January game sales slumber

Industry continues five-month slide; analysts predict that the worst is yet to come.

Industry research group NPD Funworld has released its January sales figures, and anyone hoping that the industry would be turning the corner after a late-2005 slump was in for a rude awakening.

NPD's January numbers indicate that US console software sales were $357 million, down more than 5 percent from last year's $377 million January take. The number of games sold was actually down 11 percent, but that was partly made up for by a higher average selling price of games.

While their discount-resistant next-generation games might have helped offset slowing sales across the board, the PSP, DS, and Xbox 360 markets aren't growing as fast as they should be, according to Wedbush Morgan analyst Michael Pachter. Pachter specifically includes the portables under his definition of "next generation" in a note to investors analyzing NPD's January numbers. While he says the next-generation systems as a whole aren't ramping up sufficiently fast enough to make up for declining current-generation sales, the Xbox 360 seems to have been particularly disappointing to Pachter.

"It appears that history from 2000 is repeating itself," Pachter said, noting that Microsoft shipped 50,000 fewer Xbox 360s in January than it did in December. "Consumers were sold the promise of an incredible next generation console, the Xbox 360, and while Microsoft indeed delivered an incredible machine, few consumers have thus far been able to actually purchase one."

August 2005 was the last month that saw year-over-year software sales growth in the industry, and even that month's gain (from $337 million in August of 2004 to $338 million) was modest, to say the least. Perhaps underscoring how disappointing the holiday season was, Madden NFL 06, released in August, is still driving industry sales, selling more copies across all platforms than any other game in January.

That's not the only perspective to be gleaned from the top-sellers list. Trailing Madden in the number of copies sold were Need for Speed: Most Wanted, Call of Duty 2, MVP 06 NCAA Baseball, and Star Wars Battlefront 2, in that order. Of that group, MVP 06 was the only title released in January. By contrast, three of last year's best-selling titles for January, Resident Evil 4, Mercenaries, and The Legend of Zelda: The Minish Cap, were released that month.

Pachter's outlook for the near future isn't especially rosy, suggesting that the industry will face double-digit declines in software sales for the first half of the year, and that next-generation sales won't make up for the rapid erosion of current-generation sales until the PlayStation 3 and Revolution are launched. What's more, he suggests that many gaming stocks, which have generally been down of late, are still overvalued.

"We do not believe that investors have appropriately considered the risk of the console transition with share price stubbornness indicating to us that most investors think that the transition is behind us," Pachter told investors. "In contrast, we think that the transition has only just begun and believe that the worst of the transition lies ahead. We think that as the industry racks up double-digit monthly percentage declines for software sales, many investors may begin to question the health of video game publishers, and may begin to question whether these stocks make sound investments."

Pachter wasn't the only analyst to weigh in on the numbers with a note to investors. Michael Wallace and Stephen Tam with UBS Securities also predicted a tough start to the year as the generational transition continues to impact sales, though they predict a slightly cheerier longer-term outlook, with an expected 3 percent growth in software sales for the year. Meanwhile, FBR Research's Shawn Milne said he expected the interactive entertainment sector to bottom in the first half of the year, and noted that rapidly declining sales of PlayStation 2 hardware (down 45 percent last month compared to January 2005) raises the possibility of a spring price cut for the system.

67 Comments

  • blackwing837

    Posted Feb 15, 2006 10:52 am PT

    Bloodrayne was the biggest flop ever... Even worse than House of The Dead....

  • jimbo102671

    Posted Feb 15, 2006 7:57 am PT

    This kind of thing has to be expected in a transition period as developers and gamers alike await the new gaming systems. But if the games don't go back to their roots (of being innovative, that is), the industry may soon experience a fate similar to the 1983-'84 gaming crash.

