NPD reports July sales that sizzle

NPD Funworld reported a red-hot July for the electronic entertainment industry on Monday. According to industry analysts, year-on-year sales for July were up by 27 percent. The strong numbers, which exceeded analyst projections, were propelled by the trio of NCAA Football 2005, Spider-Man 2, and ESPN NFL 2K5. Those three titles alone made up almost 30 percent of July revenue.

With 10 games in July selling more than 100,000 units, compared to four the previous July, the sharp increase in revenue should come as no surprise. Total sales for July were $350 million, helping year-to-date revenues that track 4.6 percent ahead of last year's sales at this time.

One of the top performers in July was Activision, which experienced a blow-out month due to movie tie-ins. Excellent sales of Spider-Man 2 and Shrek 2 more than trebled its console market share from 4.5 percent to 16 percent. The strength of these two titles, combined with a successful Doom 3 launch, has led the majority of analysts to view Activision as likely to extend its success through the end of the year.

Another company that increased its market share was Take-Two. The choice to release its football game earlier than EA’s Madden--and at a reduced price of $20--paid off handsomely. The sports game reportedly sold 792,000 units in July. Tony Gikas of Piper Jaffray noted, "In our opinion, the incredible strength of ESPN Football 2K5 is surprising and will likely cut into Madden Football 2005 sales at some level."

One disappointing figure of the month was sales of hardware units, which experienced a 7 percent decline--despite Xbox sales increasing by 47 percent due to April price cuts. The drop in unit sales was partially due to shortages of Sony’s PlayStation 2. UBS analyst Michael Wallace is more optimistic for the coming months though, citing software bundles from Nintendo and Microsoft and more inventory from Sony as a catalyst for hardware sales.

With the July figures in hand, analyst estimates for 2004 show a growth range between 7 percent and 15 percent. Their optimism stems from the market’s encouraging year-to-date numbers, as well as a bumper crop of sequels in the coming months. The upcoming releases of Gran Turismo 4, GTA: San Andreas, and Halo 2 should all contribute to a strong finish to 2004.