Analyst: '08 game sales to hit $10 billion

In 2007, US retailers racked up $8.64 billion worth of game software sales, according to the industry-tracking NPD Group. That's a 34 percent growth spurt over the year before, and one analyst expects 2008 will bring more of the same.

In a note to investors this morning, Janco Partners analyst Mike Hickey detailed his US retail games sales expectations for 2008. Hickey projected 20 percent game sales growth for 2008, putting the total US software market at a record high of $10.34 billion.

Hickey broke the numbers down by platform, predicting that Sony's PlayStation 3 would see the biggest growth of the year, more than doubling the system's 2007 take to finish with $1.66 billion in game sales, up more than 121 percent in all. The PlayStation Portable and Wii were next in line for software sales growth, with Hickey expecting $757 million in PSP games (up 51 percent) and $2.13 billion in Wii sales (up 46 percent).

Although the Xbox 360's game sales are projected to grow the least of the current generation of consoles (up less than 20 percent), Hickey expects Microsoft's latest to win in sheer revenue, with a projected $2.87 billion. By the same token, the Nintendo DS is expected to see a relatively tepid 8 percent growth rate to $1.3 billion, but Hickey expects consumers to purchase 49.5 million DS games this year, more than any other system.

One argument Hickey made for the software growth is that many gamers won't have new hardware to buy this year. For example, he notes that a gamer who purchased an Xbox 360, a spare controller, and four games with an annual budget of $640 in 2007 could skip the hardware and accessory purchases and instead spend $600 on 10 Xbox 360 games in 2008.

That wasn't the only projection Hickey included in his note. He also supposed a "Software Sales Gone Wild" scenario. If 2007 tie ratios (the number of games sold per console) were to stay constant through 2008, and Hickey's projected hardware sales for the current year were accurate, the gaming industry could see explosive software growth of up to 60 percent, or $13.72 billion. Though Hickey says the hypothetical results are interesting and worth considering, he warns specifically that they don't necessarily "reflect a realistic growth opportunity."