Analyst Michael Pachter at Wedbush Morgan has released his preview of the NPD U.S. game charts for November, and is forecasting sales of $785 million, up 12% compared to last year.
The report, arriving ahead of the actual NPD results, which will likely debut after market close on Thursday, December 7, suggests $345 million in sales contribution from new platforms (PS3, Wii, 360, PSP and DS), representing year-over-year growth of $196 million, or 131%. However, current generation software sales, it's suggested, may be $440 million, reflecting year-over-year decrease of $112 million (-20%).
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The company expects November sales to be driven by new releases including Nintendo’s The Legend of Zelda: Twilight Princess (Wii), Square Enix’s Final Fantasy XII (PS2), Microsoft’s Gears of War (360), Take-Two’s GTA: Vice City Stories (PSP), Electronic Arts’ Need for Speed Carbon (360, PS2, Xbox, PC, PSP, GBA, DS, GC, PS3, Wii), Activision’s Call of Duty 3 (PS2, 360, PS3, Xbox, Wii) and Guitar Hero II (PS2), and THQ’s WWE SmackDown vs. Raw 2007 (PS2, 360), along with "a slew of launch title games for the PS3 and Wii." It also notes that 13 games sold over 100,000 units in October, and Wedbush expects 23 in November (compared to 21 last year).
There are two caveats to these estimates. Regarding Xbox 360 game sales, it's particularly noted: "There may be upside to our $125 million estimate for Xbox 360 software sales, particularly if titles like Gears of War sold through more rapidly than we modeled." In addition: "There may be some downside to our initial estimate of $100 million in combined software sales for the PS3 and the Wii, particularly if the "eBay effect" (hardware units sold for resale without accompanying software sales) was as pronounced as the media has speculated."
Overall, Pachter sees plenty of upside here, especially thanks to the new console launches: "PS3 and Wii software sales are expected to contribute $576 million to overall sales growth for the year, helping to drive our estimate for overall 2006 U.S. sales to be at least 4% higher than 2005 levels."
As for hardware, Wedbush states: "Consumers appear willing to purchase compelling content for current generation consoles in spite of the recent launches of the unobtainable PS3 and Wii. Through October, NPD data shows that Xbox 360 hardware sales in the U.S. were 2.9 million units, averaging approximately 250,000 units monthly for the last six months."
Going forward, Pachter comments: "We expect sales of 750,000 Xbox 360 hardware units in November, and between 1.5 – 2 million units in December. Sell through of Xbox 360 hardware could be higher if the supply situation for the PS3 continues to lag Sony’s promised 1.2 million units by year end, with many holiday gift givers likely substituting purchases of the 360 in place of the PS3."
Overall: "The U.S. hardware installed base currently stands at 15 million next generation consoles (including handhelds) as of the end of October 2006 (up from 8 million at year end 2005)."
Finally, looking forward, Pachter comments: "It is important to note that during November, we expect Microsoft and Nintendo products to capture significant market share. Accordingly, our market share forecasts for the U.S. publishers are generally below their performance last year. We expect third party market shares to increase year-over-year in December, with positive sales trends continuing at least through March 2007."
He adds: "It appears to us that all of the U.S. publishers are solidly on track to meet or exceed consensus estimates for the December quarter. We expect the publishers to continue to deliver solid results
through March, and expect to see next generation hardware sell-outs well into next year."
However, a major note of caution is sounded over next-gen console pricing: "Once supply and demand of the PS3 and Wii are in balance (expected some time after April 2007), we think that hardware unit sales will be more modest than they were in the analogous period of 2002, when console prices averaged under $200. In our view, once hardcore gamers have
obtained their next generation consoles, the higher average prices will be an impediment to rapid sell-through, and we expect cycle-to-cycle declines of 10% or more to persist through the summer of 2007."
[Finally, for those wondering how Wedbush's estimates are made: "Our forecast is based upon a combination of channel checks, company press releases and intuition, with the greatest dependence upon intuition. Our channel checks are conducted by visiting a very small slice of the over 25,000 retail stores that carry video games in the U.S. We note that for a given game, a difference of only one unit per store per week could result in a difference of 100,000 units in volume, or $3 – 6 million in retail sales for the month. Therefore, we caution investors to use our estimates as only one data point in a sea of information."]