Analysts lower gaming growth expectations, project price cuts by October

EEDAR's Jesse Divnich and Wedbush Morgan's Michael Pachter now believe gaming industry will grow only 5% in 2009; $50 PS3, Wii discount, 360 response possible.

Last week, Pacific Crest Securities analyst Evan Wilson got a jump on prognosticating The NPD Group's monthly US gaming retail sales data, predicting June software shrank 20 percent year-over-year to $700 million. According to Wilson, the decline could be attributed as much to an overall dip in consumer confidence and greater market forces as it could to a less impressive release schedule for the month.

Alex Mercer knows how to make an impact.

Today, two other industry illuminati weighed on NPD's upcoming report, which is due later this week, and both assessed similar losses for the industry. Electronic Entertainment Design and Research's Jesse Divnich believes June 2009 software sales came in at $697 million, a 20 percent year-over-year slip. Michael Pachter, of Wedbush Morgan Securities, took a slightly gloomier stance, predicting a 23 percent software sales decline to $670 million.

With the first half of 2009 coming to a close, both analysts also took the occasion to revise their full-year sales predictions downward.

"Unfortunately, due to a slowdown in gaming sales, an increasingly aggressive retail environment and some delays from major titles, EEDAR is lowering full-year software growth estimates for 2009 from 7 percent down to 5 percent," Divnich said. "While we believe that the video game software sector remains highly recession-resistant, we expect growth of only 5 percent in 2009, due to a weak start to the year and continuing tough year-over-year comparisons," Pachter noted.

As for software, Divnich and Pachter both agree that Activision's Prototype led sales for the month, with the former pegging combined sales at 680,000 copies and the later estimating 500,000 units. Divnich also called out an interesting trend with Prototype sales data as compared to the PlayStation 3-exclusive Infamous.

"Infamous is currently on track to sell 35 percent more than Prototype for the PS3 in North America," Divnich said. "Lifetime sales could outpace Infamous over Prototype by as much as 50 percent due to the longer sales curve exclusive titles receive. Due to near identical gameplay and quality scores, the Infamous versus Prototype case study presents interesting data to publishers when considering the sales bump a title could receive by choosing exclusivity over a multiplatform release."

Divnich went on to say that Prototype is expected to outsell Infamous by some 90 percent, when the Xbox 360 edition of the game is factored in. Other titles the analyst expressed optimism over were EA's Fight Night Round 4, predicting a 600,000-unit debut, and THQ's UFC 2009 Undisputed, which he now believes will broach the 3-million-unit milestone during the publisher's current fiscal year.

As part of his investor note, Pachter reiterated his belief that all three hardware manufacturers will enact price cuts for their devices during the back half of the year.

"We think that the console manufacturers will therefore be forced to consider a price cut before year-end, with Sony cutting the PS3's price by October 1," Pachter said. "Further, we do not think that Nintendo's hardware forecast figures are achievable without a price cut, and we expect one around the same time as the PS3 price cut. It is likely both manufacturers will cut by $50, with Sony making up any lack of increased demand with a software bundle. We expect Microsoft to follow suit, giving us confidence that US software sales will grow later in the year."

With the PSP Go due October 1, Pachter also said that he expects Nintendo to trim the price of the DS Lite this fall.

131 Comments

  • Coolyfett

    Posted Jul 15, 2009 4:43 pm PT

    I still say cross platform is the way to go! Plus there really needs to be more Greek Mythology games, but why all the same ole same ole all the time? Prototype & Infamous are almost the same game. One is on one system and the other is on all systems. I would think the one on all systems would do a lot better. The other day I played the Gear of War game and thought it was pretty fun, if someone was introduced to Gears or War on 360, but only owned a PS2 or DS, why would they have to purchase a 360 just to enjoy the game? Just take more time to bring out the same GREAT game for all systems. Let the fakes and trash go away. That would help the gaming market.

