The video-game industry saw software sales decline from 2004 levels for a third straight month in November as the launch of Microsoft Corp.'s Xbox 360 console helped erode demand for existing titles.
U.S. video-game sales plunged 18 percent from last year to about $700 million in November, market research firm NPD Group said on Wednesday.
The overall results were buoyed somewhat by hardware sales, which gained 10 percent to about $456 million over November 2004. Including accessories, total industry sales slid 9 percent to reach $1.3 billion last month.
Still, last month's sales were almost twice those in October as the industry ramped up for the critical holiday spending season.
Much of the decline in software sales can be attributed to consumers holding out for the next wave of consoles, such as the late November debut of Xbox 360, said Wedbush Morgan analyst Michael Pachter. Gamers have also been waiting for the spring release of Sony Corp.'s PlayStation 3.
But while retailers sold about $70 million of software for Xbox 360 and $60 million for new handheld systems, that was not enough to counter the $240 million drop in sales of current games, Pachter noted.
"We think that consumers have been lulled into believing that the next-generation consoles are just around the corner ..." he wrote in a research note. "Should that be the case, we think that weakness in sales may persist in December, and the year could end up in negative territory."
Frenzied demand for new systems is expected to boost sales in the coming months, but a shortage of Xbox 360s has some analysts worried about results for the holiday season. And game publisher Activision Inc. added to the gloom when it warned of a quarterly profit shortfall late Wednesday.
Although Activision's November sales surged 54 percent — helped mostly by its "Call of Duty 2" for Xbox 360, the third-best seller last month — the company said its overall game portfolio is lagging expectations. Both its third- and fourth-quarter sales are forecast to miss Wall Street estimates, Activision said.