Analyst: CoD: MW2 Could Sell $500 Million Week One, Music Genre Still Challenged

Activision's Call of Duty: Modern Warfare 2 could top $500 million in sales in its first week, and can "easily" sell 10 million units in its launch quarter, says Wedbush Morgan analyst Michael Pachter. The analyst is just one of many predicting a massive, possibly unprecedented launch for the game, and joins retailer GameStop and Activision itself in preparing for a windfall. The publisher will benefit from such big numbers, says the analyst, who believes the long-term success of Activision's other titles isn't quite so assured. "The elephant in the room remains the challenged music category," says Pachter. He estimates that through September, sales of the Guitar Hero franchise totaled $250 million -- "impressive," but about $200 million behind last year's level. "The company sold over $500 million worth of Guitar Hero games in last year’s fourth quarter, and we think it will be challenged to sell much more than $400 million in music games this holiday," the analyst says. A total $650 million in sales is, as Pachter puts it, "nothing to sniff at." But considering that the Guitar Hero franchise last year sold about $1 billion in total, "this year’s likely figure represents a severe decline." That's something of a different take than the one Activision offered on the company's quarterly results call to investors yesterday. CFO Thomas Tippl says this holiday should be a stronger one for the franchise than last year's, while publishing CEO Mike Griffith said that on the Xbox 360 and PlayStation 3 platforms, core users "continue to be very engaged, and in fact, consumer sell-through on these platforms is up 20 percent." But Pachter isolates several factors currently challenging the franchise: "First, the game’s immense success in 2007 and 2008 was due to widespread adoption among the installed base of console owners, and continuing sales reflected a high attach rate among new console purchasers." "As the installed base became more saturated, the share of new Guitar Hero games sold to existing console owners has declined," he says. Additionally, console sales themselves have seen a 12.3 percent year-to-date decline in the U.S -- April through August alone, sales are down 38 percent. "Fewer new console purchasers (particularly in the months leading up to the release of Guitar Hero 5) translated into fewer game sales," says Pachter. Finally, the publisher has discontinued its peripheral bundles, a challenge to year-over-year sales growth. Another challenge to growth for the music game genre in general is the $100 price point at which many packages, like rival The Beatles: Rock Band, retail -- but Pachter reminds that last year, peripheral-bundled music game sets were priced even higher, a boon to last year's revenues: Guitar Hero World Tour debuted at $189, making its current $99 price point look like a deep discount.