Video Game Industry Suffers Brutal Month Of May

In May of this year, the video game industry suffered its worst month in five years according to a recent report.

According to new data released by NPD Group, the video game industry's total sales were down 14 percent year-over-year from $866.8 million in May '10 to $743.1 million this year. The month was a low point for this generation of consoles (Xbox 360, Wii and PS3). The last time sales were this low were during the last months of the old generation in October of 2006.

Keeping in mind that these sales figures represent just the new physical portion of the market for video game hardware, software, and accessories and not the growing portion of the industry that is comprised of digital format content distribution, May 2011 was the lowest month of sales for the industry since October 2006. A light slate of new releases is at the heart of this month's performance, Anita Frazier, analyst at NPD Group, said.

Sales were led by the Xbox 360, which has contributed 34 percent to the year-to-date revenue across the spectrum. It was the top selling platform in the month and realized nearly a year and a half of month-over-month unit sales increases. The PS3 and PSP also experienced unit sales increases. The Wii continued its decrease in sales, something Frazier foresees for the remainder of the year into next year.

At the current rate of growth and decline (on a year-to-date basis) for each of the respective console systems, a year from now the Wii will still enjoy the lead in install base in the U.S., although both the Xbox 360 and PS3 will close the gap. Of course, new details on hardware introduction could certainly change the picture, Frazier said.

This past month at E3, Nintendo debuted the Wii U console. The tablet-sized controller can play Wii games on its own or it can be used in conjunction with the big screen. Nintendo is betting on the Wii U, which will be released in 2012, to kick-start its hardware sales.

Nintendo's 3DS, which has done poorly in terms of sales, will receive a boost in the coming months with Nintendo franchise releases such as Zelda, Kid Icarus and Mario.

On the software side, May's light release schedule was the reason sales were down as sharply as 13 percent. According to Frazier, 42 new SKU's were introduced in May as compared to 58 last May and 72 in 2009.

As a result of a lighter release slate, promotional activity at retail and in circulars was reduced as well, which undoubtedly affected not only planned but impulse purchases, Frazier said.

The top selling game of the month was L.A. Noire for Xbox 360 and PS3. Following that, it was Brink, Lego Pirates of the Caribbean, Portal 2, Mortal Kombat 2011, Call of Duty: Black Ops, Zumba Fitness: Join The Party, NBA 2K11, Just Dance 2 and Lego Star Wars III. The most popular type genres were dance games, first person shooters and general adventure.

The top genres contributing to the decline in new physical software sales were Action/Driving hybrid (Red Dead Redemption) and Platform/Scrolling Character (Super Mario Galaxy 2). Despite strong continued sales of Pokemon Black & White, the RPG genre also declined since the new games did not comp the performance of HeartGold and SoulSilver last year, Frazier said.

A new slate of games, all of which were heavily demoed at E3, will be released later this year and will likely improve sales.

Follow Gabriel Perna on Twitter at @GabrielSPerna