  • kadrik

    Posted Feb 15, 2006 6:42 am PT

    I kind of predicted this was going to happen. They are forgetting that most gamers are young teenagers and young adults that are just entering the work force. There are others, but I would say the meat of the customers are between 13-35. I think they seriously overestimated the sales of the new systems and the games. First off, the younger teenagers may not be able to afford the new psp, ds, or xbox 360. Let's think about it, if a teenager only has $300 of christmas or allowence built up, then what is he going to choose. Is he going to stick with the game titles he has been watching online, stick to a certain title like the resident evil series, or get a console. Consoles are expensive! You can't just buy a console, you have to buy atleast an additional controller, usually a memory device, and atleast one game. I can't blame most people for choosing 5-8 games over an expensive console with one game (and who says that console is going to be the best one to get later on, maybe the playstation 3 will dominate the market) During the last console war between the ps2, xbox, and game cube; I choose the playstation 2 first and only got one game with it that christmas. It was a hard choice, each console had something I liked be it extras or game titles. The playstation was affordable and had titles. The xbox had a little less titles but had lan features, halo, better graphics, and an internal memory. The gamecube was even more affordable and had the nintendo titles I grew up with like zelda, mario, and metroid. I now own an xbox, game cube, and a playstation 2; but I didn't get my xbox until 2 summers ago and the gamecube last summer on ebay. I think most people are buying for their current systems and are waiting till the consoles show a true winner or enough game titles to warrant the purchase. I know I am waiting. I could have afforded the xbox 360 this year, but all I would have got was the system. Again each system has something I like. The revolution will have the nintendo titles, the xbox360 will have halo 3 and other fps, the playstation 3 will have my fighting games and it will have the metal gear solid series that I enjoy. What I hate about these new consoles is that if you look at the specs that are almost 92% the same. You want increased sales, make one console that costs $400 and then make money off the titles. I would bet almost everyone would get it this year if they did. However, like that is going to happen, nintendo, microsoft, and sony want their money. I am loyal to many game titles and before the xbox 360 was even released, I had a list of over 6 games I wanted at 40-50 a pop. I bet many customers are going to switch but not for a while. Atleast until a new console is released or the next major holiday like christmas. The games I could also see dropping right now in sales. Most people have spent their money by now if they don't have a job. Not to mention, in my opinon it is the dry season right now for games. Yeah there are a few good titles, but none of the new 06 titles right now are worth paying full price. The big hitters are already released for the christmas rush. These publishers and major companies are fogetting most of us are young adults and money don't grow on trees. We are loyal to the industry but this isn't like selling hd tvs to adults. Income is limited for the meat of their fan base.

  • M5

    Posted Feb 15, 2006 12:13 am PT

    No killer apps. These Lawsuits are gonna kill creative freedom as game companies fear a vote hungry republican and democratic crusaders, saving us from the bad games.

  • bizsumpark182

    Posted Feb 14, 2006 5:22 pm PT

    What do you expect, of course January is going to be slow. And to be honest I don't expect things to start picking back up until April.

  • ZeldaMaster32

    Posted Feb 14, 2006 4:49 pm PT

    March will see The Elder Scrolls IV: Oblivion and Kingdom Hearts II. Now THAT will be a big month. And referring to these numbers, howcome DMC3SE didn't make it? I thought it was really good myself.

  • advent6

    Posted Feb 14, 2006 4:24 pm PT

    "I can't see how software sales will improve too much with prices for next-gen games being set at $60." Good point in the post above. Cutting people's jobs and raising game prices; now that is a way to win over the approval of gamers!

    "Here's an idea for developers, make better games and we'll buy them." Good point here as well! Where are all the great, innovative, games?

    Microsoft, and their contracted 360 production facilities, are killing these statistics as well! All of the consoles must be on Mars, as I have yet to see one in the store, besides the premium one I got lucky and found. I have done a lot of checking in our area too! No consoles, with waiting gamers, equals zero game sales. I am sure that everyone isn't just sitting their and waiting, but the 360 fans sure are hoping for one soon. I would buy some XBOX games, but Microsoft has also sucked at releasing updates for the playable XBOX games. Where is the next release after December Microsoft???

  • sofy

    Posted Feb 14, 2006 1:27 pm PT

    Indeed not enough good games & prices are too high...
    Personally waiting for all consoles to be out before picking one.

  • VFG

    Posted Feb 14, 2006 11:50 am PT

    Here's an idea for developers, make better games and we'll buy them.

