The decline of the music genre was almost entirely to blame for September's flat US sales, with Activision's Guitar Hero 5 and EA and MTV's The Beatles: Rock Band both failing to meet lofty expectations at retail.
Analysts and investors were expecting the month of September to show a strong bounce back for videogame sales with double digit growth, but numbers released by the NPD Group yesterday revealed a marginal 5 per cent growth over September 2008.
"We expected far higher sales for the month, as we succumbed to much of the hype surrounding the relatively high-profile launches of The Beatles: Rock Band and Guitar Hero 5," said Wedbush Morgan's Michael Pachter.
"We had expected the former to sell 1.3 million units, and thought that sales of the disc would drive sales of older Rock Band bundles; instead, the game sold fewer than half our estimate, and overall sales came in at $73 million, well below our $140 million estimate.
"Similarly, we thought that the giveaway of a voucher for Guitar Hero Van Halen would have great appeal, and would drive Guitar Hero 5 sales. The game sold fewer than our 700,000 unit estimate, and overall Guitar Hero sales were only $43 million, well below our $75 million unit estimate," he added.
He also said that Activision's music games sales could be down as much as 25 per cent on last year.
The Guitar Hero and Rock Band franchises are going head-to-head in the market while MTV spent unprecedented amounts on securing the rights to The Beatles songs, Activision is attempting to diversify into new genres with the upcoming DJ Hero.
Cowan and Company's Doug Creutz also blamed poor music sales, as well as a disappointing performance from Microsoft's Halo 3: ODST.
"These results lead us to conclude that music genre sales will be down more significantly this year than we had previously expected," he said.
He also lowered software growth expectations for the full year, anticipating a 2.8 per cent decline in games for 2009.
Pachter added that he expected October to see a modest decline in sales, with a full recovery set for November.
"We remain convinced that software sales will rebound to solidly double-digit growth beginning in November, and will remain there each month through August 2010. However, it is likely that investor confidence will continue to be weak until a solid growth pattern emerges," he concluded.