Video Game Industry Suffers First Decline Since March 2006

Oct. 21, 2008 12:40 PM ETMSFT, NTDOY, SONY, EA
Seth Gilbert profile picture
Seth Gilbert

Following August’s surprise shortfall, September was set to be a litmus test for measuring the health of the gaming industry in the U.S; a chance to spot test if softness in consumer spending would have an impact or if the industry’s record setting pace would resume. Thursday, the data came out. NPD released the results of their retail sales survey for the month of September. The results were, well, mixed.

Overall, sales fell seven percent year over year to $1.27b in September. It was the second month in a row, after a streak of 27 months, that sales failed to yield a double digit growth rate. It was also the first decline since March 2006.

On the face of it, that decline may look troublesome. Beneath the surface, however, it’s a little more complex. In September of 2007, Microsoft released (MSFT) Halo 3. It was one of the fastest selling titles of all time, driving both software results and hardware so high for the month (the Xbox 360 took the top slot for console sales) that the total combined tally was up nearly 75% over 2006 (and hardware sales were up 124 percent year over year). This year, without a comparable major release, the numbers don’t match up and the comparison is skewed. Additionally, in September (of this year), Microsoft cut prices on the entry level Xbox 360. While that fueled a significant jump in unit sales, the per-console discount reduced its top line contribution.

NPD’s analyst, Anita Frazier, seems to think the results are nothing to worry about. “Overall,” she said, “the health of the video games industry remains quite strong despite the rocky economic conditions. Tracking against typical seasonality, the U.S. video games industry is positioned to realize $22b or more in revenues for the year.”

Breaking out

This article was written by

Seth Gilbert profile picture
Seth Gilbert is the founder and editor of (, a business blog and website focused on the convergence of media, entertainment and technology. From music, to movies, from gaming, to publishing, the site covers the affairs of private and public companies. It’s a survey of things just starting and things winding down, a look at significant transactions and events that could have an impact tomorrow. Metue is as much about connecting the dots as it is about reporting them. Prior to starting Metue, Seth held senior business development, strategy and product marketing roles for Silicon Valley start-ups and in the Venture Capital industry. In addition to Metue, Seth provides strategy and business development consulting services. He can be contacted through the pages on (

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