  • brendanhunt1

    Posted Jul 15, 2009 3:11 pm PT

    infamous had a bigger rating than prototype

  • ange10

    Posted Jul 15, 2009 2:36 pm PT

    ps3 is just 2 advanced atm, so no price cuts, i bet sony are not spending money,and they are waiting for parts to become cheaper to build the ps3 or something, or blue ray surpasses dvd like flat screens surpassed those fat tvs and consoles surpassed pc's (gaming wise and price wise. not console fan boy but pc fan boy with consoles) but face it consoles have bigger audience then pc gamers, pc gaming might not be dieing buts not growing like consoles.

    prototype is a great game and beats infamous, only reason its got bigger score was because of viusals.
    just proves that game ratings mostly rely on visuals instead.
    crysis for example, and bioshock for exmaple again.

  • Imperator2007

    Posted Jul 15, 2009 12:56 pm PT

    The price cut is good news for me. I have a 360 and love it, but I'm no fanboy. I've been wanting to get my hands on these juicy PS3 exclusives (not to mention a blu ray player). $50 price cut is good news for someone who lives on a college budget. Looks like my time is coming.

  • izmickey

    Posted Jul 15, 2009 12:08 pm PT

    @ccputgat2m

    You're right. I understand blu-rays can be expensive, but with a little search, they can be cheap. I usually buy my blu-rays for $10-$20 brand new on ebay. On multiplatform games the games arent programmed or look much different from eachother, but PS3 exclusives are. I go on my brothers xbox360 and XBL is good, but i experience more lagging than i do on the PSN. XBL is a little better than PSN but it doesnt blow it away. I can only say this because i've played both PSN & XBL, if i didnt, i wouldnt talk about XBL.

  • ccputgat2m

    Posted Jul 15, 2009 10:37 am PT

    @izmickey

    The ps3 isnt overpriced, its just more expensive than its competitors. As for blu ray, great, but if you dont have a 1080p tv or dont want to shell out 30 bucks per movie, what good is it? Blu Ray certainly isnt used in the programming of games to make them better than the 360 versions. XBL blows sony online away, and it can be had for much less than 50 bucks. just shop around.

  • pakhair

    Posted Jul 15, 2009 3:23 am PT

    Price Cut, Yes that's what we want, Grrrhhh.............

  • Vegeta-sama

    Posted Jul 15, 2009 2:30 am PT

    75 bucks sounds about right... but frieght to the US isn't cheep... that probably tacks on 10-15 a unit and then the average transportation cost

  • mayceV

    Posted Jul 14, 2009 8:11 pm PT

    problem is that M$ can lower the price of the Xbox without breaking a sweat getting an xbox 360 arcade from the factory in China cost 75 dollars (no I'm serious my fother works with stuff from china and I asked him to check for me. but Sony on the other hand already looses a lot of money every system they sell (thats the reason for the sudden increase in exclusiives) causing sony to require you to buy as many games as possible to make up for thier loses. Poor Sony did so well last generation guess they over shot this time thier goal before making the PS4 is to sell 130 million systems to match or exceed the ps2 but seeingg them fall behiend for so long I don't see how thats possible.

  • rasterror

    Posted Jul 14, 2009 3:55 pm PT

    If the increase of prototype outselling infamous is by 90% because of the 360 that means that the 360 version will outsell both games on the PS3. I have both and enjoy both very much but this means Sony needs to do something. Step your game ups Sony and lower the price. Take a big hit in the short run or keep losing in the long run.

  • JGoWild

    Posted Jul 14, 2009 2:10 pm PT

    I think, the paradigm is slowly changing from $60 price point to people wanting free games. And this is getting real and real everyday, just look at the current MMORPG scene.

  • LindBergh2007

    Posted Jul 14, 2009 12:59 pm PT

    Sega has now approved a patent for a USB flash memory card device for storing game memory.

    http://www.patentgenius.com/patent/7556197.html

    The patent was approved last week on July 7,2009.

  • mulder_000

    Posted Jul 14, 2009 12:22 pm PT

    Being in Canada, the issue for me is more about software than hardware. I have a 360, WII and PSP 3000. With the currency fluctuations, the games on the 360 are back up to $69.99 plus tax which is absurd. I no longer buy new games, I wait for the kids to buy em on the 1st day play em and sell em back for $10 and then I buy them...thanks guys!

  • tudyniuz

    Posted Jul 14, 2009 11:56 am PT

    In a year or so gaming will continue it's natural growth, just before the whole recession...

