Sales of video game consoles set records in December in the USA, according to recently released figures by market tracker NPD Group. Last month there were no surprises: Nintendo Wii remained on top of the list, Microsoft Xbox 360 came second, whereas Sony PlayStation 3, which showed tangible increase of sales, remained the worst selling new-generation game console.

Nintendo managed to sell 1.35 million of its Nintendo Wii systems in December, which is less than 400 thousand up from November. Given that usually sales of game consoles double in December compared to the previous month, it can be estimated that sales of Wii were strictly limited by supply, which means that the new-generation video game system from Nintendo is more than likely to remain on top in the coming months.

Microsoft succeeded in selling 1.26 million of Xbox 360 game machines last night, an increase of 60% from the previous month, which main indicate that popularity of Microsoft Xbox 360 may face decline soon, as Nintendo Wii and Sony PlayStation 3 become more accepted among gamers in the U.S.

Sony’s PlayStation 3 game console managed to demonstrate 70% sequential growth, which means nearly 798 thousand of systems sold through. While it is evident that the PS3 continues to gain popularity, it is still the worst selling video game system on the new generation in the USA. In fact, even the aging PlayStation 2 was a considerably better seller in December with 1.1 million units acquired by gamers.

Nintendo maintains its leadership the market of portable game consoles with 2.47 million of Nintendo DS sold through, whereas sales of Sony PlayStation Portable increased to 1.06 million of devices acquired by end-users.

In total the video-game industry in the U.S. generated $17.94 billion in sales in 2007, compared with $12.53 billion the year before. Sales of hardware and accessories increased by 54% and 52%, respectively, whereas sales of software grew 36% to $8.64 billion, claims NPD. But analysts from NPD do not expect hardware sales to show considerable increase in 2008 unless manufacturers cut their prices, which means that hardcore gamers have already acquired their new-generation systems and to increase install base developers of video game consoles need to attract mainstream and casual gamers, which are substantially more price-sensitive.

“While I wouldn’t count on similar growth in 2008, I would expect to see 2008 increase over 2007, with more growth [proportionately] coming from software sales. While we will continue to see strong hardware sales, particularly if prices come down again, the spotlight now turns from hardware to software,” said NPD analyst Anita Frazier.

If the analysts from NPD are correct, then in the coming year video system vendors will need to reduce pricing of game consoles to keep sales on high levels and broaden install base of their systems. While Nintendo has been making profit on selling its Wii from day one, Microsoft Corp. and Sony Computer Entertainment Inc. had to work hard to reduce manufacturing costs of their consoles to comfortable levels. The question is whether either of aforementioned companies will be willing to reduce their recommended prices in 2008 in order to solidify the success and increase install base at the price of either further losses on hardware or low profit margins.