  • grobe

    Posted Feb 14, 2006 11:23 am PT

    This should teach the gaming industry these stupid bait and switch tactics (making game commericals look like movie trailers like another guy said) and endless rehases of the same tires gameplay will only get you so far. I only had two must haves last year (bf2 and fear) and It's only going to get worse. I have yet to see anything I really want thats slated for release in the next 4 months. Microsoft rushed the release of the 369 as usual and it's coming back to bite them in the ass. Every game coming out for it looks like an xbox game with better texture filtering and not much else. I thought next gen meant next gen not something a pc could do three years ago.

  • SavoyPrime

    Posted Feb 14, 2006 10:49 am PT

    I can't see how software sales will improve too much with prices for next-gen games being set at $60.

  • WolfSkill5544

    Posted Feb 14, 2006 9:40 am PT

    Unfortunately, it's always slow around this time of year, but this is the worst year for many business.

  • MetaMods

    Posted Feb 14, 2006 8:55 am PT

    January doesnt have game release anyway, so wouldnt surprise the sale went down.

  • Mehfuz

    Posted Feb 14, 2006 7:52 am PT

    This is becasue there is not much good games released in jan

  • bruno_fmenedes

    Posted Feb 14, 2006 6:47 am PT

    The sales will only go up a litle with "metroid DS"
    But the sales are really going up when "Zelda:TP"
    Only then the sales are going to be much bigger by comparison with 2005.....

  • ufopuller

    Posted Feb 14, 2006 6:16 am PT

    Need more GOOD games

  • modstark9

    Posted Feb 14, 2006 5:21 am PT

    oh no"!

  • Galalderia

    Posted Feb 14, 2006 2:38 am PT

    All the true games will come out on march anyway. If Resident Evil 4 juiced up the industries income i have true faith Gears of war will turn the tables so would Ghost recon Advance warfare
    .

  • Reetesh

    Posted Feb 14, 2006 2:30 am PT

    ..... The Month was KINDA slow but just By seeing one Month why to judge the Whole year? We didnt have any releases in Jan hence the Decline.

  • s0l0123

    Posted Feb 14, 2006 2:15 am PT

    Thought so, seeing as there were hardly any good games in Jan.

  • automaticsnake

    Posted Feb 14, 2006 12:59 am PT

    a lot of people are waiting for their next gen systems.

  • dru26

    Posted Feb 13, 2006 10:28 pm PT

    360 sales are down because there aren't any in stores. IGN reported that within 6 weeks we will see alot more 360s available, along with a bunch of big games. I think Sony being so tight lipped about it's price and release date is helping to keep sales down. They have done a great job creating a myth of a far superior machine, w/o showing any gameplay footage.

  • jakeboudville

    Posted Feb 13, 2006 7:32 pm PT

    i didn't think there were any good games in Jan

  • chibi-acer

    Posted Feb 13, 2006 6:49 pm PT

    This is a bad thing for game companies, but it's really a good thing for gamers. We may have a lull of games for a bit, but once everything starts coming out next-gen, we'll have better games.

  • xfactor19990

    Posted Feb 13, 2006 6:27 pm PT

    the slump b/w newer consoles...........

  • davahsa

    Posted Feb 13, 2006 5:57 pm PT

    DOA4 is what I'm still playing...and will be untill FullAuto comes out. Burnout Revenge 360, Fightnight Round 3, and Oblivion (I'm not even into RPG's) are next for me... and thats not bad for spring! Sales should increase as the public converges over to 360.... the haters will even feel the itch. The price, the quality of the system, the library of games, and LIVE will get ya soon enough, and as it spreads game sales will rise. Ps2 games will continue to sell well because there are a billion Ps2's out there, and Xbox games that support BC will sell well.... like Black. I sold my old Xbox, GC and PS2 but will still buy BLACK if it supports BC. And with the high attach rate with 360.... new X360 games will do well too. If there is any slump it would be because of no big PS2 games. Xbox and GC never sold nearly as much combined. Sure Halo2 broke single day records but Xbox still continues to loose money. I sold 2 GC's during it's span and bought both of them new (the 2nd one for RE4...duh.) Since Twighlight Princess aint coming I don't see any Blockbusters right next door on any system, but E3 might change all that. Come on E3!

  • Oni

    Posted Feb 13, 2006 5:12 pm PT

    Last year Lots of amazing games were released, Like World of Warcraft, for example. What was released this year? Nothing!

