Analysts: Software stays strong in January

Pachter, Divnich, and Wilson project US game revenue will climb 6-12% despite rough economy; Wii Fit said to be on track for month's best-ever performance.


December 2008 capped off a stellar year for the US gaming industry, adding $5.29 billion in hardware, software, and accessory sales to the already soaring $21.3 billion total-year haul. With the 19 percent year-over-year sales growth in 2008 a thing of the past, analysts are now wondering how the game industry will fare in the face of a deepening recession without the ever-lucrative holiday shopping season at its back.

Healthy living, healthy sales.
Healthy living, healthy sales.

The first indicator of the industry's performance will come later this week, when the NPD Group releases its January recap of the US game industry's performance at retail. Wedbush Morgan Securities analyst Michael Pachter believes the industry's recession resistance will continue into the New Year. He predicts domestic software sales will grow 12 percent for the month to $690 million.

According to Pachter, top performers in January include Activision's Guitar Hero World Tour and Call of Duty: World at War, Microsoft's Gears of War 2, MTV Games' Rock Band 2, and Nintendo's Wii Fit.

Electronic Entertainment Design and Research analyst Jesse Divnich was particularly enthused about Wii Fit. Divnich believes Nintendo has opened the floodgates on the Wii Balance Board-bundled title, which was already the number-three best-seller of 2008 with 4.53 million units. He predicts the fitness trainer will sell 700,000 copies on the month, a figure that would set a new record for the most single-SKU sales in January.

On the whole, Divnich concurs with Pachter's prediction that software will see a 12 percent year-over-year climb, rising to approximately $685 million. Interestingly, Divnich foresees Nintendo's popular Wii and DS enjoying around half of the total console and handheld software sales for the month.

Pacific Crest Securities' Evan Wilson broke ranks with Divnich and Pachter, projecting more modest gains of $650 million in US software sales, a 6 percent rise. Wilson believes the top-selling titles on the month will be EA's Lord of the Rings: Conquest and Skate 2, as well as continued strong sales of Call of Duty: World at War, Guitar Hero World Tour, Rock Band, Wii Fit, and Wii Play.

Divnich and Pachter also laid out expectations for hardware sales on the month. Waging a more aggressive guess, Divnich anticipates a 58 percent climb in console hardware sales. As has become standard, Wii sales are expected to lead the pack with 740,000 units on the month (a 170 percent year-over-year increase), followed by the Xbox 360 with 300,000 units (a 30 percent increase). Of note, Divnich expects Sony's PlayStation 3 to continue to struggle, projecting sales of the console to slip nearly 22 percent from a year ago to 210,000 units.

Pachter takes a more conservative outlook on hardware sales, projecting a 35 percent year-over-year gain. He expects Wii sales to lead with 550,000 units, followed by the Xbox 360's 275,000 systems and the PS3's 225,000 consoles.

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