The video game industry is in trouble, even if most of the headlines say otherwise.
Industry watcher NPD Group released its data for September, and it's hard to see why the media is hailing this as a turnaround for the beleaguered gaming sector. NPD is reporting that video game hardware and software sales clocked in at $1.28 billion last month, essentially flat with the $1.27 billion the sector rang up during September of 2008.
Technically, that is an increase, ending a problematic streak of year-over-year declines in each of six previous months. Still, I'm not impressed.
If the video game industry had truly turned the corner, breaking the negative streak wouldn't be a matter of decimal points. There are several reasons why September should have been off the charts.
- All three of the major console makers have slashed their system prices as we head into the holidays. Lower selling prices naturally take down the sum of dollars, but the industry has historically been able to make up such shortfalls in increased sales volume. This time, despite the price cuts, hardware sales actually fell.
- The software component rose 5%, but the release of Microsoft's
(NASDAQ:MSFT)chart-topping Halo 3: ODST and the success of Viacom's (NYSE:VIA)genre-widening The Beatles: Rock Band should have provided a bigger punch.
(NASDAQ:ATVI)had a meaty incentive for buyers of Guitar Hero 5, offering gamers a free copy of a Van Halen version due out in December if they purchased GH5 in September. Alas, it seems this franchise is in trouble. The twofer was only good to push the title up to ninth place on NPD's list of bestsellers, and it'll be giving away a lot of David Lee Roth in two months.
The industry may as well also start worrying that Sony's
Thankfully for the industry, there are plenty of meaty titles coming out in November -- including the latest installments in the Super Mario, Call of Duty, and Assassin's Creed franchises -- to counter a potential dip in October.
However, I still stand by my original bearish thesis that the industry -- and especially physical distributors such as GameStop
Diehard gamers can laugh at my notion that folks are spending too much time on their ad-supported App Store casual games, or playing FarmVille or Mafia Wars on Facebook. But the industry is faltering because these same mainstream gamers are staying away from consoles. The Beatles: Rock Band was supposed to be a title to turn an older generation into plastic guitar wizards.
Unfortunately, a flat September isn't a very memorable tune.
Where do you see the future of gaming? Did it peak for keeps? Let us know in the comment box below.
Longtime Fool contributor Rick Munarriz loves playing video games, but he doesn't own shares in any of the companies mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.