Analysts forecast booming February

Wilson, Pachter, and Divnich expect 20, 27, and 34 percent growth for leap-year month, with the PS3 and X360 finishing neck and neck.


Given that the January 2008 reporting period was one week shorter than its 2007 equivalent, last month offered up a tricky comparison to judge whether the industry will continue its double-digit gains into the new year. Despite software, hardware, and accessory sales technically slipping by six percent year-over-year, the industry actually grew by nearly 18 percent when balanced on a week-by-week scale. More pointedly, according to NPD analyst Anita Frazier, software sales alone were up by nearly 50 percent to $550 million from the same time a year before.

So will the impressive software gains continue now that the holiday season is firmly in the past? Several industry watchers weighed in today in anticipation of the NPD Group's monthly report, and they answered with a resounding yes. Pacific Crest Securities' Evan Wilson, Wedbush Morgan Securities' Michael Pachter, and Jesse Divnich on the behalf of prediction market the simExchange all expect software sales to maintain their double-digit growth.

Wilson was the most conservative of the bunch. He predicted a 20 percent rise in software sales to $545 million, thanks to one genre in particular. "Music genre games continue to dominate industry sales, with Guitar Hero III and Rock Band together comprising 17 percent, 14 percent, and 19 percent of November, December, and January sales, respectively," said Wilson. "We expect the games to represent roughly 17 percent of February sales."

With the rationale that February serves as further indication that the gaming sector is "highly recession resilient," Pachter said that he believes software revenue will grow by 27 percent to $575 million. Pachter also took a stab at the month's best-sellers, saying Capcom's Devil May Cry 4 (X360, PS3) will lead sales for the month, with other contributors including "to a lesser extent Microsoft's Lost Odyssey (360) and THQ's Frontlines: Fuel of War (360, PC)."

Also calling out Capcom's latest as driving growth, Divnich notes that the industry will see a 34 percent uptick in software sales to $591 million. "For new releases, the prediction market expects Devil May Cry 4 to reign supreme at 489,000 and 303,000 units for the Xbox 360 and PS3, respectively."

The trio of analysts also weighed in on how the console race will have played out in February. All three believe it to be a forgone conclusion that team Nintendo will take the pole position in the hardware race, with the only dispute being whether the Wii will top the DS, or vice versa. Pachter believes Wii sales will trail DS sales 300,000 to 350,000, whereas the simExchange predicts a photo finish, with both systems expected to shift about 450,000 units.

At issue, then, is the embittered rivalry between Sony's and Microsoft's consoles. "In January, PS3 hardware demand continued to improve, and we believe that PS3 sales will gain momentum over the balance of the year with the victory of the Blu-ray format over HD DVD," said Pachter. The high-definition video-playback war victory will give Sony's PlayStation 3 an edge on the Xbox 360 in February, believes Pachter, logging sales of 260,000 PS3s to 250,000 Xbox 360s.

Pachter also addressed the issue of ongoing supply constraints. Referencing reports of an intentional drying of the retail channel last month, Pachter said, "Our [February] console sell-through forecasts reflect our belief that Wii, DS, and Xbox 360 hardware continued to be supply constrained during the month. With the launch of several high-profile games in March, we expect supplies for the consoles to increase."

Also predicting a close finish for February, the simExchange does not see Sony's victory in the HD wars to be an outright death knell for Microsoft's Xbox 360. "This stalemate between the Xbox 360 and the PS3 is expected to continue well into April, with the prediction market expecting the PS3 to outsell the Xbox 360 320,000 units to 315,000 units in March, and a reversal in April with the Xbox 360 outselling the PS3 386,000 units to 371,000 units, respectively," said Divnich. The simExchange expects the Xbox 360 will slightly outpace the PS3 in February, with 285,000 Xboxes sold to 270,000 PS3s.

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