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TheStreet Open House

Game Sales Jump, Despite Xbox Slump

The video-game software industry looks to be on the rebound.

U.S. retail sales of games for consoles and handheld systems rose 17.5% in August, according to data from market research group NPD that was cited in a research report by Wedbush Morgan analyst Michael Pachter.

That was better than at least some analysts expected, and it marked the third straight month -- and fourth out of the last five -- of year-over-year growth. The recent growth spurt followed a prolonged period of sales declines brought on by the industry's transition to a new generation of video-game technology.

"While it is too early to call an 'end' to the console transition, the sales strength over the last few months suggests to us that consumers are far less concerned about the transition than they have been in prior console cycles," Pachter wrote in a research report on Friday.

"We continue to expect monthly year-over-year declines ... for current generation software sales, but we have consistently seen positive signs that next generation software sales growth can more than offset these declines," added Pachter, whose firm has not performed recent investment banking business for any of the major hardware makers or U.S. video-game publishers.

Investors seemed to cheer the good news. In recent trading, shares of the top four independent U.S. publishers -- Electronic Arts (ERTS), Activision (ATVI), THQ (THQI) and Take-Two Interactive (TTWO) -- were each up at least 2.5%. Shares of THQ led the pack, rising 7.6%.

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