  • jrhawk42

    Posted Feb 13, 2006 5:10 pm PT

    It's a waiting year of course sales are going to be down since all the developers are waiting on next gen. Its like releasing new biofuel for cars next year, and complaining about this years gasoline car sales, nobody's gonna buy your product this year if you're just gonna come out with something 10x better next year consumer will wait.

  • reallaughingman

    Posted Feb 13, 2006 4:57 pm PT

    as stated, the worse is ahead.

  • Ravenlore_basic

    Posted Feb 13, 2006 4:14 pm PT

    Many Next Gen games are not much different than todays games. There are PLENTY of used games available in game stores. In addition, there are plenty of Greatest Hits games for a low cost.

    In addition, there is an always changing spending habbits of people form indoor activities like watching Movies, Playing games, and Watching TVs with outdoor activities. Add to this other expensives and wants such as Ipods, camers...

    I think there is going to be a down turn for a while unless REV or PS3 does someting that people like and is different than what they are already doing.

  • i_love_my_ds

    Posted Feb 13, 2006 3:49 pm PT

    hopefully march does a lot better with Metroid Prime Hunters, Burnout Revenge, and Pursuit Force being released.

  • Mindphaser

    Posted Feb 13, 2006 3:41 pm PT

    Good! Maybe this will turn game development back into an art form by private companies instead of another profit-driven Wall Street fiasco ruled by stock prices!

  • mpalacio

    Posted Feb 13, 2006 3:30 pm PT

    Who cares? I've got my own prolems.

  • timinator18

    Posted Feb 13, 2006 3:25 pm PT

    360 isnt that amazing. that y its not selling well.

  • pine_1045

    Posted Feb 13, 2006 3:21 pm PT

    In the grand scheme of things (cliche I know) this article is very short term but I think it speaks for what could possibly be in store for the future. Many game researchers have suggested the game indutry has been in a state of stagnancy for many many years, especially in comparison to the rapid growth of previous media. I personally have written a research paper during grad school suggesting the same thing but more focused on branding in games and user-created content.

    A lot of you are right to suggest there is a severe lack of good games coming out. 2005's greatest game came out in the first month of the year. What does this say for the other 11 months? God knows we would all love to have new and GOOD releases in the summer when we're not in school but there are barriers to entry at that point in time which barely make sense to most of us and even if we do understand their reasoning, it most likely could be solved with better research & development coupled with marketing the correct way (I could go on a big rant about how videogame commercials must stop looking like movie trailers, but now is not the time.)

    Also look how the console makers and the consumers are changing the videogame spectrum. Thee are not videogame console anymore; they are media centers. With the PS2 and Xbox it wa a game machine with a sub-par DVD player. But with the next-gen, Sony is already promising more features for Blu-Ray than the standard machines will offer and Microsoft has integrated the file handling and accessability features of Windows into their system. The point I am trying to make is. the entire atmosphere of videogaming is changing from the people to the uses of games. Unfortunately, it does not appear the videogame industry is trying to keep up OR it is trying to guide us, the players and consumers, instead of really listening to what we have to say.

    Development costs are going to continue to skyrocket, debt will occur in greater amount and there will be fewer and fewer companies making fewer and fewer games. I don't know if this has happened yet but I feel we are a short time away where a year's best selling game is one that came out the previous year. Unfortunately, that might be a point of no return and something will have to happen before then. Are the second dark ages of gaming upon us? I hope not.

  • Cypher_187

    Posted Feb 13, 2006 3:16 pm PT

    It's to be expected.

  • thezuki

    Posted Feb 13, 2006 3:15 pm PT

    dont worry march ratings will be in the sky

  • VGMusicFreak

    Posted Feb 13, 2006 3:08 pm PT

    pshh january was awesome because i got dmc3 special edition and Wild Arms 4. This month im gonna get Grandia 3 and Drakenguard 2 and already got Tales of Legendia. Just because the majority of the gamers dont play the sexy japanese rpgs doesnt mean the month automatically sucked because we didnt see a GTA or Halo.

