News: Microsoft outsells the competition

Investors, at present, are wary of video game stocks. The lack of success in the retail market and added competition from other sectors increase volatility of video game stocks. Continual threats from mobile gaming, social networking games i.e. Farmville and digital distribution all cut into the budgets of gamers but also time spent gaming. Sadly, relief for video game stocks won’t be coming anytime soon. [Readers please note that The Yank is obviously quoting US sales figures, and this should not be a reflection of the local Australian industry – ko-zee-ii]

Year to date, the video game industry is down 8% from last year’s pace. This week the NPD, the research group behind tracking video sales, released September’s sales numbers and many video game stocks reacted. This information piles on the fact that 2009 was already a down year for the industry which hasn’t experienced positive growth since March and outlook for the rest of the year isn’t looking any better.

The numbers tell the story of an industry begging for more blockbuster titles. The NPD Group stated that retail sales were down 6% last month to $614 million. Any hope that September would rescue the games industry were quickly dashed and stock prices soon followed, as scared investors reacted negatively to the numbers. September’s biggest release, Halo: Reach sold 3.3 million copies. Soon after the game’s release Microsoft let consumers know Reach had hit $200 million in sales.  The news of Reach’s success along with the trend busting Xbox360 means Microsoft [MSFT] was the only company who saw positive growth.  Hardware of the 360 is up 34% year to date according to Anita Frazier of the NPD Group. The stock saw a steady increase to 25.54, up 1.23%.

Other companies didn’t fare as well as Microsoft. Sony [SNE] and the lack of support for the Move, did nothing to soften the fall. The stock price fell a bit to 32.13, only down .28% and more bad news came this week as the biggest Sony exclusive title Gran Turismo 5 was delayed. Doubt has arisen whether GT5 will see release before Christmas and along with the delay of Little Big Planet 2 means PS3 could see a terrible Christmas season. It should be noted that no Move title was in the NPD’s top 10, though its release was late in the month, on the 17th.

Activision and EA were not immune to the lack of sales either. Both saw their stock prices fall, EA [ERTS] taking the bigger hit with almost a 4% drop, down to 15.96. Activision [ATVI] wasn’t nearly as bad but still the stock still decreased to 11.37 down .11 or .96%

Nintendo continues to see the decline in sales of the Wii. In September, sales of the console were 254,000. The handheld market for Nintendo faired a bit better with 403,000 units sold. The argument for the numbers could be based on Nintendo’s full saturation of the mainstream market. By this point, consumers who want a Wii already have one. Its obvious Nintendo is getting out of its own way for the launch of the 3DS.

Soon after the NPD numbers were released EA experienced more bad news. Their bullish outlook for the new Medal of Honor game drove stock prices to increase 15%. All leading up to the game’s release, though soon after, following mixed reviews the stock fell $1.05 to 16.61 down 6%. Investors view of the title, created by the fact Taliban characters could kill US soldiers in multiplayer (changed to Opposing Force before release), were less than positive. The review scores have done little to increase consumer confidence. The New York Times report that if Medal of Honor fails to sell 3 million copies across all platforms EA may decide to discontinue the series.

The outlook for the rest of 2010 is mixed to say the best. The biggest release Call of Duty: Black Ops is a guaranteed hit, though more than likely won’t be able to turn the whole industry around before the end of the year.

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