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Analysts expect October sales rebound

Last month's US software revenues projected up 20-30 percent; Guitar Hero World Tour, Fallout 3, Fable II among key releases.


September saw a rare sales slump for the gaming industry, given that the month had no AAA blockbusters to fill the sizable shoes of Master Chief. After all, the Xbox 360 hit Halo 3 sold 3.3 million copies domestically and helped push September 2007 US retail game-software sales to more than $656 million.

By contrast, this September's biggest performer was Star Wars: Force Unleashed, with the three biggest console versions of the multiplatform action game combining for 1.16 million copies. Analysts believe that October's US retail sales figures--set to be released Thursday by the industry-tracking NPD Group--will be a different story, but they're split on how different.

Electronic Entertainment Design and Research analyst Jesse Divnich was the most bullish of the usual prognosticators, predicting that October software sales will be reported at $700 million. That would represent a 36 percent jump over the previous October's take of $514 million, when the best-sellers included Halo 3 (again), as well as Guitar Hero III: Legends of Rock, which sold a combined 1.4 million units across platforms in its first week.

Specific games that Divnich pegged as hot sellers included Fable II, Guitar Hero World Tour, Wii Fit, and Fallout 3. As for the root cause of the projected spike, Divnich said it was attributable to a greater volume of new releases during the month (230 compared to last year's 189, by his count). Another factor he pointed to was an abundance of discounts and sales as retailers tried to clear out older inventory to make more room for the holiday's hot new releases.

Pacific Crest Securities' Evan Wilson was slightly less bullish, projecting a 36 percent year-over-year jump in software sales to $670 million. Among his expected best-selling games of the month were Fallout 3, Fable II, Guitar Hero World Tour, FIFA 09, and Dead Space.

"While our checks clearly show that the industry did not grow to its potential in October, we believe sell-through may come in above dire expectations," Wilson told investors. "We understand that we could look foolish calling such strong growth, but we believe that the large number of releases in October have prevented a disastrous month for sales."

Coming in on the reserved end of analysts, Lazard Capital Markets' Colin Sebastian projected sales growth of 20-25 percent, whereas Wedbush Morgan Securities' Michael Pachter settled on an increased software tally of 20 percent, to about $620 million.

Despite game publishers' recent stock woes and word of layoffs at Electronic Arts and closures at THQ, there was an agreement that the industry is still somewhat recession-resistant.

"We will begin to worry about the effects of the economy on the video game industry when we begin to see a decline in demand for some of the highest-priced items in our industry," Divnich wrote. "Those being hardware, Wii Fit, and the Guitar Hero: World Tour complete band kits. Fortunately, we see no signs of any of those items slowing down at retail. This is not to say that we are entirely 'recession proof' as an industry, but given the large influx in new gamers entering the market as well as the overall growth of the next-generation systems, it will be tough to pinpoint how much the current economic situation will influence industry sales."

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