Pachter: Industry Could Show Negative 2005 Growth

Following the clearly undersupplied North American launch of the Xbox 360, and taking additional factors into account, influential video game industry analyst Michael Pachter of Wedbush Morgan has released a memo querying whether the video game software business will show 2005 growth. As recently as early September, Pachter had predicted that the launch of Microsoft's Xbox 360 in late November will provide a small boost for that month and a large one for December, enough to put console game sales for the year 9 percent over 2005's. However, Pachter's new note makes his skepticism clear, as he comments: "Recent lower than expected reviews of key holiday releases, a supply shortage of Xbox 360 units, price cuts on several new games, the lack of a price cut on current generation hardware, and a weak consumer environment leaves us questioning whether sales will rebound sufficiently to drive growth for the full year." Pachter is also estimating that 1 million Xbox 360s will reach North American shelves by the end of the year, down from his previous estimate of 1.5 million. Given that game sales are currently down 2 percent for the year, compared to Wedbush Morgan's previous 6 percent increase estimates, and Xbox 360 mania is likely demotivating many buyers in making purchase choices for current-gen titles, the analyst's concerns are well worth considering.