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Analysts Surprised By July's 360 Success, Wii Not A 'Fad'
by Brandon Boyer
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August 24, 2007
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Following the release of NPD's July sales figures, Wedbush Morgan's Michael Pachter and fantasy video game prediction market simExchange expressed surprise at 360's outselling of the PS3, with Pachter saying 360 sales should increase with the warranty issue seemingly "of little concern to consumers."
Said Pachter, who, along with simExchange, had predicted the PS3 to eclipse 360 sales with the former's price cut and the latter's highly publicized red ring warranty issues, "Xbox 360 demand was far stronger than we expected this month, with sales just above those for the PS3. We had expected a decline in demand due to the warranty issue and price competition from Sony. We now expect Xbox 360 sales to increase, as the warranty issue appears to be of little concern to consumers, and the recent price cut should stimulate demand."
simExchange expressed many of the same feelings, adding that "the market overreacted to the leaked upcoming Xbox 360 price drop and the warranty issues as deterrents to July purchases, and saying "given the lifetime unit sales predictions for the Xbox 360 and the PS3, the Xbox 360 will continue outselling the PS3 every month through the holidays."
The Wii was the clear winner in July, though, with some 425,000 units sold in North America, a figure which caused Pachter some confusion. "This increase is inconsistent with reports that Nintendo has had difficulty in increasing its manufacturing capacity," he said, "suggesting to us that the company has diverted supply from other areas (perhaps Japan) to the U.S."
simExchange took the news to be a clear indicator of Nintendo's clear long-term success, saying "The Wii’s stock has always forecast that it will lead the other home consoles this generation. The Wii’s August sales future is currently predicting 433,000 units will be sold this month. This implies momentum will continue through the holidays even up against strong software titles for other systems, including BioShock, Halo 3, and Lair. These forecasts combined with July results indicate the Wii is no fad."
Finally, turning to software, Pachter said he was "a little disappointed" by the month's software figures, "particularly after the strong report by GameStop (+49% in the July quarter, implying that software sales were significantly higher) and Canada’s NPD sales figure (+30% in July)."
He concluded, though, that "while some detractors may consider the next generation cycle off to a poor start, we think that improving hardware and software sales indicate strong demand for the still relatively light software lineup on the next gen consoles, and we believe that once a greater variety of compelling software is released later this year, demand for the new hardware will increase."
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