Analyst: Sellout Weekend Prelude To True Next-Gen Battle

In his latest notes on the major next-gen console launch, Lazard Capital Markets analyst Colin Sebastian has said that despite a sold out weekend for both Sony and Nintendo, the real next-gen battle won't begin until 2007. Sebastian's retail channel checks have initially shown that nearly all retailers nationwide have "mostly" sold out of both Sony's PlayStation 3 and Nintendo's Wii, though some retailers have said they expect Wii replenishment as early as later this week. Sebastian has also found that Resistance: Fall of Man and The Legend of Zelda have been the two top-seller titles for each respective system. "We believe sales at video game retailers have improved in early November over October," said Sebastian, "however, the biggest holiday sales weekends are still ahead. We continue to anticipate that both the PS3 and Wii will sell out at retail through the holiday period, and that the real battle for next-generation leadership will be fought in 2007." Sebastian also expects that Xbox 360 will get see a bump this holiday season from shortages of the PS3, with retailers "likely to encourage consumers unable to find PS3 or Wii consoles to consider purchasing an Xbox 360," as well as Epic/Microsoft's recent blockbuster Gears of War, which he notes has seen strong sell-through according to his retailer checks. On a related note, in anticipation of GameStop's third quarter earnings results about to be released, Sebastian believes that the company's earnings could be impacted by the supply restraints of the PlayStation 3. He is quick to add that both a strong launch and fast replenishment of the Nintendo Wii, as well as freely available supplies of the Xbox 360 should "offset the PS3 gap," and that "lower hardware margins and a modest contribution from PS3 software sales" should not have a significant negative impact on GameStop's fourth quarter earnings guidance.