Pachter: Holiday To See Continued Console Sales Spike

Wedbush Morgan analyst Michael Pachter has released his expectations for the video game industry in the month of December, and among his conclusions is the anticipation that a current spike in console sales led by price cuts and key titles will continue through the end of the year, with Wii sales leading the charge despite the fact that demand is likely to outstrip supply well into next year. Pachter leveraged reports by Sony, Microsoft and Nintendo to point out that overall console sales in the U.S. have been "selling extremely well" thus far in the current holiday season. Looking forward, Pachter said, "While next generation hardware unit sales are more modest than they were in the analogous period of 2002 (when console prices averaged under $200), recent price cuts and new hardware (slim PSP and the 40Gb PS3) and the release of key games (Halo 3 and Guitar Hero III) triggered a spike in hardware sales over the last few months that we believe will continue over the remainder of the year." Pachter pointed out that the U.S. introduction of Sony's 40 GB PS3 its 80 GB price cut, plus Xbox 360's Premium and Elite holiday bundles and increased Wii supplies, led to "robust" Thanksgiving week sales. Microsoft announced sell-through of 310,000 Xbox 360s, Nintendo announced sell-through of 350,000 Wiis, and Sony announced significantly higher sell-through of the PS3: "We estimate 150,000 – 200,000 in unit sales for the week," noted Pachter. He continued, "These figures imply that Microsoft will sell 1.5 million Xbox 360s in December in the U.S., that Nintendo will sell 1.7 million Wiis, and that Sony will sell around 800,000 PS3s. This is about double the number of consoles sold last December, and suggests that the holiday will be a good one for the U.S. publishers." Additionally, said Pachter, better-than-expected PS2 software sales (down only 24% year-to-date compared to the analyst's forecast of down 32%) will drive overall growth well into next year. "We expect next generation console software sales growth to highly correlate to any increase in the rate of PS2 software sales decline," he added. Pachter pointed out that U.S. console software sales are up 26 percent year-to-date, with overall software sales growth (including PC) up 21 percent. "We expect overall sales growth (including PC) to be up 19 percent for the full year, with console/handheld sales coming in around +21 percent and PC software sales down around 3 percent. We are optimistic about software sales through the end of the year." Pachter also commented on speculation about "a redesigned PS2 priced at $99 (from the current $129), with a likely U.S. launch in early 2008 (we note that this new PS2 has already been released in Japan with no price cut). We believe that the lower-priced PS2 will sell at least as well in 2008 as it has in 2007, with sales running at the 4 million unit level next year." He concluded, "Nintendo remains the least promotional of the three hardware manufacturers due to the strength of its Wii, with demand expected to outstrip supply well into next year. We expect supply and demand to be in balance by April, with U.S. Wii sales of around 6 – 6.5 million units per year in 2007 and 2008."