Microsoft's Xbox 360: Big Slice, Small Pie

The video game industry has been fading for three years, but you wouldn't know it by the way that Microsoft (Nasdaq: MSFT  ) is gushing.

Here's last night's tweet from the Twitter account of Microsoft's corporate communications department:

#Xbox360 is No. 1 U.S. console for 18th straight month & top three selling titles are Xbox games

Microsoft claims to have sold 257,000 Xbox 360 units last month, and that's good enough for a thick 47% of the market that it shares with Sony's (NYSE: SNE  ) PlayStation 3 and Nintendo's (OTC: NTDOY.PK) Wii.

What Microsoft won't tell you is that -- according to industry tracker NPD Group -- it sold 507,000 a year earlier. It's part of another gloomy monthly update out of NPD showing that the sale of video game hardware, software, and accessories plunged 29% last month. This is no longer a shock to gamers. The precipitous dives have been taking place for three years.

The data doesn't include digital downloads -- which continue to grow briskly -- but the lack of hardware sales, and the freefalling state of stateside shipments of PCs, should tell you that the traditional players of PC and console gaming aren't the ones benefiting from the digital disruption.

This is Apple's (Nasdaq: AAPL  ) world now.

Sure, Nintendo argues that it's doing just fine on the handheld front. It claims to have sold more than 5 million 3DS units since being introduced in this country early last year. That may be good for 75% of the market, but that's because it's only pitted against the overpriced PS Vita.

Apple has hundreds of millions of iOS devices that dive right into its growing collection of App Store games. Google (Nasdaq: GOOG  ) revealed two weeks ago that there have now been more than 400 million Android devices activated. We're looking at two ecosystems that will soon combine for a billion activations for platforms that weren't even around a little over five years ago.

Anyone who thinks that the traditional gaming industry will ever bounce back to what it was in its heyday is living either in the past -- or in Microsoft's corporate Twitter feed.

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The Motley Fool owns shares of Microsoft, Google, and Apple. The Motley Fool has sold shares of Sony short. Motley Fool newsletter services have recommended buying shares of Microsoft, Apple, Nintendo, and Google. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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  • Report this Comment On July 14, 2012, at 4:25 AM, bobbert333 wrote:

    Of course xbox 360 sales are decreasing, anyone that wanted one already bought it years ago.Also as a gamer myself, I can tell you that the little games on the android and apple's ios don't compare to the magnificent console games. When Microsoft releases xbox 720, which I expect them to do so in 2013 or 2014, millions of gamers will once more flock to the stores to buy Microsoft's gaming console.

  • Report this Comment On July 14, 2012, at 8:18 AM, nanarchy wrote:

    ummmm, do you guys know nothing about the gaming industry? We are currently at the tail end of the generation. Sales will continue to decline till the next gen launches sometime in the next 12 months or so, it has nothing to do with apple or android or anyone else for that matter. No gamer is remotely interested in switching to apple or androids for gaming, the author of the article has confused two seperate markets and made a link where none exists.

  • Report this Comment On July 14, 2012, at 4:30 PM, melegross wrote:

    As the article pointed out, these declines began 3 years ago. That's well before any activity for new consoles began. And what you guys posting don't seem to understand is that product cycles don't decent on the same people. Someone who was too young three years ago to get one, would be getting one now, and the same thing is true for those too young 2 years ago, ad 1 year ago. The same thing will app,y next year, and the next, etc.

    So if console sales are down so dramatically, it's not just because people are waiting for a new one, but because there are fewer new people entering the market for one.

    Believe it or not, there are hundreds of millions of people who do think that phones and tablets are just dandy for their games, and a lot of them aren't buying consoles because of it.

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