  • rikhan_z

    Posted Jul 14, 2009 10:27 am PT

    I'm not surprised about the gaming growth... with the PS2 having alot of titles flooded in the market and the big jump of PS3 hardware, along with the wider market because of the Wii, there alot of holes in the market. However it's a good chance to develop and fill these areas up. There will be alot of titles for the elderly and casual market in the future.

  • izmickey

    Posted Jul 14, 2009 10:08 am PT

    I would like to state my opinion. i honestly dont think the ps3 is overpriced, you get what you pay for. The xbox360 is $350 with xbl, ps3 is $400 with free PSN. Its a $50 dollar difference and you get rechargeable batteries, wifi, blu-ray, memory card slots, free online,etc. I have a link that might interest some of you. You can save $100 dollars by applying for a NO ANNUAL fee playstation credit card. Cnet dude rick says you will be instantly approved. I hope this helps some of you guys. http://news.cnet.com/8301-13845_3-10286125-58.html

    http://www.sonystyle.com/webapp/wcs/stores/servlet/CategoryDisplay?catalogId=10551&storeId=10151&langId=-1&categoryId=8198552921644604396&XID=A:404255:10610388::CJ

  • Yuck_Too

    Posted Jul 14, 2009 9:15 am PT

    @Hvac0120

    It costs on average 1/3 of the initial costs for development to port a title to another platform.

    Dual development is typically a little cheaper assuming there are no major delays.

    The point is for 3rd party developers the cost to go multi-platform equates into almost double the profit so it's far more profitable to do that then develop 2 exclusive games.

    And if you can only afford to develop for 1 platform...you pick the one with the largest install base to maximize your potential sales.

  • Hvac0120 posted Jul 14, 2009 8:50 am PT (does not meet display criteria. sign in to show)

    Hvac0120

    Posted Jul 14, 2009 8:50 am PT (hide)

    There are other factors that play a role in the Infamous vs Prototype case study. Infamous may sell less because it is exclusive to one platform, but the developer saved $$$ by only needing technical expertise and equipment for a single system.

    You need to know if those additional sales on another console were worth the extra cost that went into developing, manufacturing, distributing and supporting another system.

    We won't know the results of this for quite a while, but it may help publishers.

    If Nintendo drops the price of the DS lite to $99 or less, I'll probably pick up another one. I'd like a DSi, but it's just to damn expensive for the little amount of additional features it offers. I am expecting the next-generation of handhelds to start being shown in 2010 with releases later that year or in 2011.

  • gameweasl

    Posted Jul 14, 2009 8:15 am PT

    I'm still spending, I love everything that has came out. Fight Night 4, Battlefield 1943, Blazblue, Ghostbusters, King of Fighters XII, Marvel vs. Capcom 2, Ikaruga 50% off, Call of Juarez, NCAA 10, Red Faction, and UFC...

  • angelGP32

    Posted Jul 14, 2009 8:02 am PT

    yeah Frimmel and even losing some you can still make money. You could lose 5% of projections and still be 10% over what was done last year, most people don't realize and understand that either.

  • Corelis

    Posted Jul 14, 2009 8:02 am PT

    @ Yuck_Too i believe exclusive titles can ultimately help the hardware manufacturer sales in the long-term.. After release of God of War 3 i plan on picking up a PS3, along with some of the exclusive games for PS3.. so although i wont be purchasing inFamous for another 9-12, hence the longer sales curve he mentioned, I will be growing that exclusive title by 1 unit.

  • Rottenwood

    Posted Jul 14, 2009 7:56 am PT

    When Prototype and Infamous are the horses you're riding, it's no wonder the industry is struggling. If people are simply saving their money for something worthwhile, a huge holiday season could save the day.

  • Frimmel

    Posted Jul 14, 2009 6:55 am PT

    So only growing five percent during a recession is 'bad?' These guys seem to think that not making as much as some analyst projected is somehow 'losing' money.

  • EasyToTalkToIty

    Posted Jul 14, 2009 6:47 am PT

    bye

  • Yuck_Too

    Posted Jul 14, 2009 6:07 am PT

    lol...so many of you missed this...or don't understand

    "Divnich went on to say that Prototype is expected to outsell Infamous by some 90 percent, when the Xbox 360 edition of the game is factored in."

    So basically what he is saying is being exclusive for 3rd party developers is costing you half your profit margins.

    3rd Party exclusives are poor business decesions for investors.

