Analysts pessimistic on early 2011 game sales

Pacific Crest's Wilson and Wedbush's Pachter caution investors that first months of the new year could show the same sort of declines common throughout 2010; price cuts, 3DS could spark turnaround.


Yesterday, the industry-tracking NPD Group reported overall US retail game sales slipped 6 percent in 2010. Today, analysts are saying to expect more of the same to start 2011.

3DS sales to the rescue?
3DS sales to the rescue?

In a note to investors today, Pacific Crest Securities analyst Evan Wilson said the first few months of 2011 are likely to continue their slide. Wilson acknowledged that the first quarter boasts a strong release slate, but was quick to point out that the same was said of last year.

"Our call remains that the industry will continue to be weak because growth in the 360, largely from Kinect, is not enough to offset Wii, PS3, DS and PSP declines," Wilson wrote.

Wedbush analyst Michael Pachter was similarly skeptical that the first quarter of 2011 would turn things around, but expressed optimism that a number of factors could have industry software sales growing in the low double digits for the full year. Specifically, he expects a wave of console price cuts to boost sales, while the March arrival of the 3DS and a rumored launch of the PSP2 later in the year could breathe new life into the flailing handheld market, which saw hardware unit sales plummet 25 percent in 2010.

"We think that a bad end to 2010 positions the industry for a rebound, and product introductions and price cuts should be sufficient to ensure solid growth," Pachter wrote. "While this may not begin until April (after the 3DS launches), we think that savvy investors will begin to establish positions now and will be handsomely rewarded in the coming months."

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