Wedbush Morgan senior analyst Michael Pachter wasted no time in alerting the industry to his outlook of the remaining 39 days of 2005.
"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 wrote in a memo to investors today.
This on the heels of the high drama surrounding the launch of the Xbox 360. Talk about popping the collective game industry's bubble.
Earlier in the year, Pachter was the company of analysts who saw year-on-year revenue growth that hovered somewhere around 10 percent. Then last month, he bumped that growth estimate to positive 6 percent. But now, given Pachter's latest round of number crunching, growth of any kind may be in jeopardy.
"Total US video game software sales year-to-date are down 2 percent compared to last year," Pachter stated, "and significantly lower than our up 6 percent estimate."
Drilling down to the company-by-company forecast, the analyst said he did not see "significant risk" of preannouncement or weaker-than-expected results for the publishers his firm covers. However, he did reiterate that even on this granular level, "we are no longer confident that we will see significant upside to results."
Bullet-pointing his assessment, Pachter sees the following four major influences that are turning the retail skies bleak: the early discounting of software prices at retail (which indicates softer demand on the part of buyers); a "pattern of lackluster reviews" for games he had thought would have netted better review scores; the no-show price cut for the PS2--something Pachter had anticipated; and his new, reworked estimate for Xbox 360s he sees Microsoft getting to market. Pachter is now forecasting only 1 million units reaching the channel before the end of the year, down from previous estimates of 1.5 million.
"This [Xbox 360] shortfall alone could cause a shift in holiday software sales from positive to negative territory."
In conclusion, Pachter said he saw little likelihood of a positive catalyst significantly impacting the industry's cash flow over the next five weeks. Any light at the end of the tunnel, according to Pachter, burns with the intensity of a single match, if even that.
An opportunity he does address is one that may appear should the share price of game stocks go even lower than they are now. "We would opportunistically add to positions in Activision, Atari, Electronic Arts, GameStop, and THQ," he said. "Particularly should any of these five stocks decline in value before year-end."
Negative Growth? Oxy-moron?
There shouldnt be any concern about a recession, because next year when the PS3 and Revolution come out there will be a drop in prices, and a boom in consuming, plus PS2 and XBOX will be able to be bought for next to nothin (Gamecube can already be purchased at this price), this stuff happens with each console release, I remember when Nintendo w/ the power pad was $199, and was sold out everywhere, because I wanted one for Christmas, because it had no competition. History repeats itself over and over.
Microsoft is not the only reason games are doing so poorly this year. There were other reasons listed, and I agree with them. The games released recently on other consoles have gotten poor reviews and aren't selling (PSP GTA anyone ?) and the anticipated price drop on the ps2 won't come, so there you go. Yes MS has their share in this, but it's not only them.
MS may have shot their selfs in the foot, if this proves to be true.