  • angelGP32

    Posted Jul 14, 2009 6:06 am PT

    @supersaiyinx:"I think Nintendo should worry more about software than hardware, if there is great software the hardware will sell"
    This is 100% correct. Nintendo doesn't need to reduce the cost of it's system, and it's profit margin per system, honestly really can't be that much, even $50 may not make it profitable anymore. So then it would be dependent on software sales which would be disastrous if the current trend holds true. All the bad titles are really starting to take it's toll and the confidence in the system and software is starting to take a hit because of all the bad software. So yes, for Nintendo, the focus needs to be on software.

  • sun_rider95

    Posted Jul 14, 2009 5:50 am PT

    First they have to lose a lot of money than the prices will be reduced

  • AlphaCommando

    Posted Jul 14, 2009 5:38 am PT

    Many people who own both inFamous and [PROTOTYPE] (just had to spell it like that ) will tell you inFamous is better, me being one of them. Also, the PS3 would be allowed to charge higher amounts than they are now IF they made it PS2 COMPATIBLE!!! Pleeeeeeease?

  • thekey

    Posted Jul 14, 2009 5:18 am PT

    @supersaiyinx

    I agree. Thats why I no longer support the 360, nor brought another one for the same reasons.(I got the RROD 2wice) Which was twice too many.

  • supersaiyinx

    Posted Jul 14, 2009 2:52 am PT

    I think Sony should check with consumers about a new possible two SKU plan, like offering the 80GB for $300 and a 500GB for $400-$450. Or they could just cut out the 80GB and 160GB systems and release a 500GB system for $400-$450.

    Yes, 500GB notebook HDD "DO" exist, I know someone will try contesting this, enjoy.

    I think Nintendo should worry more about software than hardware, if there is great software the hardware will sell.

    Now, as for Microsoft they really need to put work into fixing the RRoD instead of living in denial about it, it is a killer platform, but the hardware failure is still quite common. Thus the reason I have yet to get another 360, mine crapped out in case you didn't know.

  • Darkside7972

    Posted Jul 14, 2009 2:23 am PT

    Oh look, more analysts making the expected monthly predictions of a PS3 price drop... Don't those guys ever get tired of being wrong?

    Who is hiring these "analysts" anyway? It's obvious that they all know nothing about gaming, and as for the accuracy of their estimates, they might as well be getting paid to throw darts on a board.

  • somberfox

    Posted Jul 14, 2009 2:23 am PT

    If the Wii gets a price cut I'll eat my shoes.

  • darklight4

    Posted Jul 14, 2009 1:28 am PT

    the news has realy been poor the past few days is there anything more interesting than what analysts predict clearly not

  • KhanhAgE

    Posted Jul 14, 2009 12:41 am PT

    I'm starting to get tired of these analysts and their predictions. Just look at the business/financial market. They FAILED big time there.

    The only people who really care about these predictions/numbers are shareholders.

  • ElJay2010 posted Jul 14, 2009 12:01 am PT (does not meet display criteria. sign in to show)

    ElJay2010

    Posted Jul 14, 2009 12:01 am PT (hide)

    They say infamous will sell more due to exclusive lmao no, its just cause its a better game than prototype. If you have a PS3 then you will get Infamous without a dout. It has nothing to do with it being an exclusive. its just a better. This is the exact reason that people believe that gamespot is a bias website. BTW get a better analyst cause im sick of hearing about price cuts. I have all systems and I know what they should be worth. The wii should be about 200 cuz it has know power but cuz it sells better than any other system rite now, their isnt a need to unless they want to beat PS3 in Japan. Xbox 360 honestly should be like 200 including the hard drive due to really its just like your renting a game system due to the RROD that ive had 3 times. The PS3 i believe should be 400 due to all the stuff it has in it and has the most power, and the most games. But I would love to see it go for 300 so more people could afford it.

  • everettseanw

    Posted Jul 13, 2009 11:55 pm PT

    $300-$350 ps3 is going to be cool.

  • Fz1994

    Posted Jul 13, 2009 11:50 pm PT

    I started saving for a ps3 since 2006 I bought it in 2008 when they made the price cut......but they rlly should make that price cut for games.....cuz i think they arent going to... but i rlly hope so....

