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Analyst: July NPD To Decline 22 Percent As Console Price Pressure Mounts

Analyst: July NPD To Decline 22 Percent As Console Price Pressure Mounts

August 10, 2009 | By Leigh Alexander

August 10, 2009 | By Leigh Alexander
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More: Console/PC

Prepare for a fifth consecutive month of NPD declines, warns Wedbush Morgan analyst Michael Pachter. The damage should be a little lessened over June's concussive 31 percent gap, however; Pachter forecasts July to ring in 22 percent lower than the same month in 2008.

But it's not clear that the narrowing decline is any indication that the Summer slump is over. When it comes to hardware, Wedbush estimates sell-through figures in units of 305,000 Wii, 190,000 Xbox 360, and 135,000 PlayStation 3 consoles -- a 36% year-over-year unit decline for July hardware.

This spells a 22 percent decline year to date in hardware sales, according to Pachter, and that means software growth could see a squeeze as the year goes on.

"We think that stagnant sales will force the console manufacturers to consider a price cut," says the analyst, who says that unless Nintendo and Sony cut their hardware prices by October, they're unlikely to achieve their unit forecasts for their respective consoles. Microsoft may wait to see what its rivals do, adds Pachter.

The 2009 decline can be averted and the industry can still achieve flat growth for the year with such hardware price reductions, suggests Pachter. As of June's results, the industry combined is trending 12 percent lower than 2008 overall.

As for software, Pachter expects a 16 percent decrease even though the main period of tough comparisons has largely passed, thanks to "greater seasonality" in Wii software purchases, fewer catalog sales on the year's weak start, and a more hesitant consumer.

The games biz this year continues to be challenged by tough year-over-year-comparisons. Publishers' strategy of releasing the strongest titles during the Christmas season drew scrutiny from gaming audiences, but it's what they put out in the Spring and Summer months -- long-tail blockbusters like Grand Theft Auto IV, Super Smash Bros. Brawl and Metal Gear Solid 4 -- that challenge this year's results now.

But Creutz has also pointed to consumers potentially feeling the recession's pinch, and highlighted weaknesses in the portfolios of several key publishers, such as EA's core slate and Activision's delay of StarCraft II

There's a light at the end of the tunnel, though, according to Pachter. He expects August NPD to welcome a return to monthly software sales growth, and his forecast calls for at least a 30 percent jump in September.

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