" microsoft is a bunch of idiots!!!!!!! ps3 will rule" ZOMGZ BCUZ MICRLSFT IS DOIANWG PWORRLY IN THERR FURST WEEK OF CONSLOES TEHY FAIL. PE.SS.THRREEE FTW. Please, contribute a little bit more than that. At least that way you won't look like a complete moron. In any case, Microsoft clrearly had a good plan for their World Wide release, put out a semi-large shipment to whet the mouths of even the most rabid of video game enthusiasts, just to get the console out there, while still producing more consoles for the next wave of consoles, to keep meeting the needs of the consumer. Get the media's attention by having them realize "oh hay, this happened four years ago with the PS2! Shortages will abound! The gaming industry will crash if this doesn't make it to store shelves quickly!" inducing a greater hype for people to buy the console. (while attracting those who go and put them up on eBay to sell for thousands of dollars). Then, when the next wave comes out, the console will become more popular, and those walking away empty handed will frown and, again, look elsewhere. In the end, the whole scaling of shipments will help Microsoft out by producing enough consoles in the long run to effectively supply enough people in the market to get their product out and tried by gamers and non-gamers alike, sense there will be a certain unknown factor to the console, like, "Wow! Is that an Xbox 360?! You got one before christmas! Holy crap!" Another thing that has been good about Microsoft's launch is that they've been able to put out fairly strong games. When everyone first heard the launch line-up many where scared, or, at least, concerned with how terrible it looked, many were stating that PD:Z and PGR3 were going to be the only good games for the system. But then games like Condemned, Kameo, and Need For Speed sort of rose from the ashes and all those poor preconcieved notions and came away with fairly high scores. When I heard Gates say that MS had the best launch line-up ever, I quickly thought to myself, "Not if you're seeing the same game line-up I am," but after getting my hands on some of them, I can see where that notion would be percieved. Best line up ever? Nah, probably not, but it is a pretty strong line-up, and why wouldn't Gates want to take that word further and say it was the "Best" even if it's just propaganda? It's not really hurting anyone. In all, I think the fiscal year will finish strong (and the fiscal year for individual companies may end in May, but as for the average of them all, they generally lump them all together before the first of the year), maybe breaking even with last year, and I don't really expect it to be much higher than breaking even, but even if there is negitive growth, there are definitely more promising games starting off quickly within the next year, so there doesn't really appear to be much of a depression or recession for the game industry within the next year.
Please stop quoting Michael Pachter re: his opinion on ANYTHING. Have a 5 minute conversation with him, and you'll figure out why for yourself.
microsoft is a bunch of idiots!!!!!!! ps3 will rule
Hats off to MS for releasing the Xbox360 to shortages. What that means to the real committed gamer is that, with his gamer savvy, he pre-ordered 3-4 Xbox360s, stood in line at BestBuy and had his buddy stand in line at Wal-Mart. Now, with 5-6 Xbox360s to his name, he is making a $500+ return on the ones he sells on Ebay, and enjoying the launch games, even if there is no killer app, because he is paying for them with other peoples' money. From my perspective, there has never been a console release that has targetted the committed gamer more than this one. If only I had that much capital lying around at the time, I would have done the same thing :) Exaspenite - you make a point that really concerns me... rising development costs. With all the emphasis on pixel shading, multiple textures, and anti-aliasing, people sometimes lose sight of what really makes a game good.. GAMEPLAY. Rising development costs leaves less room for innovation, because companies are wary of releasing something that isn't a tried and true formula for solid returns. So, while I question Nintendo sometimes, part of me really hopes the Revolution is revolutionary and breathes some life back into the game industry. A lot of the "Killer Apps" in recent years are just mediocre to me... H2, GTA:SA, even MGS3to a point - they all just do the same things over again, but with shinier graphics and bigger maps. There was a time when I thought games would become another medium for serious artists and great storytellers (see - Planescape: Torment), but I'm worried that time may have passed.
