Hurt by the recession and few hit game launches, U.S. retail sales of video games dropped sharply in July, showing an even bigger decline than what many analysts were expecting.

Market researcher NPD Group said Thursday that sales of game hardware, software and accessories plunged 29 per cent from the same period last year, to $848.8 million US.

July marked the fifth straight month to show a sales decline this year. Canadian numbers were not yet available. But in June, Canadian and U.S. figures were in lock step with each other, with sales in both countries showing a decline of 31 per cent from the same month the previous year.

On top of that, the drop was steeper than what analysts were looking for. Janco Partners analyst Mike Hickey, for example, had expected a 15 per cent decline. Year-to-date sales were down 14 per cent at the end of July, totalling $8.16 billion US.

"While year-to-date results are weak, there are some big titles set to be released over the next several months, including Madden this month, which should help spur sales," said NPD analyst Anita Frazier in a statement.

Squeezed by the recession, customers are being more selective about what video games they buy, and many are waiting for blockbuster game launches coming later in the year.

They are also hoping for console price cuts. NPD said hardware sales slowed down considerably in July, and analysts attribute much of this to anticipated price cuts for the gaming consoles.

Nintendo DS a top seller

Sales of portable gaming systems and consoles tumbled 37 per cent, to $280.9 million US. The handheld Nintendo DS was by far the month's bestselling system, with 538,900 units sold. It was followed by the Wii with 252,500 units and Microsoft Corp.'s Xbox 360 with 202,900 units. Sony Corp.'s PlayStation 3 sold just 121,800 units.

"We need hardware to turn around or the industry is going to be in trouble," said Wedbush Morgan analyst Michael Pachter. He added that the industry will most definitely turn around, in September, because of huge game launches planned for that month.

But, he added, the trough on the decline "is worse than I thought."

Last year's spring and summer saw the launch of blockbuster games like Wii Fit and Grand Theft Auto IV. In comparison, the first half of 2009 has been unusually slow when it comes to top-flight game launches. Combined with the recession, the retail games industry is not doing too well.

But Frazier said the year should pick up with the arrival of games such as The Beatles: Rock Band, and new versions of the Halo and Call of Duty franchises.

July's software sales fell 26 per cent to $437 million US. The No. 1 game was Nintendo's Wii Sports Resort, followed in No. 2 and No. 3 by Electronic Arts Inc.'s NCAA Football 10 for the Xbox 360 and the PlayStation 3, respectively.

Wii Fit, which launched in May 2008, and Mario Kart from April 2008, rounded out the top five.