Analysts, console makers respond to July sales

Winners and losers picked for a traditionally slow summer month rife with sales surprises.

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July is usually a very quiet month for game sales, representing the last lazy stretch of summer before Electronic Arts' annual release of Madden NFL and the murderers' row of blockbuster hits that usually carries the industry through the holidays. While the industry-tracking NPD Group yesterday released US retail sales figures for July showing the expected growth for the industry, there were plenty of interesting stories for analysts who looked beyond the recap numbers.

Foremost among those stories was that of Xbox 360 and PlayStation 3 sales. Sony cut the price on its 60GB PlayStation 3 by $100 to $499 during the month, and Microsoft openly admitted that its Xbox 360 hardware had been far too unreliable for its liking. While Microsoft bundled that admission with news that it was extending the system's warranty to cover certain types of failure to a full three years, many analysts expected news of flaky hardware to temper sales of the system.

Between the PS3 price cut and Microsoft's warranty woes, it seemed the time was right for Sony's system to beat out the Xbox 360 in the monthly sales race for the first time. Add to that the fact that Microsoft dropped the price of the Xbox 360 to spark sales in August, and July might have been the PS3's best chance to pull ahead. That didn't happen, as the 360 narrowly outsold its rival once again, 170,000 units to 159,000 units.

It's a trend that The simExchange analyst Jesse Divnich believes will continue at least through the end of the year. Basing his predictions on the futures trading of his site's prediction market, Divnich expects the Xbox 360 to have outsold the PS3 254,000 units to 155,000 for August. He also thinks Microsoft's system will beat Sony's on a month-to-month basis through the rest of the year.

Like many of his peers, Nollenberger Capital Partners' Todd Greenwald was impressed by Activision's performance for the month. Driven by sales of the Guitar Hero franchise and its newest addition, Guitar Hero Encore: Rocks the '80s, the publisher more than tripled its sales tally from July 2006. However, Greenwald also singled out Electronic Arts for some praise, as it was the best-selling publisher of the month, despite sales having been down 17 percent from the year before. Both companies are "on the verge of a very strong second half," Greenwald said.

Meanwhile, Wedbush Morgan Securities' Michael Pachter and Pacific Crest Securities' Evan Wilson both expressed surprise at the sales figures, saying that GameStop's record-setting second-quarter sales and the NPD Canada sales figures for July had both led them to expect more robust results for the US. Wilson noted that NPD changed the way it gathers data for the month, which might account for some of the discrepancies.

Naturally, the console makers saw an opportunity to spin the numbers to their benefit, and Microsoft, Nintendo, and Sony all touted their various triumphs for the month. While Microsoft touted its sales position over the PS3, it also dug a little deeper into the numbers. The company noted that NCAA Football 08 for the Xbox 360 was the best-selling title of the month, beating out the game's PlayStation 2 and PlayStation 3 sales combined. It also said that consumer spending for its system is double that of the PS3 and the Wii, and once again pointed to third-party success on its system. While third-party publishers have accounted for 22 Xbox 360 games in the top 10 since the year began, the Wii and PS3 have only had a single third-party top 10 appearance each.

Nintendo didn't have to look too deeply at the numbers to put its sales in a positive light, as the company merely pointed out that the Wii and DS are still the two best-selling systems on the market, and that Nintendo hardware collectively outsold all other systems put together.

Sony touted the fact that the PlayStation brand accounted for 31 percent more sales than it did during July 2006, and brought up the spike in PS3 sales by saying it was the console's best sales month since January. It also noted that the PSP faced some supply shortages as stock of the existing model is cleared out in anticipation of the redesigned model, due out September 17.

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