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First-Half Game Dollars Down, Units Up

5 Aug, 2004 By: John Gaudiosi

The sale of video game consoles, games and accessories fell 2.5 percent for the first half of the year, compared to the same period last year.

According to the NPD Group, the video game industry saw sales drop to $3.4 billion in the first half of 2004, compared to $3.5 billion in the first half of 2003. While dollar sales dropped slightly, overall unit sales of video games hardware, software and accessories were up 1 percent.

Console software and console accessories were the only categories to show growth during the first half, with software revenue increasing 4 percent and accessory revenue increasing 8 percent. Within accessory sales, Internet components and specialty controllers saw the most growth, with dollar sale increases of 120 percent and 184 percent, respectively. All other categories, which include console hardware, portable hardware and portable software saw dollar sales decreases of 17 percent, 10 percent and 12 percent, respectively.

“The reduced price points for Xbox and PS2 helped to stabilize industry sales during the first half of the year,” said Richard Ow, senior video game analyst, The NPD Group. “While the first quarter of 2004 was showing double-digit losses in console hardware unit sales, with the help of lower price points for the Xbox and PS2 during the second quarter of 2004, the industry actually saw double-digit increases in unit sales for the entire second quarter of the year.”

The second half of 2004 is shaping up to be one of the strongest release slates in the short history of the game industry. With nearly 50 percent of yearly game sales made in the months of November and December, this Q4 will see an unprecedented number of “AAA” game releases. Ow expects this fourth quarter to account for 60 percent of game sales for 2004.

“Some of the titles that are coming in the second half of this year have been in development for three or more years and are the most anticipated we've seen in this console cycle,” said P.J. McNealy, video game analyst, American Research Technology.

Shipping early is key to some of the big games of 2004. Electronic Arts sold more than 1.5 million copies of NCAA Football 2005 in its first week, and Madden NFL 2005 hits stores Aug 9. There will be a double dose of Doom 3 this year with the PC game already released and the Xbox game slated for October.

Halo 2 is at the center of much of the second-half activity. The Nov. 9 release, which currently has a trailer playing on more than 1,500 screens at Loew's Cinemas nationwide, has prompted October bows of about a dozen games and some delays until 2005. Halo has sold more than 4 million units worldwide.

This year saw more big releases shipped in Q1 and Q2 than ever before. While many titles were delayed from last year's fourth quarter because they weren't completed, game publishers are starting to test releases throughout the year.

“NPD has seen tremendous success from games released outside of the fourth quarter,” Ow said.

“I come from the movie business, and new movies come out all the time,” said Mitch Koch, corporate VP, worldwide retail sales, Microsoft Xbox, adding that there's no reason games cannot become a 52-week business. “When we talk about growing the size of the games industry, it's critical that we release games year-round.”

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