Console video games post continued sales declines in October; lackluster titles a key factor

But compensating for the decline in overall console sales, said Riley, is continued strength in portables. "Last year with only the Game Boy Advance in the market, all portable units were sold for under $100," he remarked, "while this year you have the [Nintendo] DS and [Sony] PSP pulling up the average retail price of portable hardware overall."

How much of the apparent sales decline is due to the industry’s own internal trends, and how much is a factor of the near-term weakening of the US economy ? "I don’t think we can deny that the current economic situation plays a role in the decreased sales we’ve seen over the past two months," NPD’s Riley responded, "but I’m confident that November and December sales will drive the overall industry sales for the year above the record $10.3 billion.

According to a Reuters report, October’s numbers have triggered a split among securities analysts who track game publishers, at least one of whom, from Wedbush Morgan Securities, is predicting a strong holiday rebound, while a UBS analyst predicts final figures for the year overall will show a general, though slight, decline - as little as 1%. NPD’s recent holiday spending survey, said Riley, "showed that consumers are currently planning on spending slightly more this holiday than last, which speaks to their optimism... About a quarter of respondents did say that gas and heating prices would impact their spending decisions, so it’s definitely a factor to be considered."

While it’s still theoretically possible for 2005 to be a record-breaking year for video game retailers, the likelihood of that eventuality might be compared to a generally winning football team that finds itself in the midst of a three-game losing streak. The economy will play a role in determining which way the needle points, said Riley. But the critical factors of inventory availability and publishers adhering to their shipping deadlines - which amateur gamblers could safely bet against this year - must be considered equally. "It’s such a dynamic and rapidly changing industry," Riley added.

So all eyes are on the holiday season for the US economy as a whole, which had been poised for a strong comeback over the previous year, until the hurricanes crisis triggered a sharp rise in oil prices, which in turn triggered an economic speed bump. The key to making a reliable forecast may be the relative strength of the "unselfishness" factor this season. Over the past four years, NPD’s David Riley told us, between 67 percent and 72 percent of console game purchases during the fourth quarter of the year, have been estimated as gifts for someone else, not purchases for oneself. Even though Sony will be battling Microsoft’s new Xbox 360 this season with a PlayStation 2 that analysts say has already saturated the market, if Sony comes up with a price plan, it could stay in the game, especially if that price appeals to as much as three-quarters of customers who aren’t evaluating the console for their own purposes anyway - they may not even be playing the games themselves.

"The Xbox 360 will certainly get many of the earlier adopters that are buying for themselves," said Riley, "but will the other platforms benefit because they’re offered at a more gift-giving friendly price ? The device manufacturers are going to have to work hard to make sure they’re on the top of many a wish-list to win that battle."