Nintendo Leaves Rivals Feeling Brunt of Recession (Update1)

Dec. 15 (Bloomberg) -- Take away Nintendo Co., and the video-game industry looks like every other consumer business: in a funk.

U.S. sales of games, players and accessories rose 10 percent to $2.91 billion in November, researcher NPD Group Inc. said last week. Nintendo, maker of the Wii console, accounted for almost three-fourths of the growth, leaving the rest of the industry with a gain of 3 percent or less.

The results show Kyoto, Japan-based Nintendo prospering, while the rest of the industry faces a U.S. economy in recession and slumping retail sales. U.S. consumers doubled their purchases of Wii players to 2.04 million last month, while Sony Corp.’s PlayStation 3 declined 19 percent from a year earlier, when a price cut gave sales a lift. Total U.S. retail sales fell 1.8 percent in November, according to the Commerce Department.

“If you’re worried about your job, are you going to buy a $400 PS3?” said Mike Hickey, an analyst for Janco Partners in Greenwood Village, Colorado. “Christmas is not going to have the same glow.”

The Wii, outselling PS3 and Xbox together by almost 2-1, also is having an impact in software. Five of the top 10 titles last month were for the Nintendo player, including “Wii Play” and “Wii Fit,” according to the Dec. 11 report from NPD, a Port Washington, New York-based researcher.

Wii games typically sell for about $10 less than those used on Microsoft Corp.’s Xbox 360, which increased sales 8.6 percent last month, and the PlayStation3, according to Billy Pidgeon, a New York-based analyst with researcher IDC.

Software ‘Challenge’

Nintendo produces about two-thirds of the Wii’s games itself, John Riccitiello, chief executive officer of Electronic Arts Inc., the second-largest game publisher, said on a conference call last week.

“For those that sell leading console games, that’s a challenge, and it’s something we have to contend with,” Riccitiello said.

Redwood City, California-based Electronic Arts cut its full-year forecast on Dec. 9, citing slow holiday sales in North America and Europe.

It was too early to gauge how the economic slump would impact video games, Bobby Kotick, chief executive officer of the largest game publisher, Activision Blizzard Inc., said in a Nov. 10 interview. Ashley Dyer, a spokesman for the Santa Monica, California-based company, didn’t return a call seeking comment.

Nintendo’s Wii sales in November marked a record for any month other than December, Nintendo of America President Reggie Fils-Aime said in an interview last week. Nintendo accounted for more than 70 percent of the industry’s growth, he said.

PS3 ‘Overpriced’

“Certainly that says that companies that are aligned on our platforms, that are bringing compelling experiences on our platforms, are doing well,” Fils-Aime said.

Nintendo rose 5.5 percent to close at 34,800 yen on the Osaka Securities Exchange, paring its loss this year to 48 percent.

The company also is leading in sales of handheld devices. Consumers purchased 1.57 million DS machines last month, up 2.6 percent from a year earlier, according to NPD. Sony’s sales of 421,000 PSP players were down 26 percent from last year.

Microsoft sold 836,000 of its Xbox 360 video-game players last month, up from 770,000 a year earlier, according to NPD. In September, the Redmond, Washington-based company lowered the price of the Xbox 360 Arcade, its least-expensive model, to $199.99 from $279.99. That gave Xbox an advantage over the PlayStation 3 costing double that price, said Hickey.

“The PS3 is too overpriced to penetrate the market we are in today,” Hickey said. The Wii costs $249.99 in the U.S.

Online Sales

Sony, based in Tokyo, said PlayStation 3 sales are up 60 percent for the first 11 months of the year, and that sales last November benefited from a price cut. That caused a “huge uptick,” said spokeswoman Julie Han.

“This year we didn’t have that kind of price move,” Han said in an interview.

Sales of software and online games that allow people in different locations to play together have a key role in Microsoft’s growth, the company has said. More than 14 million people now participate in Microsoft’s online-gaming system.

“We’re confident Xbox 360 will continue to drive record sales around the world this holiday and beyond,” Don Mattrick, senior vice president of Microsoft’s interactive entertainment business, said in a Dec. 11 statement.

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net.