Analysts bullish on 2009

Gaming industry watchers expect the business to continue growing this year despite economic concerns.

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While 2008 was a record-breaking year for the US retail gaming industry, a handful of industry analysts are expecting 2009 to be even better.

Wario apparently invested heavily in Nintendo stock.
Wario apparently invested heavily in Nintendo stock.

In a Lazard Capital Markets investors note covering technology themes for the coming year, analyst Colin Sebastian this morning said that the industry's success was tied more to the console generational hardware cycle than to the economy at large. While the US retail gaming industry posted gains of nearly 19 percent last year, Sebastian sees that growth "slowing to more modest mid-single-digit growth in 2009" due to tough comparisons with the explosive growth of 2008 and "potentially fewer hit titles."

While Janco Partners' Mike Hickey didn't put a growth range in his note for the European retailer GameGroup (operator of GAME and Gamestation stores) today, the analyst seemed more optimistic about the product lineup than Sebastian.

"We expect continued video game market growth in 2009, fueled by an exceedingly strong 2008 hardware sell through and a powerful 2009 game slate," Hickey said.

Wedbush Morgan Securities' Michael Pachter was likewise encouraged by recent hardware sales, pointing to them as a leading indicator of strong software sales in 2009.

"As Nintendo increases Wii supply further, Sony markets Blu-ray, and Microsoft fully benefits from its price cuts, we expect hardware sales to show year-over-year increases for the first half of 2009," Pachter told investors in a note regarding NPD's 2008 totals, adding, "a strong release schedule early in the year [will allow] the industry to sustain double-digit sales growth for the full year."

Pachter also returned to the notion that the gaming industry's financial fate isn't tied to that of the larger economy, although gamers might find his reasoning on that point to be rather unflattering.

"It is important to note that the bulk of purchases between January and October are driven by the user of game software," Pachter said. "In our view, this indicates even greater recession-resistance ahead, as most hardcore video game consumers are either ignorant or apathetic about current economic conditions."

Pacific Crest Securities' Evan Wilson didn't commit to a growth projection, but shared some of his peers' guarded optimism.

"2009 has difficult comparisons due to the release of GTA 4, MGS 4, Mario Kart, Wii Fit, Super Smash Bros., and a few other big titles," Wilson told GameSpot. "It also saw tremendous pent-up demand for big holiday titles like Guitar Hero 3 and Call of Duty 4 as well as Wii hardware. We could very well see industry growth continue, even with the current recession in consumer spending, but the comparisons in the first half of the year may make the growth rate below what many have become accustomed to."

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