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Game Sales Go Soft

Troy Wolverton

Video game-software sales plunged 18% in November, according to a new research report, marking the third straight month of weak sales.

Midtier players Take-Two Interactive (TTWO Quote) and THQ (THQI Quote), which saw their retail sales drop 63% and 32%, respectively, led the decline, according to data from NPD Group obtained by TheStreet.com Tuesday.

The drop in overall sales came despite solid growth posted by Electronic Arts (ERTS Quote) and Activision(ATVI Quote).

In the meantime, sales of two new game systems expected to be hits this holiday season also appeared to be light. Microsoft's (MSFT Quote) Xbox 360 and Sony's (SNE Quote)PlayStation Portable were each significantly outsold by older, rival game systems.

Coupled with other recent news from the industry, the new report, from industry research firm NPD Group, could portend a gloomy holiday season for the video game-software sector. Like most other consumer industries, video-game companies collect the lion's share of their sales in the holiday period.

Overall, retail video game-software sales in the U.S. fell from $849 million in November last year to $696 million last month, according to the confidential data from NPD, which was obtained by TheStreet.com.

EA maintained its position as the top-selling publisher, as its games garnered 20.6 of the retail sales market. Activision came in second with 14%.

Among public companies, the biggest percentage declines in sales were posted by Take-Two, THQ, Majesco (COOL Quote) and Atari (symbol Quote). However, none of those declines was particularly surprising.

Atari and Majesco have been floundering for months, beset by management turmoil and poorly received products. Majesco's sales fell 63% to $5 million, while Atari's dropped 24% to $19 million.

Meanwhile, both Take-Two and THQ faced tough comparisons with last year, when both companies' results were boosted by hit products. Take-Two, for instance, saw its sales fall $37 million, from the $100 million it posted last November, when its results were dominated by Grand Theft Auto: San Andreas.

Last November, THQ's sales swelled to $71 million with the popularity of its game based on Pixar's (PIXR Quote) movie The Incredibles; this November, its sales fell to $48 million.

Other companies posted much better results. Activision, for instance, saw its sales jump 54% to $97 million, thanks to the latest versions of its Call of Duty and Tony Hawk franchises. EA's sales rose 8% to $143 million, led by the latest iterations of its Madden NFL and Need for Speed games.

On the hardware front, retailers sold some 325,902 Xbox 360s in the days after the device's Nov. 22 launch. Microsoft expects to sell as many as 3 million of the game machines in the first 90 days after launch.

But, coupled with widespread reports from retailers of limited supplies and back orders on the Xbox 360, the sales total is an indicator that the bulk of those sales will likely come after the holiday season.

And to put the sales in perspective, Sony sold nearly 535,000 PlayStation 2s last month, even though that console is more than five years old.

Still Sony had little to crow about. Retailers sold 353,434 units of its handheld PlayStation Portable in November. That represents about 17% of the total PSPs it had sold to date in the U.S.

But the device was edged by Nintendo's latest handheld, the DS, which tallied 369,012 units sold. And both devices were outsold by Nintendo's venerable Game Boy Advance, which saw 819,733 units sold.

Even though there were specific reasons for some of the games sales declines, the overall sales drop appears to be another bad sign for the overall industry, adding to other recent warnings that the holiday season could be an unhappy one for video-game companies.

Last week, EA warned that sales would be soft in December . Late last month, GameStop (GME Quote), the leading video-game retailer, lowered its sales outlook for the holiday season.

Those warning signs succeeded a series of cautious statements by most of the video game-software companies in late October and early November about potentially disappointing earnings in the coming two quarters. NPD itself reported soft sales in September and October.