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Video game industry finally sees a rebound

After months of decline, industry has something to smile about with 6 percent year-over-year sales increase. Hardware revenues continue to dive.

For the first time in months, video game industry executives can exhale.

That's because, according to industry analyst The NPD Group, the video games business as a whole saw a 6 percent year-over-year increase in March, and turned in the third-best nonholiday period month on record. Industry sales had been down 14 percent and 13 percent, year-over-year, in February and January, respectively.

But not all the news was good. While revenues for video game software and accessories were up significantly in March, hardware revenues took a hit.

For the month, the industry posted total sales of $1.52 billion, up 6 percent from $1.44 billion. On the software side, sales were $875.3 million, up 10 percent from $795 million a year earlier. But hardware sales came in at just $440.5 million, down 4 percent from $457.1 million in March, 2009.

A major reason for the dollar decline in hardware, said NPD analyst Anita Frazier in a written report Thursday, was that average prices for video game console hardware were down 16 percent nationwide, putting significant pressure on revenues.

Prices for software were flat in March, Frazier reported.

As has been the case the majority of the time, Nintendo dominated hardware sales. Its Wii console sold 557,500 units in March, while Microsoft's Xbox and Sony's PlayStation 3 were essentially neck-and-neck with sales of 338,400 units and 313,900 units respectively. Nintendo's suite of DS handheld gaming machines was the top-seller for the month, moving a total of 700,000units.

But one sign that things in the video game industry might be shifting is the list of the top 10 best-selling games in March. In past months, that list has been dominated by Wii and Xbox titles. But last month, four of the top 10 were for the PS3--including God of War III, the top seller, with 1.1 million units sold--and both the Wii and the Xbox had just two on the list. Nintendo DS games accounted for the other two titles.

All in all, it's hard to read how the industry did in March. There's little doubt that revenue gains across the board and particularly in software are a good thing, especially when you consider that software sales generally surpass those of hardware by a significant amount. Still, even software sales are down 5 percent for the year to date from 2009, and that's not a good sign of recovery.