Video Games Sales, A Key Marker For Consumer Sentiment, Fall Apart

Video games are perfect entertainment during a recession. Game consoles such as the Nintendo Wii, Microsoft (MSFT) Xbox, and Sony (SNE) Playstation, only cost a few hundred dollars. The games that work on them have prices as low as under $30. Video games can be played for hours, days, and months without any charges beyond their original costs. That makes them a cheap alternative to almost anything else that keeps people off the streets and happy in their homes.

Games sales continued to fall apart in June. Research firm NPD reports that sales were down 29% compared to the same month last year. Sales of game hardware dropped 38%. That means that the consumer is in enough trouble that even a modest investment in low-end electronics is, in many cases, beyond his reach.

Sony (SNE) is still getting the worst of the video games sales retreat. It sold only 164,700 PS3s in the US last month. The is awfully small compared with the 361,700 units of Nintendo’s Wii sold.

Nintendo will continue to do well as a company. Its lead in the industry looks insurmountable. Microsoft may still be posting modest sales, but video games are a minuscule part of its overall business. Sony cannot afford the ongoing failure of the PS3. It has too much riding on the product, and it has no way to mount a comeback against its two competitors.

Douglas A. McIntyre