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March Video Game Sales Predictably Stronger (SNE, NTDOY, ATVI, ERTS, TTWO)


March video game sales were up 6% over last year, breaking the steep declines in February and January after the holiday season. According to the NPD Group, video game sales hit $1.52 billion for the month.  We saw a +10% jump in video game software sales, significantly better than the +3% gain forecasted. But as expected, hardware sales declined even though prices of consoles like the Sony (SNE) PlayStation 3, Microsoft (MSFT) Xbox and Nintendo (NTDOY) Wii were marked down significantly from 2009.

If you read the March video game sales preview published on two weeks ago, you shouldn’t be surprised by any of the details. We predicted strong sales thanks to easier year-over-year comparisons, and a drop in hardware sales. And the big hits (all of them sequels, as we expected) were predictable: Sony (SNE) made a splash with its highly anticipated sequel God of War III, Japanese video game studio Square Enix made a huge splash with yet Final Fantasy XIII and Activision Blizzard (ATVI) continued to see success from its Call of Duty franchise. Electronic Arts (ERTS) did fairly well also with its latest Tiger Woods golf video game and other seasonal offerings from ERTS stock. Other video game stocks Take Two Interactive (TTWO), Majesco (COOL), THQ Inc. (THQI) and Konami (KNM) were there to pick up the scraps.

Activision’s online video game sales were perhaps the only real stunner, with ATVI stock getting a bump from blowout downloads for Call of Duty: Modern Warfare 2. There was also a bit of excitement on the development front as Nintendo continues to push ahead with ambitious plans to bring video games to the classroom and to implement 3D video game technology, though those pipe dreams had little to do with March video game sales and the bottom line of stocks.

Looking forward, the real story will be whether March sales are enough to lift the earnings of video game stocks that are about to report earnings.

First up is Microsoft (MSFT), a tech juggernaut that’s not really a pure video game stock. However, if you’re willing to comb through filings to find Xbox sales the report hits Wall Street on next Thursday, April 22. The same is true for electronics powerhouse Sony (SNE), which reports a little later on May 10.

Electronic Arts (ERTS) reports in two weeks on May 3, with Activision Blizzard (ATVI) releasing earnings later that week on May 6.

Take Two Interactive (TTWO) just reported March 3 and Gamestop (GME) on March 18, so you can expect a long wait for the next report from either of these video game stocks.

The first-quarter earnings reports will tell us a lot about the video game industry, because a disappointing start to the year may mean a defensive strategy this summer as stocks buckle down and bank on holiday sales at the end of the year. That means staying lean in the short term – and probably not rolling out any flashy new releases.

These companies better hope that gamers don’t notice. Playing it safe can be profitable in the short term, but it sure isn’t a heck of a lot of fun for those of us with video game controllers gripped tightly in our hands.

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