The videogame table is set this holiday with souped-up hardware and blockbuster titles. Even so, the important gift-giving season is expected to yield lukewarm sales, industry watchers say.

Global retail sales of game hardware, software and accessories—physical products that can be wrapped and given as gifts—are expected to decline 2.2% to $13.1 billion in the holiday quarter from a year ago, according to SuperData Research Inc. Sales fell 4.7% in 2015 and 6.2% in 2014.

The figures don't include mobile apps, full-game downloads and other digital content, nor do they take into account virtual-reality hardware. Including such goods, sales are expected to rise 6.3% to $35.91 billion, according to SuperData, mostly because of digital products. That is still slower growth than 10% in 2015 and 15% in 2014.

There are several reasons for the ho-hum outlook during the final three months of the year, which analysts estimate account for between 40% and 50% of console-gaming annual revenue. Consoles rank No. 4 on the Consumer Technology Association's annual survey of tech gadgets U.S. adults intend to buy in the coming days, down from No. 1 last year.

The latest console cycle, which typically runs five to seven years, started in 2013. Every year you get further away typically is a worse year for hardware sales, said Mike Olson at investment bank Piper Jaffray & Co. Consumers who want to buy new consoles usually purchase them when they come out, with fewer buying them in the ensuing years.

Sony Corp. and Microsoft Corp. recently released more powerful versions of their PlayStation 4 and Xbox One consoles. But few existing owners are likely to upgrade at this point, analysts said, because the machines work best when paired with pricey 4K televisions. Moreover, first-time buyers will be hard to find because about 65 million PlayStation 4 and Xbox One machines already have been sold world-wide.

Stressing the point: A $60 miniature version of the roughly 30-year-old Nintendo Entertainment System is stealing a good deal of hardware buzz. Nintendo Co.'s new console Switch isn't expected to arrive until March 2017.

High-end virtual-reality headsets, meanwhile, aren't ready for mass adoption, analysts said. There are many sophisticated gadgets this year, "but they may be coming a holiday too soon for the average gamer," said Mike Hickey at investment bank Benchmark Co. LLC.

Microsoft declined to comment. Sony said sales of both PlayStation 4 machines and the PlayStation VR headset are in line with expectations, which the company hasn't disclosed.

Another factor is a sparser slate of big-budget games, said Yoshio Osaki, president of research firm IDG Consulting Inc.

Three of the most hyped games—"Battlefield 1" and "Titanfall 2" from Electronic Arts Inc., and "Call of Duty: Infinite Warfare" from Activision Blizzard Inc.—are in the first-person shooter genre. There was more diversification a year ago, Mr. Osaki noted.

Activision Blizzard, the biggest U.S. videogame maker by market value, told analysts earlier this month that it expects fewer "Infinite Warfare" sales than last year's "Call of Duty: Black Ops III." That was the top-selling game in the U.S. for 2015, according to research firm NPD Group.

Activision Blizzard declined to comment on its holiday outlook. EA said the company is confident heading into the season.

 

(END) Dow Jones Newswires

November 23, 2016 07:25 ET (12:25 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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