ) posting improving profitability this fiscal year.
Pessimistic investors have beaten down the sector to the point that many of these companies now offer compelling valuations for companies that are growing again.
We'll have to see how December plays itself out. There are no marquee releases, but that's how it is every December. Developers make sure that their hottest games are out well ahead of the holiday shopping season. The real test this month will be if holiday shoppers flock back to video games this time around, and if folks buying Kinect and Move controllers are going to load up on the games that take advantage of the motion-based platforms.
Do you think the traditional video game industry will continue to bounce back? Share your thoughts in the comment box below.