Neuro, Vegeta, spot on, i replied lengthly in the peter moore interview string, i also remember the ps2 launch, that was bad, wot made it worse was the millions of japs who were playin on it 8mnths BEFORE US!!!!! Microsoft r prob strugling cos there releasing world wide instead of keeping them just to there own country like sony sega blah blah blah for mnths on end, so good on ya bill, and like ive said b4, if my xbox can play doom3 far cry and half life2 i cant wait to see wot 360 can play in 4yrs ;) Anaylists r pants, hes allrdy got his figures wrong this yr, he prob does every yr. (and for ur info, im not a microsoft fan, but there treatin us a hole lot better than sony did on ps2 launch day)
Exactly, a bit of a "shortfall" (as the article puts it) in Xbox 360 consoles doesn't make much of a difference in the long-term, as long as M$ gets its units out eventually (which it will). The problem is that, at least in the short term, the shortfall is causing a deficiency of 500,000 x 2-3 (however many launch titles X360 owners would buy otherwise) units for the small window left in the fiscal year. Granted, in the big scheme of things, a 1-1.5 million software unit deficiency isn't nearly enough to account for the ~6% error in predicted growth which Pachter is talking about -- but it certainly doesn't help. What he *should* have pointed out instead as the X-factor, however, was the relative lack of AAA titles this year compared to last: No MGS3, and no GTA: San Andreas or Halo 2 (the best-selling titles ever for the Playstation2 and Xbox, respectively). San Andreas and Halo 2 alone accounted for 12 million and 7 million in sales (though some of that carried over to this year). But you can bet that if GTA: Next had come out, we'd be seeing everyone's growth expectations being met for the year --- and then some, since the franchise sells like hotcakes. In any case, lack of growth in the final year of the current-gen before the next-gen shouldn't surprise anyone: in fact, the lack of any sharp drop in sales indicates to me that the current-gen market is still pretty healthy and viable. It seems like M$, $ony, and Nintendo may be jumping the gun by a year, even. But short-term revenue revisions shouldn't concern (or interest) anyone in the industry too much. What's more concerning is whether growth, especially in profits (and not deceptive revenue figures), is sustainable next year with the 20% inflation on most retail prices (from $50 to $60) and skyrocketing development costs on entirely new platforms: People tend to conveniently forget that multicore, concurrent-thread development has never been done before in the three decade history of computing.
no crap Neurothustra... god forbid if you have to wait 7-10 more. Everyone forgets that Sony totally dropped the ball for the PS2 launch and they had all the time in the world with the DC already dead.
interesting how the MS bashing begins immediately (the oft preferred term is"screwed up"). And what exactly did they do wrong? Peter Moore: "Our goal is to replenish inventory in the channel every week," Moore said. "So lots of Xbox 360s are flowing in every single week. It's not like we're shipping in and then going dry for two or three weeks." So just because everyone is screaming that the sky is falling because they can't have their X260 first, MS is "screwing up" the 2005 gaming industry cycle? Looks like the Microsoft Defamatory League is in full effect around here.
Sales may be down during the holidays, but a friend of mine that is manager of Walmart;he sais that right after Christmas the X-box will begin to hit stores by the thousands,its just stupid that at this point the most the store has had is 18 and they sold out in less then 30 minutes.
Blake -gripling has a point. However, I believe Sony has already stated that they will cut the price to $99 later this year. Sales will improve in 2006, but probably during the summer.
critics and analysts suck
Nintendo saved the gaming world in '85 and will do it again in '06. Also, with Zelda and Halo 3 coming out in 2006...WE'RE SAVED!!! Happy Thanksgiving everyone.
Wow, someone found an analyst who thinks a particular market will be dismal next year. I bet that was hard. :p Anyway, if anything contributes to the decline of people buying new games, it's World of Warcraft. :) The new shopping season for games will be just before the expansion comes out. After that, it's like releasing a movie against Lord of Rings.
I forsee this just leading to an amazing year n 2006. I think a lot of people see the next gen of console gaming as being awfully expensive and may be saving up for the X-Box360, PS3 and Revolution. Its not like coming up with $500-$600 is easy for most. I imagine that the early part of next year will see a nice rebound from the down holiday season. It does seem like there is a lack of truly hyped and amazing games for this holiday season.
Of course sales are down , i mean I couldn't go buy an Xbox 360 no matter how hard i went around town looking right now.. The stores didn't even have enough for the people in line at midnight. Preorders are going up to the third and fourth shipments. Microsoft can't expect to have good sales if they don't make enough of their product. period.
I have anticipated this , As I said before : It is an apocolypse within itself. I can understand that there will be bugs and whatnot but the way people have been acting towards this is horrible. The other thing that worries me is the assault of a 17-year old boy for the console , He suffered minor face injuries. Video games are my life and everything but this is just a console people. It makes me sick really.
2005 fiscal year finishes in may 2006.
TBH Sony will do the same, remember the ps2 demand and people paying rediculous amounts of money just to get one because of short supply.
