Video Game Sales Still Bleeding, Xbox And PS3 Gain Ground

Video game and game console systems sales plunged in the US in May. According to industry research group NPD, software sales were down 17% to $449 million and sales of players dropped 30% to $303 million compared with the same month last year.

While the Nintendo Wii is still the market leader, it is losing share and losing it rapidly. Sales of the Wii dropped 15% from April to 290,000 units. Sales of the Microsoft (MSFT) Xbox 360 were flat at 175,000. Sony (SNE) PS3 sales moved up a bit to 131,000.

The drop in console spending is not a good indicator for consumer spending. Game platforms cost between $200 and $500 and are often used for hundreds of hours a month, making them cheap entertainment. The fact that consumers are shunning the purchase of moderately priced electronics is a sign that people still  have serious concerns about the prospects for the economy and employment.

The figures show that the remarkably popular Wii, which as done so well compared to Xbox and PS3,  may have reached a high water market of market penetration. It sells for less than its two rivals which should give it broader appeal. But, the market can only absorb so many gaming devices and the Wii may have hit a permanent wall even though it is adding new features regularly.

The unit figures may seem good for Sony (SNE), buy they aren’t. Sony’s game division is still losing money, and it will take much more than flat sales to turn that around.

Nintendo, the creator of the Wii, is still selling enough units to keep the company’s fortunes strong. Sony, still running in the third position, is still facing trouble it won’t overcome. It is too far behind.

Douglas A. McIntyre