Video game retail sales declined for the tenth consecutive month
in September 2012. According to market research firm NPD, U.S video
game store sales slumped 24.0% year over year to $843.3 million in
the month of September. Although the year-over-year decline widened
compared with the prior-month level, dollar sales increased from
$515.6 million reported in August.
Hardware sales plunged 39% year over year to $210.9 million
while total software sales declined 14.0% year over year to $547.3
million. Accessories sales declined 11.0% annually to $139.9
million. The weak retail sales were primarily due to the ongoing
transition from physical to digital platform and aging hardware
consoles.
According to NPD,
Madden NFL 13
from
Electronic Arts (
EA
)
topped the game sales chart pushing August topper
Darksiders 2
from THQ out of the top 10 list.
Borderlands 2
from 2K Games was placed at #2, while EA's
FIFA Soccer 13
grabbed the #3 spot.
Microsoft Corp's (
MSFT
)
Xbox 360 was again the top-selling console for the 19th straight
month with 270K units sold. As per NPD, hardware sales improved on
an average sales-per-week basis compared with August for Xbox 360,
Nintendo's DS and 3DS shipments, as well as
Sony's (
SNE
)
PS3 and Vita gaming systems.
Nintendo benefited from the recent release (August 19) of its
new gaming console 3DS XL, as 3DS software sales jumped 89% year
over year in the month of September. In this regard, the upcoming
release of Nintendo's Wii U in mid November will be eagerly watched
by investors.
We believe that the upcoming holiday season will boost video
game sales over the next couple of months. Most of the publishers
including EA and
Activision Blizzard (
ATVI
)
are scheduled to release new games of their top-most franchises
over the next two months, which will be the key growth factor in
our view.
However, declining consumer spending on video games and the
continued rapid adoption of free-to-play games remain the main
headwinds over the long term. Although, we believe that the ongoing
transition from the physical to the digital platform will
ultimately benefit the video game industry (due to the cost
effectiveness), low priced digital games have failed to offset the
rapid decline of high priced retail sales in recent times
Moreover, the highly fragmented video game market continues to
witness increased competitive pressures, which are hurting overall
profitability.
We maintain our Neutral recommendation on Activision and EA over
the long term. Currently, both of them have a Zacks #3 Rank, which
implies a "Hold" rating in the near term.
ACTIVISION BLZD (ATVI): Free Stock Analysis
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