NPD: Sales up 25 percent in June, 4 percent in 2006

All year, publishers, developers, and stockholders have waited with dread for the midmonth game-sales reports from industry-research group NPD Funworld. The sustained decline during the last five months of 2005 continued in the first three months of 2006, with total game sales down 11 percent year-on-year in January, 13 percent in February, and 16 percent in March. April's 16 percent spike provided a brief reprieve, but May's 10 percent decline prompted analysts to warn of summer doldrums for the game industry.

But while often accurate, analysts' predictions remain informed prognostication. And this week, they were proven wrong in a very big way. NPD has reported $844.5 million in combined sales of hardware and software for June 2006--a whopping 25 percent increase when compared to June 2005.

The month saw $444 million in US console software sales, an increase of 15 percent versus the same period in 2005. The number was far above respected Wedbush Morgan analyst Michael Pachter's $370 million estimate. "The upside reflects stronger than expected sales of both current and next-generation software," wrote Pachter in a note. "Current-generation software sales declined $56 million, $37 million better than we expected. Next-generation software sales increased by $113 million, $38 million better than our estimate." (NOTE: Pachter considers the Xbox 360, PlayStation Portable, and Nintendo DS as "next-generation" machines.)

On the hardware front, June 2006 saw $297.8 million in sales, far above the $200.7 million in sales in June 2005. The Xbox 360 came back from its May slump, with monthly sales increasing 26 percent to reach 277,000 units. But while the 360 shortages are now a thing of the past, the PlayStation 2 remained the best-selling console for the month--it sold over 311,900 units at $129.99 a pop. Overall, console hardware sales climbed 85 percent year-on-year, reaching $158.7 million. Accessories for both consoles and portables rang up $102.4 million in sales--a figure not tallied in the hardware total.

Speaking of portables, June 11 just happened to be the launch date for the DS Lite, the sleek new edition of Nintendo's increasingly popular handheld. According to NPD, 600,000 DSs were sold during the 19 days after the Lite went on sale--a 426 percent increase for the platform over 2005. The DS Lite launch also helped lead to a 264 percent rise in DS software sales, which in turn boosted overall June portable software sales to $135.5 million.

NPD analyst Anita Frazier was quick to credit the DS Lite launch as a key factor for the June turnaround. "When you have a month with a hardware introduction or a marquee title introduction, that can affect industry results," she told GameSpot. "We had contributions from the successful introduction of the DS Lite, New Super Mario Bros. rang up stellar sales, and nontraditional fare from Nintendo such as Brain Age and Big Brain Academy contributed."

Frazier also said the June rise was due to gift-giving occasions, such as Father's Day and college graduation, and higher-than-expected sales of THQ's multiplatform Pixar-film tie-in Cars. A full breakdown of the top 10 console and PC bestsellers for the month is below.

TOP 10 CONSOLE GAMES, JUNE 2006
1) New Super Mario Bros. (DS, Nintendo)
2) Grand Theft Auto: Liberty City Stories (PS2, Rockstar/Take-Two)
3) Brain Age: Train Your Brain in Minutes a Day (DS, Nintendo)
4) Cars (PS2, THQ)
5) Hitman: Blood Money (Xbox 360, Eidos)
6) Cars (Game Boy Advance, THQ)
7) FIFA World Cup 2006 (PS2, Electronic Arts)
8) Big Brain Academy (DS, Nintendo)
9) Hitman: Blood Money (PS2, Eidos)
10) Cars (GameCube, THQ)

TOP 10 PC GAMES, JUNE 2006
1) World of Warcraft (Blizzard/Vivendi)
2) The Elder Scrolls IV: Oblivion (2K Games/Take-Two)
3) Guild Wars Factions (NCsoft)
4) The Sims 2 (EA)
5) Heroes of Might & Magic V (Ubisoft)
6) The Sims 2: Open for Business Expansion (EA)
7) Age of Empires III (Microsoft)
8) Rise of Nations: Rise of Legends (Microsoft)
9) Star Wars: Empire at War (LucasArts)
10) Civilization IV (2K Games/Take-Two)

Besides the impressive June numbers, NPD also released sales stats for the first six months of 2006. As of June 30, the total non-PC game industry had done $4.3 billion worth of business, four percent more than in the first half of 2005.

The biggest sector increase was in Xbox 360-boosted console hardware, which saw $854 million in sales, a 44 percent year-on-year increase. However, the same period only saw $1.73 billion in console-software sales--a four percent slump. Portable software fared better, rising nine percent to over $596.1 million. Total portable hardware sales for the year so far are an impressive $516.8 million.

As for the rest of the year, most analysts are becoming more bullish about the game industry. Lazard Capital's Colin Sebastian put it this way: "We believe the prevailing negative sentiment on the interactive entertainment sector is likely to become more difficult to defend in the near term, given very solid June NPD data, a stronger second half of 2006 software release schedule, easing year-over-year sales comparisons, improving Xbox 360 sales, and the fall launches of next-generation PS3 and Wii video-game consoles."