Unhappy Holidays for Game Makers

Industry leader Electronic Arts (ERTS) gained share in the quarter, as sales of its games accounted for 21.1% of the overall market in December, compared with 20.6% in November and 20.2% a year earlier. But because of an the overall sales decline, EA's share gain translated into little increase in terms of dollar sales of the company's games; retail dollars spent on EA's games last month were up just 0.3% from December 2004 to $343.7 million.

The average price of a game rose 7% to $32.65 as retailers charged a premium for Xbox 360 and PSP titles.

In terms of hardware, December sales of the Xbox 360 brought the total number of units sold since its November launch to about 607,000. That's far fewer than analysts originally expected.

In contrast, retailers sold nearly 415,000 units of the original Xbox and about 1.5 million PlayStation 2 consoles in December alone.

In terms of the handheld battle, Sony's PSP seemed to finally gain an edge -- if only a slight one -- over Nintendo's rival DS system in December. Retailers sold 1.12 million PSP units last month compared to 1.07 DS units.

Nintendo still held the edge in terms of overall handheld market share, though, thanks to its venerable Game Boy Advance, which outsold both of the new handheld systems last month.

Companies and analysts have been warning for weeks that the industry would show poor results for the holiday period -- the most important time of the year for the industry. Last week, Take-Two posted fourth-quarter earnings that missed analysts' estimates and warned of a disappointing fiscal first quarter, which includes results from November and December. Last month, both EA and Activision(ATVI) issued earnings warnings.

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