The video-game industry produced three huge hits last year, including Microsoft's "Halo 2," but sales of consoles and other hardware suffered from supply shortages, according to...

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The video-game industry produced three huge hits last year, including Microsoft’s “Halo 2,” but sales of consoles and other hardware suffered from supply shortages, according to a report released yesterday from research firm The NPD Group.

The Xbox game “Halo 2” sold about 4.2 million units in the U.S. in just two months after its November release, according to NPD. At about $50 each, its total U.S. sales easily topped $200 million.

The game’s success is second only to “Grand Theft Auto: San Andreas,” which sold about 5.1 million units after its October release and was exclusively available on Sony’s PlayStation 2 console.

Those two titles, along with “Madden NFL 2005,” were the only ones to sell more than 3 million units in the U.S. last year, according to NPD. Some analysts said those games created enough demand to buoy overall game prices as the current generation of consoles nears the end of its cycle.

Total U.S. sales for hardware, software and accessories reached almost $9.9 billion last year, down slightly from the almost $10 billion in sales in 2003, a record.

Games for personal computers were not included in the figures and will be released next week, NPD said.

Software sales rose nearly 8 percent over the year, a larger increase than some analysts had expected, while hardware sales fell 5 percent.

The Xbox and PlayStation 2 were in short supply during the holiday season, which contributed to the sales drop, said Doug Lowenstein, chief executive of the Entertainment Software Association, an industry trade group.

“This market continues to grow, and is in fact somewhat understated due to the hardware shortages,” he said. The fact growth is occurring in the twilight of the current console cycle demonstrates the maturity and the resiliency of the industry, he said.

Microsoft, Sony and Nintendo are developing next-generation video-game systems and could begin selling them as early as the next holiday season, although the companies have not confirmed any release dates.

PlayStation 2 titles dominated NPD’s Top 10 sales list, with six games specifically made for Sony’s console. Three titles were for the Xbox, led by “Halo 2.”

Microsoft said recently it has sold 6.3 million copies of “Halo 2” worldwide. The company is expected to shed more light on its holiday Xbox sales next week, when it reports its financial performance for the last three months of 2004.

Only one Nintendo title made it to NPD’s Top 10 list: “Pokémon FireRed” for the Game Boy Advance. The company’s highest-selling GameCube game, “Pokémon Coliseum,” ranked 25th, according to Lowenstein.

In 2003, Nintendo had four titles on NPD’s Top 10 list.

Analysts said yesterday Nintendo had struggled with its strategy throughout the year, which its sales reflected.

“It was definitely not the year of the GameCube,” said analyst David Cole of DFC Intelligence. The momentum shifted when Sony and Microsoft dropped the prices on their systems, he said.

“Throughout the year, the Xbox and PS2 were really clobbering the GameCube,” Cole said. “The Xbox and the PS2 were sold out by Christmas. The only advantage the GameCube had was it was the only system you could find on the shelf.”

Nintendo turned its focus to its handheld players last year, introducing the Nintendo DS and continuing to produce games for the Game Boy Advance. The company said it sold 1.3 million DS systems and 8 million Game Boy Advance players in North America last year.

Nintendo owns the handheld-player market, at least until Sony debuts its PSP later this year. In 2004, portable hardware sales rose 10 percent to $828 million from $751 million in 2003.

“Nintendo has really been trying to clarify its strategy,” said Schelley Olhava, an analyst with IDC. “They are really working to make their brand mature; they’re really working to just figure out where they are.”

Nintendo spokeswoman Perrin Kaplan said the three major video-game companies constantly trade places with each other in yearly Top 10 sales lists. This year, Nintendo games didn’t have the marketing blitzes that “Halo 2” and “Grand Theft Auto: San Andreas” did, she said.

The handheld-player business is growing, and Nintendo has done a good job of reinventing it with each new system release, Kaplan said. “Our console business is healthy, but our portable business is just dynamite,” she said.

Overall, software and hardware sales will likely fall in 2005, Olhava said, but sales of Sony’s PSP and Nintendo’s DS will help lessen the blow to the industry.

She added that she expects game companies to continue to cut the prices of console systems.

Cole said he didn’t expect this year to be as strong a year as 2004 for the industry. Game titles will come down in price, with some debuting for as low as $20.

“It’s kind of the inevitable point in the life cycle,” he said.

Kim Peterson: 206-464-2360 or