Video games continue performing, but there is one problem

Well, we all know the deal by now. Sony unfortunately is suffering because of pricing. Until the company enacts a deep price cut, it probably will remain in third place. Problem is, it would be very difficult financially to reduce the cost of the PlayStation 3 for consumers. No matter what, though, those who follow the video-game industry will take note that it continues to perform. Hardware sales expanded by 11% while software sales moved up 9% (these are year-over-year comparisons).

However, there is one thing that bothers me: There was some price deflation in February for software titles. The average retail price for games decreased 4%. This is a big issue. Publishers such as Electronic Arts (NASDAQ: ERTS) and Activision Blizzard (NASDAQ: ATVI) are counting on premium prices for their games, since it costs so much to make them. A great game like Call of Duty: World at War might require tens of millions of dollars to produce. Marketing expenses aren't insubstantial, either.

Let's be real, though: The consumer doesn't want to pay $59.99 for a game. And don't just think it's the recession. Even in good times gamers want to pay as little as possible. I always find that strange to some degree. Personally, I understand why video games are pricey. Although I did buy Capcom's Resident Evil 5 at a promotional price last week, I wasn't looking to do so. I just happened to be at a store that was offering a sale on the title. I really don't have a problem putting down $59.99 for a title of that caliber. So I think publishers have to figure out exactly what they need to do to get the word out there: Video games offer a lot of entertainment value, and they need to extract a high premium.

Of course, maybe I'm biased in this opinion. I do, after all, own Activision Blizzard. (I also own Microsoft, but it's not for the Xbox 360.)

I recently wrote about both Activision Blizzard and Nintendo in terms of their potential as investment ideas. One thing's for certain: There's no compelling reason to add Sony to a portfolio of video-game inspired investments. I can't wait til the time comes when Sony is number one for a few months in a row. Actually, will that time ever come? I really don't know.

Disclosure: I own Activision Blizzard, Microsoft; positions can change without notice.