  • sandz_09

    Posted Feb 13, 2006 3:03 pm PT

    I could care less about analyst predictions. All i know is that i get Fight Night next this month, then GRAW, then BF2, then Elder Scrolls, tomb raider, saints row, dead rising and etc etc in the next few months. I personally cant wait for the next splinter Cell. now I know most of you probably hate it, but Rockstar needs to make another gta or something worthwhile, because nothing will be in the spotlight until ps3 and/or revolution come out. Hate it or love it, controversy puts you in the spotlight and raises interest. also if microsoft can get more damn 360's out, that'd be awesome. i know all kinds of people who STILL want one but cant get it. Sucks when the local bestbuy only get like 5 systems. hahaha. I personally think as budgets rise and technology advances, we'll see less quantity in favor of quality. at least thats what we should hope. Development time will be longer with new advancements. I just want the games i listed above until PS3/halo 3. 2006 is going to be slow IMO. and if the PS3 launch games are lackluster, 2006 is definitely a slump. With unknown ps3 price and unknown release dates for highly anticipated titles, 2006 is going to be a slow year. Oh well, more time for my small library of 360 titles and things in my life. 2007, cant wait for that year, because then its on.

  • TryMe01

    Posted Feb 13, 2006 2:47 pm PT

    analysts predict their predictions are only predictions (incorrect, if that)

  • Belianth

    Posted Feb 13, 2006 2:43 pm PT

    I think it comes down to the very obvious fact that there hasn't been a really MUST have game in a long time. I can't think of a game I just had to have in the past couple months. They need to innovate new game franchises. Xbox 360 has a few good games coming out over the next few months but that alone wont fix the slump.

  • SnowFarmer

    Posted Feb 13, 2006 2:37 pm PT

    This is to be expected really. The industry seems to have stagnated, there aren't any really exciting games coming out for the next couple of months and even after than I don't see anything that really looks like a huge standout. Game developers need to start focusing more on producing some thing new and exciting, not just mindless rehashes of what worked before. If they don't they will end up like the movie industry. Hopefully the Revolution and the PS3 will bring some new life, and some new ideas.

  • frankeyser

    Posted Feb 13, 2006 2:24 pm PT

    it will pick up in november... maybe.

  • xBlitzerx

    Posted Feb 13, 2006 2:19 pm PT

    Yea, I bought a few games this month, all off of eBay, and all older games (DMC1 and 2, Shadow Hearts 1).

    I predict March will be better (MPH, KH2)

  • birdinflight

    Posted Feb 13, 2006 2:13 pm PT

    Game sales likely won't pick up until March. There really aren't many high profile games coming out until then (except for Fight Night Round 3). The only surprising thing is that January 2006 only experienced a 5% loss. I predicted it would be higher than that.

  • HitmanAgent47

    Posted Feb 13, 2006 2:12 pm PT

    The industry has finally been smacked in the face with the reality that all these short term money making schemes (endless sequels and no innovation) would come back to bite them hard. The only way out of this is by actually looking for long term money making rather than short term. Pop culture lives and dies too quickly anymore to make any sound investiments. The gaming industry refused to acknowledge this, and gave the finger to hardcore and casual gamers. Now they realize it wasn't such a smart idea in the first place. I'm sure things will get better, but the gaming industry better start giving faithful gamers what they want, or face extinction.

  • MiKaNoH

    Posted Feb 13, 2006 1:56 pm PT

    games sales are dropping because people is holding money fore next-gen consoles

  • 247k

    Posted Feb 13, 2006 1:56 pm PT

    some good games are coming out later this month and month after on current generation consoles, it'll go back up!

  • GyRo567

    Posted Feb 13, 2006 1:54 pm PT

    Who really cares about January sales? When's the last time a good game came out in this month?

  • halffullbunny

    Posted Feb 13, 2006 1:39 pm PT

    So what? The game industry has lots of ups and downs. Some of the gamers out theres including myself cant leave an EB Games without buying SOMETHING. If theres isnt a good new game, I buy an old one. Are they expecting people to buy the newest games just because theyre new? The newest systems because theyre new? Most people dont have more than one of the next gen systems or plan to get a second. And people who already have a system arent going to get a duplicate. Theres alot of old games that people still need to buy out there. Its not like they didnt make any money at all, so why complain?

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