Video game sales have collapsed just as retailers begin to rely on strong holiday sales. Industry research firm NPD reports that in October, U.S. video game retail revenue dropped 25% compared to the same period last year when sales were $1 billion. The sales of game consoles fell 37% to $296 million.
The companies that will be most badly damaged by the trend are the major console makers, which include Microsoft Corp. (NASDAQ: MSFT), Sony Corp. (NYSE: SNE) and Nintendo. They cannot follow the migration of games to smartphones and tablets because these new devices take the place of their console products.
There is a bit more hope for companies that make software — the games themselves. At the top of this list is Electronic Arts Inc. (NASDAQ: EA), the largest of the traditional game makers. It has begun to create games that can be played on new portable devices, which means EA has begun to undermine the hardware sales of its traditional partners like Sony. But EA and its long-time rivals may be unable to stay ahead of new companies that do nothing but program for the next generation of portable devices.
Douglas A. McIntyre
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