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January video game sales among the ugliest in recent memory

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Still the king.

To say the video game industry stumbled out of the gate in 2012 would be exceedingly kind.

January software sales, which are the most closely watched figure by investors, were down 34 percent - the biggest percentage drop in more than 2 years — to $750.6 million. That's more than $389 million less than a year ago.

Hardware sales plunged a shocking 38 percent to $195.5 million.

Analysts had expected a bad month, but nothing like this. The consensus on Wall Street was the industry was facing a 12 to 20 percent decline, due to the lack of any major releases in January.

That lack of new titles resulted in the best seller's list looking a lot like it did in December. Call of Duty: Modern Warfare 3 continues to outsell all other titles, followed by Just Dance 3 and Elder Scrolls V: Skyrim.

[ Related: Activision slows 'World of Warcraft' declines ]

What's likely to worry investors is that the ugly January numbers follow a very disappointing December. Game sales fell off a cliff as the holiday drew close, resulting in a surprise 8 percent decline at the end of 2011.  That decline, for now at least, appears to be a freefall.

"While the lack of new launches was a major reason for software declines, games which launched in Q4'11 also performed poorly in Jan'12, down 31% in units compared to Q4'10 launches in Jan'11," said  NPD analyst Liam Callahan. "As shoppers were not drawn to stores due to new launch activity, this potentially impacted additional software purchases made on impulse."

February could slow the decline, but isn't likely to stop it. Titles like Twisted Metal, Kingdoms of Amalur: Reckoning and SSX should sell well, but none has "blockbuster" written on it. And while the launch of the PS Vita could bring a short term sales bump, analysts are worried about its longevity.

For the year, though, there's still cause for guarded optimism. Several big titles are due this year, including (perhaps) a new Grand Theft Auto. And that has some industry watchers less concerned.

"While we expect a January decline, we think that things will begin to pick up in the next few months as several high-profile games are scheduled for launch in the first half of the year," said Michael Pachter of Wedbush Securities in the days before the numbers were released.

As for January, here's how the 10 top-selling games shook out:

Rank Title Publisher
1 Call of Duty: Modern Warfare 3 Activision Blizzzard
2 Just Dance 3 Ubisoft
3 Elder Scrolls V: Skyrim Bethesda Softworks
4 NBA 2K12 Take 2 Interactive
5 Battlefield 3 Electronic Arts
6 Madden NFL 12 Electronic Arts
7 Mario Kart 7 Nintendo
8 Skylanders: Spyro's Adventure Activision Blizzzard
9 Zumba Fitness 2: Party Yourself Majesco
10 Saints Row: TheThird THQ

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