Tuesday, Don't Fail Microsoft Now

Next Tuesday can't come soon enough for the video game industry.

Microsoft's (NASDAQ: MSFT  ) highly anticipated unveiling of the new Xbox gaming console comes at a desperate time, with die-hard gamers dramatically scaling back on their purchases.

Industry tracker NPD Group put out its monthly retail sales data last night. It wasn't pretty. Sales plunged 25% last month when pitted against April of last year. These sharp declines have been routine for three years.

The Xbox 360 may continue to be the country's best-selling console -- it's been that way for 21 months in a row -- but it's a shrinking pie. Hardware sales fell a brutal 42%.

Naturally this places a lot of pressure on Microsoft to hit a homer at Tuesday's media event. It needs to raise the bar. The software giant's stock may be trading at a five-year high, but a hearty reception for the new Xbox will comfort investors fearing Microsoft's fading relevance in its operating systems stronghold.

The NPD Group data isn't complete. It only covers physical retail sales. We know that digital sales are on the rise, and that's not factored into the 25% drop. The resale of used games and gear also isn't in the data, and investors will get a solid glimpse into that niche when GameStop (NYSE: GME  ) reports on Thursday.

The video game retailer scores its thickest margins in the used game resale category, but even that once lucrative line has been slipping at GameStop in recent quarters.

The one thing that we can't ignore is that 42% drop in hardware. There's no digital padding there, and that's a troublesome indicator. Apologists were hoping that new consoles would help end the problematic slide in hardware and accessory sales, but last year's Nintendo Wii U obviously didn't breathe new life into the industry.

Electronic Arts (NASDAQ: EA  ) -- the country's second-largest video game publisher -- has apparently abandoned the platform.

"We have no games in development for the Wii U currently," an EA spokesman told gamer hub Kotaku this week.

The industry needs Microsoft's Xbox to come up big this holiday season, and we'll have a better feel if that is a realistic goal or not come Tuesday.

This may very well be the industry's last shot at mainstream relevance. No pressure, Microsoft. No pressure.

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  • Report this Comment On May 18, 2013, at 12:14 AM, lakawak wrote:

    REally? You mean people aren't buying as many 8 year old consoles as they were 3-4 years ago? No way!

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