Recession Spares Gaming Industry, Sales Hit Record High In December

Video game industry managed to put up a good show during 2008, despite a deepening recession and mounting layoffs, according to research firm NPD group.

Video game industry sales increased 9% in December compared to the same period a year ago. According to NPD, the industry raked in $5.29 billion in December, the first time it had ever cleared the $5 billion mark in a single month. This is pretty decent compared to the 2.7% decline witnessed by retail sector as a whole in the month.

Nintendo, which sold 2.15 million Wii consoles and 3.04 million DS handhelds, stood out as a winner in the month.We had a record-breaking sales month, "said Nintendo of North America President Reggie Fils-Aime. Cammie Dunaway, Executive Vice President of sales and marketing at Nintendo of America, stated"Our type of entertainment has now moved to the point where there is no longer a question that if you offer consumers an expanded definition of what a video game can be, and deliver that idea with quality and affordability in mind, millions of new people will start playing video games."

Microsoft (NASDAQ: MSFT) sold 1.44 million Xbox 360s. "December marked the biggest month ever for Microsoft Corp.'s game console", a Microsoft spokesman said.

Sony's (NYSE: SNE) Playstation3, a relatively costlier console, registered a sales of 726,000.

Sales of gaming software saw a respectable growth of 15% in December. "Wii Play" was the best selling game followed by Activision Blizzard Inc.'s "Call of Duty: World at War." Hardware sales rose 2% in the month.

For the full year 2008, video game sales totaled $21.33 billion, up 19% from $17.97 billion in 2007. In November, NPD had projected sales of $22 billion for the entire year. Sales of software hit nearly $11 billion, a 26% jump from 2007.

However, the NPD report made it clear that growth in sales wasn't as evenly distributed and it's not that all video game companies are doing well. The fact that top ten Wii games in 2008 had 44% of the market share very well illustrates the validity of this argument. NPD also admitted that recession is indeed hurting the growth of the industry.

"We get asked a lot why there are so many layoffs and studio closings occurring in the industry when it has just realized another record-breaking year," said Frazier in NPD's release. "This is not a case of the rising tide lifting all boats. The increases are not being enjoyed equally by all manufacturers and publishers."

In mid December, Electronic Arts Inc. (NASDAQ: ERTS), the company best known for titles like "Madden NFL" and "FIFA Soccer" games had announced that it will eliminate 1,000 jobs or 10% of its workforce in an effort to cut costs.

Disclosure: Author does not own any of the stocks discussed here.