NPD data last night showed things are only getting worse for the U.S. video game industry as sales fell for the fifth straight month. In July, the video games business posted sales of $848.9 million, a 29% drop from the $1.19 billion in sales racked up in the same month last year.
Sales of videogame consoles dropped 37% to $281 million compared to nearly $448 million in July of 2008. Overall sales of videogame hardware and software in the U.S. for the first seven months of this year amounted to $8.16 billion, 14% lower year-over-year, according to NPD Group.
Industry analysts say that the pressure is on for console price cuts to spark sale. One company that will most likely be directly impacted by this dynamic is Amazon.com (NASDAQ:AMZN). According to Barclays Capital Internet analyst Douglas Anmuth, the sudden collapse of the video-game industry, which for the time being will continue to weigh on N. America Media growth, combined with the prospects of console price cuts, will negatively impact Amazon’s near-term performance.
Mr. Anmuth says that consoles are a high ASP/low margin business for Amazon. Lower console sales would negatively impact revenue & gross profit $, but likely result, he notes, in higher margins. Anmuth estimates AMZN video game related sales are 15-20% of company’s NA Media biz.
Mr. Anmuth notes however, that “despite current weakness, declines could moderate in coming months as: 1) comps get materially easier from Aug; 2) widely expected console price cuts could spur demand; & 3) a stronger roster of titles is coming including Halo, Madden, & the Beatles: Rock Band.”
Anmuth also notes that “AMZN shares could come under N-T pressure in light of the data. We maintain [he said] our 2-EW & our $83 PT is based on 18x 2010E FCF.”
AMZN shares are currently trading down $1.32, or (-1.54%), to $83.32 in NASDAQ.
Separately: Out of the entire video game industry Microsoft (NASDAQ:MSFT) was the only company that did well in terms of sales. The software giant pointed out that the Xbox has turned in 17% growth on y/y basis.