• Los Angeles Times, Friday, June 12, 2009 3:15 PM

The video game industry in May failed to top $1 billion in sales for the first time since August 2007, providing yet more evidence that the industry is far from immune to the economic recession. According to market research firm NPD Group, total sales reached $863.3 million for the month. Console sales were particularly disappointing, dropping 30% to $302.5 million from $433 million in May 2008. Sales of Nintendo's Wii dropped by more than half, according to the report.

"The hardware decline is the most troubling," said Wedbush Morgan Securities analyst Michael Pachter, "because that sets us up for bad performance overall in the industry going forward." Nintendo sold 289,500 Wiis, while Microsoft Corp. sold 175,000 Xbox 360s and Sony Corp. sold 131,000 PlayStation 3s.

Pachter suggested that one possible explanation for sluggish hardware sales is the fact that consumers have been trained to anticipate price cuts. Right now, the PS3 sells for $400, the Wii sells for $250 (the same price when Nintendo launched the console 2.5 years ago), and the Xbox 360 sells for $200. None of the companies have indicated that price cuts will be forthcoming. "Consumers have been trained to expect price cuts," Pachter said. "Each month we go without a price cut, more people will hold out and sales will continue to drop."

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