UBS Predicts 2006 Video Game Sales Up 3 Percent

Contrary to the general downward trend and dire predictions made by other analysts, Michael Wallace of UBS says that overall game sales in 2006 could rise by 3 percent. However, Wallace warns that, despite the potential for growth, certain game companies still may see declining profits in the new year. "Despite our expectations for slight growth this year, we remain cautious on the industry heading into 2006 due to the transition," Wallace said in a memo to investors. The theory is that demand for games largely transferred from the existing consoles to Xbox's new 360, while Microsoft was unable to produce enough units to successfully transition consumer dollars into the new generation. With new systems expected from Nintendo and Sony in 2006, the effect could intensify. Wallace believes that the PlayStation 3 will be released in Japan in the summer, rather than the spring dates Sony has so far supplied, though he made no mention of the Revolution. Other predictions of Wallace's for the year were lowered estimates for some of the bigger companies, including Electronic Arts and Activision, based on soft December sales falling in the second half of their financial years. "We expect these moves to hurt near-term results," said Wallace. "We also expect both companies to be very conservative with guidance, which could lead to more estimate cuts." Further predictions from analysts for 2006's game market are expected over the next few weeks.