Michael Pachter, Wedbush Morgan Securities

How each platform will fare this holiday season: The Wii should continue to sell out. Nintendo shipped around 2.9 million to the U.S. last holiday, and they were sold out within hours of arriving at retail. This year, they indicated a substantial increase in shipments. Therefore, we're assuming that 50 percent more Wii consoles, or around 4.4 million, will arrive in U.S. stores this holiday season.

Although it may take a day or two for them to sell out, it's inconceivable to me that they would gather dust on the shelves. The Wii remains affordable for many, and quite fun, so I think that Nintendo "wins" the console war this holiday.

The PS3 remains the most expensive of the three, with an entry point at $399. This is a lot of money to most people, and the Blu-ray feature, while valuable, has appeal only to those households with HDTV. That's only around 35 percent of households.

Although I expect an increase in PS3 sales year-over-year, I don't think it will be dramatic. Last holiday, Sony sold 1.4 million PS3s from October through December. This year, I think that the number could be 2.1 million or so, but still well behind Wii sales.

The Xbox 360 benefits from both an across-the-board price cut and from a pretty strong holiday lineup. With last year's Halo 3 launch, Microsoft had a decent holiday, selling 2.4 million boxes.

I don't think that this number will be up dramatically, probably to only 3 million this holiday, but Microsoft should be comfortably in second place. Gears of War 2 and Fable 2 should move a few boxes, and the Arcade lineup is very strong. I think that if they market the Arcade version of the 360 aggressively, they'll capture some value-conscious consumers.

Also, Microsoft is launching in November an update to the Dashboard, which includes Netflix's "Watch Instantly" feature. I think there are a bunch of Netflix customers who are on the fence about a console, and the ability to stream 14,000 movies to their TV sets could convince them to buy an Xbox 360 this holiday.

On the handheld side, last year, Nintendo sold almost 4.5 million DS hardware units at holiday. I would bet that this figure will be flat, at best, unless there is a price cut before holiday. If there is a price cut, sales should grow by 10 to 20 percent.

The PSP is likely to perform a bit better than last year's 1.9 million units, with the redesign and a decent games line-up driving sales higher, probably by 10 to 20 percent.

Titles which will be hits, and which will be misses:

LittleBigPlanet, Dead Space, Gears of War 2, Fallout 3, Left 4 Dead, SOCOM: U.S. Navy SEALs Confrontation, Call of Duty: World at War, Guitar Hero World Tour, Rock Band 2, WWE SmackDown vs. Raw 2009, Far Cry 2, Prince of Persia, James Bond: Quantum of Solace, Resistance 2, Need for Speed Undercover, Mirror's Edge all will sell enough to be considered hits.

One or more of them will break out, the way last year's Call of Duty 4 and Assassin's Creed did, and it's tough to pick those. My guess is that Gears of War 2 will surprise, as will Mirror's Edge.

Microsoft/Epic's Gears of War 2

I'd say that the worst positioned are Midnight Club: Los Angeles (coming out in front of Need for Speed Undercover), Shaun White Snowboarding (the Wii version will do well, but is constrained by Wii Fit boards; the PS3 and 360 versions are not positioned well), Tomb Raider Underworld (a great franchise, but flying under the radar this holiday), and (waits for the slams from Gamasutra readers...) Animal Crossing: City Folk.

The last is a great franchise, but the Wii audience is dominated by the mass-market audience, and Animal Crossing is somewhat more hardcore than most Nintendo titles. I think that the game will do very well, but will likely be disappointing, relative to expectations.

[UPDATE: Michael Pachter has asked us to add the following addendum to his remarks: "When I commented on the likelihood of Midnight Club: Los Angeles being a disappointment launching in front of Need for Speed Undercover, I assumed (wrongly) that NFS would get solid ratings (it got 60s), and that MC would get fair ratings (it got solid 80s). Given the juxtaposition in their ratings, I now think that Midnight Club will perform in line with expectations."]

How the industry will fare this holiday season:

There are two types of buyers at holiday: those who purchase games for themselves, and those who buy games as a gift. The former category should be largely insulated from an economic downturn, given that purchases for self-consumption require a certain level of self-indulgence, and it's easy to rationalize why a game purchase has lasting value.

The latter category can be further split into two constituencies: those who are well-off (upper middle class) and are able to substitute games for a more expensive activity, and those who are less well-off (middle class or lower).

The prices of consoles leads us to conclude that the first constituency is probably larger than the second, as it is more likely that upper middle class families were the first buyers of DS, Wii, PS3, PSP, and Xbox 360.

The second constituency is the one most severely affected by a recession, and I think that this group will trim purchases of games at holiday.

My guess is that this group represents 20 percent of all games purchased, and will likely reduce spending by 10 to 25 percent, meaning that we will see a two to five percent hit for video game sales this holiday.

However, the industry was tracking to grow by 15 to 20 percent at holiday, so the two to five percent hit should result in lowered growth, not a decline. Adding the numbers together, we should end up at 10 to 18% holiday sales growth, [which is] still quite robust.

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