We're finally seeing signs of life in the video game industry.

Sales tracker NPD Group claims that spending on games and related gear through the channels it follows soared 20% to $961.2 million in April. In a rare show of strength, software led the way with a 26% spike. The success of Time Warner's (NYSE: TWX) Mortal Kombat reboot and Electronic Arts' (Nasdaq: ERTS) Portal 2 helped prop up game sales that have been largely moribund for more than two years.

Don't get too excited, though. Hardware and software sales tanked by 17% in April 2009 and 26% more in April 2010. Last month's 20% ascent -- while refreshing -- finds the recovery making up less than half of the cumulative losses over the past three years.

In other words, don't believe this morning's headline numbers. The video game industry has a long way to go to return to its former glory.

The news is still a positive sign, though, and game makers are starting to land well ahead of Wall Street's profit targets. EA, Activision Blizzard (Nasdaq: ATVI), and THQ (Nasdaq: THQI) all handily beat analyst quarter earnings expectations in recent days.



EPS Est.

Activision Blizzard



Electronic Arts






Source: Yahoo! Finance.

Take-Two Interactive (Nasdaq: TTWO) reports in two weeks.

Will software sales continue to climb, or is this simply a dead cat bounce? Any growth in recent months was usually the handiwork of hardware. Whether it was March's debut of Nintendo's (OTC BB: NTDOY.PK) 3DS handheld system or the blazing success of Microsoft's (Nasdaq: MSFT) Kinect motion-based sensors heading into last year's holiday season, the expected boost for related titles didn't materialize right away.

There still appears to be plenty of casual gamers -- apart from the die-hard faithful -- who seem to be just fine playing ad-supported or dirt-cheap games on their smartphones, tablets, and MP3 players. April's bounce after a pair of brutal Aprils before that isn't enough to crack my thesis.

It's clearly a development worth watching, but color me skeptical until we see real growth off results that weren't sandbagged.

Is April's bounce the start of a turnaround or just a temporary spike? Share your thoughts in the comment box below.

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