[This message was deleted at the request of the original poster]
Shame Microsoft, shame!
who cares
Doesn't this just tell us that his predictions suck..
Sony is screwing if they dont cut the PS2 price. mine broke 1st after a year of the purchase, and then after repair, it definitely broke. my ps2 only lasted 2 years. 1st anniversary it broke, 2nd it FINALLY broke REALLY good. thats the story of my ps2. (btw i took care of my ps2 in one of the most perfect ways you could imagine and it STILL broke) im not getting a "god-loving" NEW PS2 at full price given the circumstances (i have the money. thats not the prob as youve guessed ) so , Sony, thanks for screwing soooo smoooth with my ps2. it even gave me a DRE present the 1st anniversary. the very first. it also came with a "replace lens" note. so you better make something up for this cuz im SURE this same thing happened to a lot other people. no price cut is like giving us a big middle finger.
actually mrhoohex, gamespot at first had typed '2004' and '04', but they changed it before you had looked at it, so the first poster is not a "nub".
Crap..I'm already making an E.T. game...I guess I will stop it. And make Dynasty Warrior 67.
1st poster is nub? its 2005 now...
nah somehow i dont think sony will screw up. well......... if they do i dont think it will be as bad as MS did.
haha, cant wait for more humilitation when x360 sells in Europe and Asia..
But will Sony screw up too?
To claim someone doesn't "know their stuff" because they have not contributed to game development is ridiculous. The job of a critic is to tell others what their opinion of a product is...if you can't respect someone else's opinion for what it is, that's not their fault, it's yours. Many gamers in general, let alone game journalists, have been playing video and computer games for 2-3 decades and have come to "know their stuff" well enough to convey basic pros and cons to others. Take reviews for what they are...if I take a bite out of something and tell my friend it tastes like crap, and he ends up liking it, that doesn't make me wrong. The reviewers aren't ruining your experience...you're ruining it for yourself by continuing to put too much stock in them when you've learned from past experiences that you have different tastes then certain editors.
KonCusShen: I couldn't agree with you more. I've long said that "gaming journalists" are the most jaded, arrogant, and verbose jerks around--and they are like vultures who feed off other's creativity while contributing NOTHING to the art. I find it hilarious that they have the audacity to critique things like technical prowess when few, if any, of them have ever contributed to the development of a game. It's unfortunate that some of the best in games have curtailed shelf-lives due to one person's opinion of a game. Now if Cliffy B. or Michel Ancel or another high-profile developer were to start writing reviews (people who know their stuff) then I might change my mind.
interesting how stock prices and industry morale is often times influenced by one dipsh** who doesn't know very much about potential prospects and video game cycles.
how is it the wrong year? are we not in the last 40 or so days of the year 2005? and is christmas gonna come up soon? hmmm. and if game sales go down then that means there will be less high budget games, because the general market will go down. maybe analysts suck, but i bet if he said the 360 was gonna help profits, you would praise him for being a genious.
um of course its down when you dont have a halo 2 or a new gta game coming out liek last year
At least he's right about one thing. These ridiculously knit-picky reviews are ruinning our gaming experience and all from people who haven't even made any real contribution to the art. I wouldn't take fitness advice from most of these fat reviewers, far less gaming advice!
Gee, like we didn't see this one coming. Oh come on, at one point in time you knew MS would have had to screw up.
Oh nooooo! Everybody freak out! It's going to be another games industry crash like the early eighties. Somebody better not be developing another E.T. game.
More like Xbox 360 everyday!
Nice find islandkiwi.
ha PS3 all day every day
Analysts. I tell you, I'm in the wrong line of work. If only I could get paid gobs of cash to speculate on the results of my morning bowel movements.
I blame Microsoft for causing the Xbox shortage. They have single handedly murdered Christmas. :P
Ahahaha. Nice eyes.
what are we in a time machine?
Um...first sentence, wrong year.