Is the video game sector getting tired? According to a Reuters article, the NPD Group is reporting a 9% year-over-year decline in overall video game hardware and software sales, to approximately $1.3 billion last month. Game sales alone dropped 18%, while hardware sales fell 21% in terms of units sold. (On a gross dollar basis, however, hardware sales jumped approximately 10%.)
So what gives? Well, the video game industry is experiencing some growing pains. Microsoft's
So what does that mean for investors? Shareholders in quality publishers such as Activision
While I'm a constant bull on the blue-chip publishers, there are risks. Each new system brings technological leaps, making it harder to program for, and contributing to skyrocketing development costs. Just as in the movie business, a series of expensive flops could be an earnings killer for any publisher. It's also possible, however unlikely, that video games could one day fall out of fashion.
For now, don't let those dizzying development costs keep you away from the sector's best companies. Try to buy these great firms on pullbacks, then hold for the long term. Taking advantage of volalitity can become a great strategy for a high-scoring portfolio.
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