Slow PlayStation 2 Launch Crimps Video Game Sales

Ending five years of steady growth, video game sales dropped in 2000--dragged down by a glut of old game consoles and a shortage of Sony’s PlayStation 2 system.

Sales of consoles, console games and accessories fell 5.4% last year from their 1999 highs, according to a report being released today by the NPD Group Inc. But as console sales fell, revenues from personal computer games grew 6.7% to $1.6 billion.

It was a psychological setback for an industry that prides itself on revenues that rival those of Hollywood’s box office receipts.

In 1999, the video game industry had hoped to surpass Hollywood. But it was disappointed when holiday blockbusters powered box office receipts beyond $7.4 billion, while the game industry posted just $6.9 billion. Last year, the goal proved ever more elusive as Hollywood pulled in $7.7 billion, compared with $6.5 billion for the video game industry.

Many blamed lower sales on the dearth of PlayStation 2 consoles, which debuted in October at half the volume Sony had initially promised.

“Many shoppers went home disappointed last year,” said Richard Ow, senior account manager at NPD in Port Washington, N.Y. “The industry was very dependent on the PlayStation 2” to drive up sales of software and raise overall hardware sales.

Still, Sony captured 52.2% of new console sales last year, while Nintendo’s N64 garnered 31.1% and Sega’s Dreamcast got 16.2%.

The slowdown is expected to be temporary. This year’s sales will be powered by the introduction of newer, more powerful hardware, including Nintendo’s GameCube and Game Boy Advanced, as well as the much hyped Xbox console from Microsoft Corp. At the same time, Sony has promised to boost production of the PlayStation 2.

“There will definitely be an uptick this year,” said Billy Pidgeon, analyst with Jupiter Research in New York. “This year, hardware will drive software.”