Analyst sees "hellish" holiday season ahead

Industry analysts at Wedbush Morgan predict a Christmas "disaster" for console publishers off the A-list.

by

Financial analysts Wedbush Morgan Securities issued its annual preholiday season report for investors in the console game business today. The analysts covering the game sector at Wedbush predict a make-or-break Christmas for game publishers. Their research finds that the holiday sales will be dominated by a handful of million-selling games and that any publisher without one of those games in its lineup will "suffer."

The report, titled "The Nightmare Before Christmas: Hellish Holiday Lineup of New Video Games Could Spell Disaster for Many Publishers," calls this year's console lineup "the most formidable...ever released in a single year."

The 11 console titles--all sequels--that the research predicts will sell more than 1 million units each and will dominate holiday sales are as follows:

•Grand Theft Auto: San Andreas (Take-Two, PS2)
•Halo 2 (Microsoft, Xbox)
•Madden NFL 2005 (Electronic Arts, PS2)
•Need for Speed Underground 2 (Electronic Arts, PS2)
•Gran Turismo 4 (SCEA, PS2)
•Spider-Man 2 (Activision, PS2)
•Tony Hawk's Underground 2 (Activision, PS2)
•Pokémon LeafGreen (Nintendo, GBA)
•Pokémon FireRed (Nintendo, GBA)
•Metal Gear Solid 3 (Konami, PS2)
•Mortal Kombat: Deception (Midway, PS2)

Wedbush Morgan predicts that during 2004, 218 million pieces of software will be sold in total, skewed such that an astonishing 114 million of them will be moved during the final three months of the year. In addition, the report closes with in-depth looks at six of the major third-party publishers and recommendations for investors (giving a "Buy" rating to Take-Two, Activision, Atari, and Electronic Arts and a "Hold" rating to Midway and THQ).

While today's report focused on the console and handheld sectors, the document briefly alluded to three PC games thought capable of driving sales of a million or more before the end of the calendar year. Those would be Doom 3 (Activision), the upcoming The Sims 2.0 (Electronic Arts), and "November’s" release of Half-Life 2 (VU Games). "We expect the total unit sales for the 11 console/handheld million unit SKUs plus the three PC million unit SKUs to exceed 30 million units in calendar 2004," said Wedbush analysts Michael Pachter and Edward Woo in today's report.

Discussion