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Video game industry sales rise to $12.5 billion

January 13, 2007|From the Associated Press

NEW YORK — A strong December capped off a record year for the video game industry, with U.S. sales of software, hardware and accessories up 19% to $12.5 billion in 2006, according to market research firm NPD Group.

Last year saw the long-awaited launch of new gaming systems from Nintendo Co. and Sony Corp., but older systems dominated software and hardware sales in part because of a scarcity of next-generation consoles.

In December, the most crucial month for game sales, Nintendo sold the most consoles, followed by Sony and Microsoft Corp. The portable Nintendo DS sold 1.6 million units in December and has sold 9.2 million since its launch in 2004.

Sony's PlayStation 2 came in second, still running strong six years after its release. It sold 1.4 million units during December amid shortages of its successor, the PS3, which sold 490,700 units in December and 687,300 since its November launch.

The Wii, Nintendo's playful next-generation console, sold 604,200 units in December and 1.1 million since it was released Nov. 19, two days after the PS3's debut. Microsoft's Xbox 360, launched a year ahead of Wii and PS3, sold 1.1 million units in December and 4.5 million since its release.

In all, hardware sales surged 43% to $4.6 billion in 2006 and software sales rose 6% to $6.5 billion. Sales of accessories jumped 19% to $1.5 billion for the year.

Total U.S. sales rose 28% to $3.7 billion during December, including a 59% jump in hardware sales to $1.6 billion and a 5% increase in software sales to $1.7 billion. Sales of accessories, which include controllers and memory cards for gaming systems, rose 47% to $451 million.

Next-generation software -- for the Xbox, the Wii and the PS3 -- made up 16% of total video game sales in December, said Prudential Equity Group analyst John McPeake.

Microsoft's shooting game "Gears of War" for the Xbox 360 was the bestselling console game during the month, selling 815,700 copies. Activision Inc.'s rock-star simulation game "Guitar Hero II" for the PS2 followed, and Electronic Arts Inc.'s "Madden NFL 07" football game for the PS2 came in third place. For the year, "Madden NFL 07" for the PS2 was first with 2.8 million sold, followed by Nintendo's "New Super Mario Brothers" for the DS and "Gears of War" for the 360.

"Total software sales growth slowed as industry heavyweight EA posted its third consecutive month of year-over-year decline in U.S. retail video game revenues," McPeake wrote. Excluding Electronic Arts, the software industry would have expanded nearly 9.6% in December, above the actual 5.4% growth, he said.

Games for the Wii captured 4% of the U.S. software market, the analyst said, with "Legend of Zelda: Twilight Princess" selling more than 519,000 units in December.

But games for the PS3, which at $500 and $600 retails for well above the $250 Wii and remains hampered by shortages, captured just 2% of the U.S. software market, McPeake said, adding that "Resistance: Fall of Man" was the top-selling PS3 title, with more than 216,000 units.

McPeake called Activision and THQ Inc. "better investment opportunities" than Electronic Arts, although he said he expected the latter to gain market share as more people upgraded to new consoles.

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