NPD: July game sales up 29 percent

Gloomy industry mood further evaporates as $386 million tally bests 2005 figures; software up by 22 percent, hardware 23 percent--both largely in part to the DS.

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Today, NPD reported positive income for the game industry--income that yet again beat analysts' expectations. Total game revenue for the month was $684.6 million, up by 29 percent year over year--far past analysts' expectations. By contrast, July 2005 saw only $531.4 million in combined software, hardware, and accessory sales.

On the software front, July saw $386 million in revenue, an increase of 22 percent versus the year before. This was due mostly to robust sales of Electronic Arts' NCAA Football 07 and THQ's Cars. The increase came despite precipitous drops in software sales for two platforms. Xbox game sales fell 51 percent and Game Boy Advance sales toppled 25 percent, thanks to their successors, the Xbox 360 and Nintendo DS, stealing the limelight.

However, a heavily hyped platform also took a dive. Game sales for the PlayStation Portable slid 40 percent during the month, thanks to a dearth of compelling titles. By stark contrast, DS game sales rose 354 percent during the same period, boosted by still-strong sales of Brain Age: Train Your Brain in Minutes a Day and New Super Mario Bros.

The DS's rise was complemented by a software boost for an unusual suspect. Titles for the GameCube, which ranks third in the current-generation console race, saw an increase of 3 percent. That was nearly as much as PlayStation 2 game revenue, which was up by 5 percent year over year.

Hardware sales saw an increase of 23 percent, also beating expectations. Again, this was driven by surging sales of the Nintendo DS, which were up 358 percent versus July 2005. That bested both its sibling the GBA, which saw a 33 percent fall, and its rival the PSP, which fell 20 percent.

Besides the GC, current-generation console sales were also off during July. PlayStation 2 unit sales were down by 7 percent, while Xbox sales fell 91 percent for the month.

While startling, the decline in Xbox sales was in large part due to the popularity of the Xbox 360, which plays many of its forebear's games. Microsoft sold a total of 207,000 units during the month; so far, the console has sold 2.2 million units in the US alone. However, while impressive, the July Xbox 360 figures are a 26 percent decrease from June, despite high-profile releases such as Prey.

What do analysts read in their tea leaves now? Overall, they think the industry has nowhere to go but up come the all-important fall release season. "We still think that industry sentiment has bottomed and will continue to as we get closer to the new hardware launches from Nintendo and Sony," said UBS Global Equity Research's Michael Wallace, "Industry sales should be up again in September."

Wedbush Morgan Securities' Michael Pachter echoed his colleague. "We also think that many investors are skeptical about hardware unit sales and software attach rates for the new consoles, given the relatively high prices for both hardware and software," he said. "We think that those concerns will be alleviated once the Wii and PS3 launch, with hardware sell-outs and robust software sales expected in November and December." Pachter also singled out "innovative" games like Guitar Hero as titles that will sell well for months to come.

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