Industry to rebound after February decline - Analyst

The good news is that analysts believe the US gaming industry is getting close to emerging from its prolonged slump at retail. The bad news is that it doesn't look like the gaming industry entered the light of day during February, despite the release of such top-tier games as BioShock 2, Heavy Rain, and Dante's Inferno.

In a note to investors today, Wedbush analyst Michael Pachter predicted that when The NPD Group releases its annual US retail sales recap on Thursday, game software sales will have slipped 10 percent year-over-year to $665 million. Pachter attributed the decline to what has quickly become a thorn in the gaming industry's side: the flagging music genre.

"The February comparison is not as tough (+9 percent) as it was in January (+11 percent), but we expect another precipitous decline in music genre sales to around $20 million compared to $75 million last February and do not expect the decline to be offset by sales of the big launches during the month," he said.

Pachter believes Activision's Call of Duty: Modern Warfare 2, which is currently the subject of a heated lawsuit between the publisher and the game's creators, will make the top 10 best-seller list in February. The analyst's research indicates that EA's Mass Effect 2 and Dante's Inferno, Nintendo's New Super Mario Bros. Wii and Wii Fit Plus, and Take-Two's BioShock 2 also performed well during the month. (Of the latter title, Take-Two said last week that it had shipped 3 million units worldwide.)

In terms of hardware, Pachter expects the Wii to shift 455,000 units during the month, a figure down 40 percent year-over-year. The Wii's predicted decline notwithstanding, Nintendo's system is still expected to outpace the Xbox 360's 350,000 units, which itself would be down 10 percent from the year prior. Rounding out the console sales chart, the PlayStation 3's 300,000 units represents 9 percent year-over year growth.

With February at its back, Pachter believes the remainder of 2010 will play out swimmingly for the US retail game industry.

"The release schedule over the next four months gives us great confidence in our forward forecast," Pachter wrote. "In addition to highly anticipated titles like Sony's God of War III, Square Enix's Final Fantasy XIII, Nintendo's Super Mario Galaxy 2 and Metroid: Other M, and Activision's Starcraft II, we expect no fewer than 12 games released in the first half of 2010 to sell more than 1 million units apiece, with at least six selling more than 3 million units. In the first half of 2009, there were only eight games that sold more than 1 million units, with only one selling more than 3 million units."

Pachter is particularly enthused about March's "phenomenal" lineup, which includes Battlefield Bad Company 2, Pokemon Heart Gold and Soul Silver, God of War III and Final Fantasy XIII. He predicted that each of the titles will sell 1 million units during their first month of availability.