US Videogame Market Sales Fall In January

U.S. sales of packaged videogames fell in January, a rough start for an industry struggling to compete with cheaper games available to consumers on social media sites and their mobile phones.

Sales of new videogame hardware, software and accessories in the U.S. fell 5%, to $1.16 billion in January from $1.22 billion in the year-ago period, despite continued success of Activision Blizzard Inc.'s (ATVI) "Call of Duty: Black Ops," whose sales momentum carried over from the holiday season.

The results Thursday from market research firm NPD Group suggest this could be another tumultuous year for the industry, which suffered as recession-weary customers have sought cheaper ways to be entertained. Sales of online and mobile games have soared as players look to alternative titles from Internet start-ups like Zynga Inc., which are available on smartphones and through social-network websites such as Facebook Inc.

Videogame consoles, were hit hardest, falling 8% to $324 million from $353.7 million a year ago, although individual console market share data are no longer publicly shared by NPD.

Sales of new packaged games also fell, dropping 5% to $576 million from $606.8 million a year ago. "Call of Duty" topped the charts, followed by Ubisoft Entertainment SA's (UBI.FR) "Just Dance 2" for the Nintendo Co. (7974.OK, NTDOY) Wii ranked second, with Electronic Arts Inc.'s (ERTS) sci-fi thriller sequel, "Dead Space 2," ranking third.

NPD results are possibly skewed, however, because the research firm's reporting method includes only retail sales of new packaged games. Used games and mobile app sales, for example, aren't included in these results.

One bright spot has been the market for videogame accessories, which rose 6% to $235.1 million from $222.8 million a year prior. This category includes additional console controllers and prepaid cards that are used to purchase digital content for online games sold through Internet storefronts run by Nintendo, Microsoft Corp. (MSFT) and Sony Corp. (6758.TO).

Accessory sales have also been bolstered recently by the runaway success of Microsoft's "Kinect" motion controller for the Xbox 360. Microsoft said it shipped more than 8 million units over the holidays and that momentum was continuing in the new year.

Sony's "Move" motion controller for the PlayStation 3 was also popular at its launch, potentially providing both companies with new platforms to publish more casual games that have become a cornerstone of Nintendo's success with its Wii motion-controlled videogame console.

-By Ian Sherr, Dow Jones Newswires; 415-439-6455; ian.sherr@dowjones.com

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