Activision Sees Stagnation

In contrast, game software sales as a whole fell 18% last month.

The company did not mention which specific titles were selling poorly or which were seeing lower-than-expected reorders. But Activision did say that it was having trouble with reorders on its "most profitable" titles.

Typically, the most profitable titles in a game-publisher's portfolio are those that are developed internally and do not involve outside licenses of content. For Activision, that would likely imply that the reorder problem was affecting games such as Gun and True Crime: New York City, both of which received poor or mediocre reviews.

According to NPD, retailers sold 224,593 copies of Gun last month and just 77,251 copies of True Crime: New York City.

Games in general aren't considered a hit unless they sell at least 1 million copies. Given that the bulk of game sales typically occur in the first several weeks after they are released and that both Gun and the latest True Crime were released last month, the company could have a difficult time turning either of the titles into hits.

Activision's warning is only the latest downcast news from the video game-software sector. Although it didn't issue a formal earnings warning, industry leader Electronic Arts(ERTS) last week cautioned analysts that it too was seeing weak sales.

Late last month, GameStop(GME), the leading video-game retailer, lowered its own sales guidance for the fourth quarter.

Meanwhile, November represented at least the third month in a row of disappointing sales results from NPD.

As with other consumer-oriented businesses, video game-software makers garner the bulk of their sales and earnings in the holiday quarter. The industry has been roiled in recent months by a technology transition as hardware makers such as Microsoft rolled out new consoles.

Such transitions typically lead to soft game sales in the short term amid heightened development costs.

Despite the short-term troubles, most analysts remain bullish on the industry's long-term prospects.

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