U.S. retail sales of video game hardware and software fell 9 percent from a year ago to come in just under $1.3 billion, market researchers NPD Group said on Wednesday.
The decline was widely expected by analysts, who noted that video game sales have softened amid a transition to new console technology and Xbox 360 shortages. The November results also compared with year-earlier figures that were buoyed by strong sales of blockbuster titles "Halo 2" and "Grand Theft Auto: San Andreas."
"(The) current video game retail environment is tough," Bank of America equity research analyst Gary Cooper said in a client note. NPD Group measures nearly two-thirds of retail sales in the United States and makes projections for the remainder of the market.
Microsoft's Xbox 360 debuted on November 22 in North America, sold out quickly and has remained in short supply.
Analysts noted that the launch of the software giant's new console was not enough to lift overall hardware unit sales, which fell 21 percent year-on-year to 2.9 million units, analysts said. Nevertheless, hardware sales were up almost 10 percent on a dollar basis, landing at $456 million, NPD said.
Wedbush Morgan Securities analyst Michael Pachter attributed most of the November decline in video game sales to a sales shortfall on existing, or current-generation, gaming consoles -- particularly the original Xbox, which analysts said saw November unit sales plummet 75 percent.
Pachter had expected November video game software sales of $715 million, and noted that several new game releases performed worse than forecast, indicating a slow start for the holidays. One game that analysts said underperformed was "True Crime: New York City" an Activision urban action game sequel to a popular title.
Still, Pachter said a late burst of buying over the next two weeks could move the needle back into positive territory. UBS Investment Research analyst Michael Wallace said in a note that software sales are down 3 percent year to date. His estimate calls for a 1 percent decline in 2005. Pachter's 2005 estimate calls for overall video game unit sales that are flat to negative.
Bank of America's Cooper said launch sales of the Xbox 360 totaled 325,902 units. Analysts said renewed supplies could help boost year-end numbers, but that the likelihood of new stocks remained the big unknown for the holiday season.
"Given continued uncertainty among consumers about the availability of Xbox 360 units, we think that slow sales may persist in December," said Pachter, who noted that Xbox 360 software generated $70 million in sales in November. Overall industry sales in dollars were up 5 percent year-to-date, NPD said.