Has the Video Game Industry Run Out of Ideas?

Posted by: Michael Arndt on July 30, 2009

With unemployment rising and wages falling, people have cut way back on travel. They’re getting cheap when it comes to their staycations, too.

Nintendo reported on July 30 that sales of its Wii video-game consoles dropped by more than half in its latest quarter, to 2.2 million from 5.2 million a year earlier. The numbers were even worse in the U.S. Unit sales in Nintendo’s fiscal first quarter, which ended June 30, plunged by nearly two thirds to 880,000 from 2.5 million a year earlier. Meantime, rival Sony said unit sales of PlayStation 3 consoles and software tumbled by a third in the quarter.

The profit-deflating declines were worse than expected and followed a report from market-tracker NPD Group that found that year-over-year sales of video games in the U.S. had skidded 29% in June, the fourth consecutive month of falling sales.

Nintendo blamed itself. Though the Japanese video-game maker ranks 5th in BusinessWeek’s 2009 list of the world’s most innovative companies, it acknowledged: “There were fewer blockbuster software titles that briskly drove hardware sales this quarter.” Similarly, Sony—No. 14 on the most innovative list—pinned its sinking PlayStation revenue on the same old lineup.

In other words, the vaunted innovators failed to innovate.

Innovation could still refresh the game industry, however. Or so concludes my BW colleague Aaron Pressman. Analyzing the NPD report, Aaron writes in the Aug. 3 print issue that the sales slump could prove that the game-buying habits of pinched consumers have changed permanently.

But he quotes Todd Greenwald of Signal Hill Capital Group in Baltimore who thinks the declines have been due largely to a lack of gotta-buy games. That will change, he predicts, with big titles coming out before yearend such as Call of Duty: Modern Warfare 2, published by Activision, and a new multiplayer version of Super Mario Bros. from Nintendo. Recession or no, people will pay to play these games.

Nintendo also wagers that gamers aren’t gone for good. It says its fiscal 2010 profit will increase 7.5%, in part because of its new Wii Sports Resort game.

Game over? Maybe not yet.