Video games suffer second slump in 2010 as players curtail spending
If the video game industry were an arcade game, you would be hearing the disappointing bloops that signal the player to try again.
For the second year in a row, U.S. video game sales posted a decline, down 5.7% to $18.6 billion in 2010 from $19.7 billion in 2009 and $21.4 billion in 2008, according to a report released Thursday by the NPD Group.
Both consoles and games took a walloping for the full year as consumers curtailed spending in an uncertain economy. Console sales fell 12.5% to $6.3 billion in 2010, and software sales fell 5.6% to $9.4 billion.
"Hardware sales were down 12% in units for the year, likely due to no price cuts and the continuing recession," said Michael Pachter, an analyst with Wedbush Securities. "And the decline in hardware drove the decline in software sales."
One bright spot occurred in a category that is often overlooked -- video game accessories, which in years past included extra game controllers, dance pads or keyboards. This year, however, accessories took off, gaining 13% to $2.9 billion as Sony introduced its Move motion controller for its PlayStation 3 and as Microsoft began selling its Kinect controller for the Xbox 360.
Kinect also fueled sales of the Xbox 360 in December, some of which came bundled with the new motion-and-voice-sensing controller. Xbox 360 sales jumped 42% to 1.86 million units in December, from 1.31 million in December 2009.
Sales of Nintendo's Wii, however, suffered a 38% dive to just 2.36 million units in December, down from 3.81 million a year earlier. Sony's PS3 also declined, albeit less precipitously. It sold 1.21 million PS3s in December, down 11% from 1.36 million.
With the exception of the Xbox 360, declining console sales will put pressure on manufacturers to lower the price, particularly for the Wii, which sells for $199.99 and is rapidly losing steam, analysts said.
"The Nintendo Wii business looks increasingly like a gift purchase business, which means they will have to have a price cut in order to sustain it during non-gift-giving seasons," said John Taylor, managing director of Arcadia Investments.
-- Alex Pham
Photo: A screen shot of Kinect Adventures for Xbox 360. Credit: Microsoft.