  • hatieshorrer

    Posted Jul 13, 2009 9:05 pm PT

    "With the PSP Go due October 1, Pachter also said that he expects Nintendo to trim the price of the DS Lite this fall"

    Yes because the $250 PSP Go with current PSP hardware, smaller screen and inability to play UMD exclusive games will be huge competition for the DS lite for half that price and currently out sales the current PSP 2/1.

    Note the Sarcasm!

  • Mister__Awesome

    Posted Jul 13, 2009 8:29 pm PT

    Price cuts only make it better for the casual consumers of video game products, so in that aspect I am content.

  • zintarr

    Posted Jul 13, 2009 8:17 pm PT

    I'm glad you are happy with the Gamespot articles Zloth2. I guess you would be a fine example of their "target audience".


    @Jettero-Heller You speak truth!

  • jrabbit99

    Posted Jul 13, 2009 8:16 pm PT

    hey! at least its still growing

  • punanisher

    Posted Jul 13, 2009 7:55 pm PT

    @Jettero-Heller
    Nail on the head dude.

  • Jettero-Heller

    Posted Jul 13, 2009 7:46 pm PT

    I am an adult with disposable income, even in this recession. I went to EB on Saturday and walked out with Deadspace and Rainbow 6 Vegas 2. RE 5 was the last "NEW" game I bought upon release. It's simple really. If there were any decent new releases available that interest ME I would purchase them as opposed to buying year + older games on the cheap. $59 - $64 is a lot to spend on new software. Now with all the delays of big games that interest me pushed to next year, it looks like I'll have to continue to buy older El-cheapo games that I wouldn't have paid full price for upon release, IE the two mentioned above. When the floogates open for the interesting games (in MY opinion) I will have no problem paying full release retail for them. Call of Juarez comes to mind. Great reviews and I was looking forward to it but I can't justify that kind of money for an experience that reportedly, lasts 10 - 12 hours. Make it worth my while game-making people.

  • akiwak

    Posted Jul 13, 2009 7:24 pm PT

    Nintendo does not need to drop it's price it still outsells the PS3 and 360 sales sometimes even combined. Why would they need to sell more and get lower returns when they can sell less and get about the same results in profit. I don't disagree that it would be nice to see the price cut but I'm just being realistic and looking through business sense eyes. They can probably bundle the Wii with some other games to continue to see them sell well before we see a price drop.

  • Pete5506

    Posted Jul 13, 2009 7:17 pm PT

    thats nice but most people already knew this

  • Zloth2

    Posted Jul 13, 2009 7:15 pm PT

    Uhhh, Zintarr? High quality business analysts cost big bucks. So yeah, it probably would kill GameSpot to hire one.

  • ChamomileBaths

    Posted Jul 13, 2009 7:12 pm PT

    Wii to $200 is where it should be, likewise I just like the idea of DS Lite being $100. It's a powerful gaming value at that price.
    PS3.. I want to get one, but I can't justify $400, I'd need a slimline to cut it down to like $300 before I could think about it.
    They need to hold on a little longer, $300 is the max, wait until the hardware you put out is only losing a little bit of money at that price. In other words hold this gen out until about 2014, and constantly innovate until then. Let the gameplay ideas develop, get out of this FPS rut.

  • zintarr

    Posted Jul 13, 2009 6:37 pm PT

    Again, Gamespot misses the mark and is incapable of adding their incite into the analysis! Right now, during a devastating recession most companies would be thrilled to still have 5% growth for the year. Also, even with the contraction in growth the gaming industry is still one of the best producing money makers around.

    In the name of all creatures big ang small would it kill Gamespot to do more than a cut and paste on an article like this. Get industry analyst as your writers and dump the hacks you have now.

  • stziggy

    Posted Jul 13, 2009 6:35 pm PT

    I know we're in a recession, and that is contributing to the low sales numbers. Maybe I'm old, but the titles out there this month or lately haven't been that interesting. I haven't seen anything that I must buy.

    Speaking of recession. I have less money for games. The jump in cost of our health insurance and the smaller coverage ate my raise and then some. Obama is right. Our health care system needs fixing!

  • tupac-makaveli

    Posted Jul 13, 2009 6:34 pm PT

    Analysts predict that their jobs will be cut by Q4 if they don't start making accurate predictions.

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