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NEW YORK (

TheStreet

) -- Video games finally saw a boost in September after six straight months of declines, but

GameStop

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, one of the biggest video game retailers, is nonetheless one of the biggest losers of the day.

Shares of GameStop are plunging 7.5% to $26.03 in early afternoon trading after it was downgraded to neutral from buy.

Janney Montgomery Scott analyst Tony Wible said the weak near-term outlook for video game sales puts GameStop on track to report a 4% drop in third-quarter sales, down from his previous estimate of a 3.1% gain.

Wible said he fears GameStop will have to rely more on discounted games to drive traffic to stores rather than full-priced new titles.

On Monday evening, the NPD Group, a market research firm, said video games in September inched up 1% to $1.27 billion, but this was still well below Wall Street's forecast. Year-to-date sales are down 13%.

Sales of video game hardware tumbled 6% to $472.3 million, and for the first time since its launch three years ago,

Sony's

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PlayStation 3 was the winner, selling more units than

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Nintendo's

Wii and

Microsoft's

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Xbox 360.

Sales of Playstation 3 more than doubled from last year, mostly due to price decreases. Sony cut prices on the unit by $100 in August.

Shares of Sony are tumbling 1.9% to $28.96, while Microsoft is down 1.3% to $26.02 in morning trading.

Next: Netflix Benefits as Game Makers Cut Prices

-- Reported by Jeanine Poggi in New York

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