USA TODAY
By Jon Swartz November 25, 2009
SAN FRANCISCO — Is the beleaguered video-game industry about to blast, sing and leap its way to a comeback? That all depends on how its blockbuster titles perform over the next several weeks, starting with Activision 's Call of Duty Modern Warfare 2, expected to be the biggest-selling game of the year. Released Nov. 10, it did $550 million in business its first five days in the U.S. and United Kingdom.
If it meets analysts' projects, it should have an indelible impact on software sales this holiday season and help lead a turnaround next year, says Michael Pachter, managing director of research at Wedbush Morgan.
Hot on its heels: highly anticipated launches of Band Hero, featuring Taylor Swift , DJ Hero and Super Mario Bros. Wii.
Video gaming executives are pinning their hopes on the new titles because a brutal recession has tripped up consumer spending on hardware consoles and games after several years of highflying sales. At the same time, the industry faces heightened competition from free games on social networks, mobile-based games and more.
"Nothing, including video games, is recession-proof these days," says Jesse Divnich, director of analytical services at Electronic Entertainment Design and Research. The video-game market's woes are no different than other entertainment industries hit hard by a faltering economy, he says.
The holiday blockbuster games offer potential tonic for the $19.5 billion industry's woes in the U.S. But they could also be a quick fix for an industry that - like others - continues to grapple with reduced consumer spending, as well as competition from other forms of gaming, such as on social networks and smartphones.
Sales for the video-game industry are expected to dip 3% this year after several years of record growth - the industry's first year-over-year loss since 2004.
More unsettling are whispers of fatigue toward music-related games. The Beatles : Rock Band, highly anticipated this year, undersold. Even the much-hyped DJ Hero isn't expected to meet its fourth-quarter shipment projections. The fallout has been felt throughout the industry:
Console sales tumbled 13% this year, depressing software sales growth.
Electronic Arts says it is shedding 1,500 jobs as part of a massive restructuring after it reported a $391 million loss in its third fiscal quarter. The company announced 1,100 job cuts earlier in the year.
Profits at Nintendo tumbled 52% during the first six months of 2009, vs. the same period a year earlier. It has scaled back its 2009 target of Wii unit shipments to 20 million from 26 million.
The recessionary headwinds were fiercest in August, when overall sales in the U.S. of hardware, software and accessories were $909 million, a 16% drop from the same period a year ago.
The Beatles: Rock Band, hyped here, there and everywhere, hit a bum note with moderate sales of about 600,000 copies in its first month of release in September. By comparison, shoot-em-up Halo 3: ODST sold more than 1.5 million copies in the same month.
Complicating matters, video games face stiffening competition from other forms of digital gaming.
Tens of millions have flocked to free, simple games available on Facebook, MySpace and the iPhone instead of plunking down hundreds of dollars on consoles and video games. So-called social gaming has become a craze in recent months, through titles such as Zynga's FarmVille (an estimated 67 million users) and Playfish's Causes (35 million). Earlier this month, social-gaming firm Playdom said it landed $43 million in private investments.
More than 250 million people are active monthly social gamers, compared with 100 million in April, says Inside Social Games.
"Two years ago, I told EA that social gaming would be the next virtual http://content.usatoday.com/topics/topic/Organizations/Companies/Retail/Wal-MartWalmart," says Mark Pincus, CEO of Zynga, which has been mentioned as an IPO candidate next year.
What is more, about one-fourth of the more than 85,000 iPhone apps are electronic amusements, says Scott Steinberg, lead games analyst for DigitalTrends.com.
Meanwhile, online-gaming services for kids 9 to 14 were up 52% this year, says market researcher ComScore . Among the most popular Web destinations: Club Penguin, where for several bucks a month, kids have unlimited access to simple games they can play and to converse with their friends in a virtual setting.
"Total gaming behavior has increased, but the equilibrium has changed between them," says Matt Freeman , CEO of Betawave, a brand-advertising network.
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