Overall U.S. video game sales fell 17 percent in March to $1.43 billion, research group NPD said on Thursday, a revealing figure for an industry that had so far shown resilience in the economic downturn.

Video game software sales dropped 17 percent to $792.8 million in the month, while hardware sales fell 18 percent to $455.6 million.

Analysts said the size of the decline was a bit surprising but also misleading due to a difficult comparison with March of 2008, which saw a major game release in Super Smash Bros. Brawl.

March was just such an outsized month last year, said Wedbush Morgan analyst Michael Pachter.

However, he said the data does reveal some weakness in the market, and he expects April sales to be flat.

NPD also attributed some of the decline to the fact that Easter fell in March last year, boosting purchases for gifts.

For the first quarter of 2009 as a whole, video game sales were flat at $4.25 billion.

Although Nintendo's Wii won the month, Microsoft Corp's Xbox 360 was the only console to achieve year-over-year growth.

The Wii sold 601,000 units in March, while the Xbox was No. 2 with 330,000 units, followed by Sony's PlayStation 3 (PS3) with 218,000 units.

If there was one area that surprised me this month, it was hardware sales, said NPD analyst Anita Frazier in a release. While it's not unusual for March hardware sales to be lower than February, I thought we'd see higher unit sales on most platforms.

Although the Wii far outsells the Xbox 360 and the PS3 globally, in the important Japanese market PS3 sales outstripped those of the Wii in March for the first time in 16 months.

Nintendo of America President Reggie Fils-Aime said in an interview the company has a number of important new games on the way for Wii and we're confident that we'll continue to see very strong hardware sales behind those launch titles.

Sony recently cut the price of its older console, the PlayStation 2, by 23 percent to $99.99 in an attempt to lure new buyers.

Only a few days of the lower-priced PS2 were included in NPD's March numbers. NPD recorded PS2 sales of 112,000 units.

In an email statement, Sony Computer Entertainment America said it is seeing exciting preliminary numbers for PlayStation 2 with the recent price cut.

Capcom's Resident Evil 5 was the best-selling video game in the month, selling 1.5 million units for the Xbox and PlayStation 3, according to NPD.

Nintendo's Pokemon Platinum Version sold 805,000 units, good for second place, while Microsoft's Halo Wars was No. 3 with 639,000 units sold.

Nintendo's DS was the top-selling U.S. handheld console, with 563,000 units, ahead of Sony's PSP, which sold 168,000.

Nintendo released the next generation of its DS franchise, the DSi, in the United States on April 5. The company said it sold 435,000 units in the first week.

(Reporting by Gabriel Madway; Editing Bernard Orr, Richard Chang)

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