Video Game Sales Drop in March

The video game industry witnessed a worse-than-expected decline in the month of March. According to the market research company, NPD Group, the U.S. retail sales of video games dropped 4.0% to $1.53 billion in March 2011 from the year-ago figure of $1.58 billion.

The analysts had projected software sales to decline in the range of 8.0%-10.0%, but the actual figures slipped 16.0% on a yearly basis to $735.4 million from last year’s $875.7 million. However, on the positive side, hardware sales rose 12.0% from the previous year and accessory sales were up 13.0% on a year-over-year basis.

The hardware sales of $494.5 million benefited from the launch of Nintendo 3DS, which released on March 27, 2011. However, Sony Corp’s (SNE) PSP and PS3 and Microsoft Corp’s (MSFT) Xbox 360 also did well.

Among some of the popular names on the software side, Nintendo’s titles, “Pokemon White” and “Pokemon Black” were adjudged the month’s top selling games.

“Homefront” from THQ came in third, while video game publisher Electronic Arts’ (ERTS) “Dragon Age II” took the fourth spot and “Crysis 2” debuted at the seventh spot.

However, Activision Blizzard’s (ATVI) popular title “Call of Duty: Black Ops” dropped to the fifth spot after a four-month stint at the number one position.

Sales of gaming accessories, which includes products such as Microsoft’s Kinect motion controller, rose 13.0% to $241.3 million.

The video gaming industry is witnessing rapid changes, including gamers that are increasingly favoring “apps” for mobile devices such as Apple Inc’s (AAPL) iPad and playing more online social games. Although consumers continue to buy games that can be downloaded to consoles or computers; digital downloads, used game sales and game rentals are gaining popularity. In addition, the impact of the Japan earthquake has prompted delays in several software and hardware releases, and has also caused outright cancellations.

We believe cut-throat competition within the industry will make it difficult for any single company to gain significant market share in 2011. Moreover, increasing competition from social networking companies, such as Facebook, remains a major concern.

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