Gaming Companies See Lower Video Game Sales in February

Gaming stocks such as Electronic Arts (NASDAQ:EA), Activision Blizzard (NASDAQ:ATVI) and GameStop (NYSE:GME) are expected to decline, after a NPD Group report revealed that retail video gaming software sales declined by 23% in February 2012 compared to that in February 2011. ^[1] Though the figure improved from the massive 38% drop in January, the 23% decline was far deeper than the market expectations.

We believe a lack of significant new releases in February combined with the changing landscape of the gaming industry from retail to digital and the aging of current generation consoles, were the primary reasons behind the steep decline.

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Continuously declining video gaming industry

Video game sales remained choppy throughout February, with software and hardware sales declining  by 23% and 18%, respectively. A lack of new games was the primary reason behind the decline in software sales. Though Activision Blizzard’s Call of Duty: Modern Warfare 3 (MW3) was the market leader in February, we believe the lead of MW3 on gaming charts better represents the lack of exciting new games rather than the continuing strength of MW3.

The situation was equally bad in hardware sales. The 18% drop in hardware sales primarily reflected a sharp decline in Nintendo’s Wii sales. Microsoft XBox 360, with  units sales of 426,000 for the month, continues to be the market leader in gaming consoles. We expect the hardware sales figure to improve in March, as the recent launch of Sony PlayStation Vita is expected to improve the hardware sales numbers, going ahead.

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1. NPD Group disclose February video game sales data, Source: Market Watch [↩]