Analysts unfazed by slumping game sales

Halo effect blamed for September's declines; optimism abounds regarding October figures.

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The NPD Group yesterday released its September US retail-sales figures, showing what it called "the first true monthly decline the industry has experienced since March of 2006." Despite that news, and despite the ongoing global economic crisis, game-industry analysts were relatively unconcerned today about the slump in sales.

"While overall sales growth was negative, implying that the consumer is beginning to feel the effects of the economic downturn, it was above most expectations, with solid hardware sales implying continued software-sales strength through the holidays," noted Wedbush Morgan Securities' Michael Pachter. "We expect October software sales to be solidly higher than last year's, and believe that any perceptions of consumer weakness caused by the September data will be reversed next month."

Pachter said that last September's launch of Halo 3 comprised a whopping $226 million of that month's US retail game revenues. If one were to take Halo 3 sales out of the mix, last month's gaming total would have been up 43 percent, according to Pachter.

Evan Wilson of Pacific Crest Securities also addressed the gap in the market caused by Halo's absence this year.

"The Halo impact was not as dire as many forecast," Wilson noted. "Gauging Halo 3's impact is more complex than totaling its sales, because it drove new hardware sales and a modest pickup in other games' sales."

Wilson and Pachter both pointed out that the gaming industry is better prepared to weather an economic slowdown than other industries. Pachter reiterated his belief that the gaming industry is "highly recession resistant," and suggested that October would see a return to year-over-year growth.

Pachter was by no means alone in that assessment. Lazard Capital Markets' Colin Sebastian also said the current month's sales would stop the shrinking trend before it starts.

"We continue to believe that a stronger October release lineup, along with ramping Wii hardware shipments and the recent Xbox 360 price cuts, should reaccelerate industry sales a bit in October," Sebastian said. "While our checks indicate that interactive entertainment remains one of the stronger categories at retail, we cannot rule out the possibility that high-ASP (average selling price) software such as $190 music titles may face some headwinds."

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