Analysts see slight slip in May sales

Extraordinary continues to be the norm, as industry watchers predict 30-43 percent software growth for May.


Despite having been out for only five days, Rockstar Games' Grand Theft Auto IV and Nintendo's Mario Kart Wii had a substantial impact on April's NPD sales data. For the month, total revenues soared to $1.23 billion, with software sales alone up 68 percent to $654.7 million. With the NPD Group expected to issue its May sales data later this week, analysts are once again expecting double-digit software growth, unsurprisingly led by GTAIV, Mario Kart, and Nintendo's latest heavy hitter, Wii Fit.

Last month, Wedbush Morgan Securities analyst Michael Pachter tossed a wild pitch, erroneously predicting software revenue would rocket skyward by 113 percent. For the month of May, however, Pachter has come back with a prediction more in line with this year's monthly outcomes, saying that software will surge 39 percent year-over-year to $530 million. Pachter's estimate hits the middle road between Pacific Crest Securities analyst Evan Wilson's $545 million prediction (up 43 percent) and Lazard Capital Market's Colin Sebastian, who anticipates $495 million in software sales (up 30 percent).

The biggest X factor impacting sales data for May is Nintendo's fitness simulator Wii Fit. Though the game has generated heavy interest from Nintendo's casual gaming crowd, the publisher has failed to adequately feed its North American retail channels. With the game having launched in Europe in April, Pachter believes Nintendo limited US supplies to 500,000 copies of the game, all of which sold out. Wilson concurs with Pachter over spot shortages, but believes Nintendo funneled 750,000 units stateside.

"[W]e expect the supply situation will begin to improve over the next several months," noted Pachter. "Wii Fit's May 21 launch here was likely supported by only 500,000 game units, limiting opportunity to sell more Wii hardware units."

Nintendo's Wii Fit notwithstanding, analysts believe the strong holiday 2007 lineup will continue to buoy 2008 software sales. Unsurprisingly, Activision's Call of Duty 4 and Guitar Hero III are expected to again post strong numbers, but all three analysts believe the publisher on the whole will have taken a hit compared to last May due to a tough comparison against Spider-Man 3. MTV Games and Harmonix's Rock Band is also once again expected to perform well.

GTAIV's impact on PlayStation 3 and Xbox 360 hardware sales was a much-speculated topic leading up to the game's launch in April, and NPD's numbers from last month indicated neither system received a substantial bump. Sebastian believes that trend will continue into May. He did note, however, that the Xbox 360 is primed for a $50 price cut later this year, though Sony will hold steady to its current price point for the PS3.

Taking a crack at hardware sales figures for May, Pachter believes Nintendo's Wii and DS will once again dramatically outpace the competition, with 750,000 and 550,000 units selling of each system, respectively. With the PS3 and Xbox 360 running a tight race the previous two months, Pachter believes Microsoft's console pulled ahead in May by 25,000 units, selling 250,000 to 225,000.

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