Video game sales jump

LOS ANGELES - US retail sales of video game consoles, hand-held devices, games and accessories were up 6 per cent to US$10.5 billion in 2005, market researchers NPD Group say.

NPD attributed the year-on-year growth to the growing popularity of newer portable gaming devices such as Sony's PlayStation Portable and Nintendo's Nintendo DS, which helped mask declines in the industry's much larger console business.

Console dollar sales were down 3 per cent in 2005, while console game dollar sales dropped 12 per cent.

Combined console and portable game sales fell from US$6.2 billion in 2004 to US$6.1 billion in 2005, when US$1.4 billion came from portable title sales, said NPD, which measures roughly two-thirds of retail sales in the United States and makes projections for the remainder of the year.

The NPD results issued on Friday do not include sales of games for personal computers.

The 2005 result beat a previous high of US$10.3 billion in 2002. But an analyst said it does not reflect the volatility spawned by the industry's move to new console technology, which is dampening sales as consumers wait and save for next-generation machines and games.

Combined unit sales of Sony's PlayStation 2, Microsoft's original Xbox and Nintendo's GameCube current-generation consoles fell more than 19 per cent to 33.5 million in 2005, Wedbush Morgan Securities analyst Michael Pachter told Reuters.

He added that total console and hand-held game unit sales were 190.3 million in the United States in 2005, down 6.3 per cent.

"You need people to buy more stuff. This is a bad downturn," Pachter said.

Supplies of Microsoft's new Xbox 360 console, released November 22 in North America, have fallen short of expectations and are hard to find in stores. Game publishers have said the shortage contributed to weaker-than-expected sales during the key holiday season when they traditionally reap about half of their annual revenue.

Competing next-generation units from Sony and Nintendo are due later this year.

The video game industry weathered hard times when Sony, the world's biggest video game console maker, released new machines in 1995 and 2000. Some experts had suggested that this console transition would be different -- but history now appears to be repeating itself.

"This happens every time there is a console transition," UBS Investment Research analyst Michael Wallace said. "The only thing you can count on is that the transition will likely be harder than anyone expects it to be."

And analysts are saying the worst is yet to come.

Wallace said this year's wild card is video game software pricing. He sees current-generation console game prices falling 20 per cent to 25 per cent and added that demand could sag.

"I think there is another shoe to drop here," said Wallace, who added that while 2006 could be tougher than expected, it would likely mark a bottom for the current console transition.

- REUTERS