May sales rebound led by Red Dead Redemption - Analyst

Wedbush's Michael Pachter points to strong debut of Rockstar's Western, decent starts of Super Mario Galaxy 2, Alan Wake for expected 11 percent software growth last month.

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April arrived like a punch in the stomach to analysts and gaming executives who have been holding their breath to see a turnaround in US software sales at retail. Defying even some of the most pessimistic expectations, industry game sales were down 22 percent during the month, a figure that bloated to a 26 percent decline after factoring in hardware and accessories.

The hope of May doesn't quite ride alone.
The hope of May doesn't quite ride alone.

With Wedbush analyst Michael Pachter speculating that "something is terribly wrong" despite prime selling conditions in April, the industry watcher has returned to offer an optimistic outlook on May's figures. According to the analyst, May software sales should come in at $500 million for the month, up 11 percent from the same period in 2009. While that tally is respectable, Pachter believes that May sales should have been stronger, given the release slate.

"While the lineup provided something for everybody, with one Xbox 360 exclusive, one Wii exclusive, two hardcore shooters, two adventure games, one racing game, two action sports game, and three movie licenses, it appears that several of these titles performed well below expectations," he said.

"Red Dead Redemption was a breakout hit, but Alan Wake was launched the same day (and suffered as a result), the Prince of Persia film did not provide the expected boost for the video game, Blur had a very weak launch, and Super Mario Galaxy 2 sold at only a mediocre level (for a Nintendo title)."

And whereas Pachter was previously baffled by April's sales declines, he now believes that one likely reason gamers aren't showing up to retail is the strong--and largely unmonetized--online element of many hit titles.

"We believe that the publishers and developers of games have created more robust multiplayer content in recent years that has resulted in core gamers playing the same games for much longer, on average, than they did in the past, leading to lower sales of new games," he wrote. "We expect the publishers to monetize the value created by online play, led by Activision."

"We anticipate that Activision will find a way to monetize the 1.75 billion hours of Call of Duty Modern Warfare 2 online play on the Xbox 360 in the first five months following the game's release," he continued. "This game play suggests that as many as 12-13 million gamers (PS3 and Xbox 360 combined) played online for an AVERAGE of 10 hours per week for the five months since the game's launch. It is obvious to us, and likely equally obvious to Activision, that these gamers are spending a lot of time that was monetized only through the original purchase." [Emphasis in original.]

As for the performance of individual titles in May, Pachter believes Rockstar's Red Dead Redemption led US sales with 1.8 million units sold across the Xbox 360 and PS3. Take-Two has previously noted that the game sold 5 million units worldwide in less than a month of its May 18 release. Other top sellers, according to Pachter, were Super Mario Galaxy 2 (650,000 units) and UFC Undisputed 2010 (700,000 units), the latter of which came in below THQ's expectations. Xbox 360-exclusive Alan Wake also was named as a top performer, though Pachter did not offer a sales estimate.

On the hardware front, Pachter believes all three consoles saw sales growth during the period. He estimated Wii sales of 330,000 units (up 14 percent), Xbox 360 sales of 190,000 units (up 9 percent), and PS3 sales of 175,000 (up 34 percent). However, DS sales are expected to fall 29 percent to 450,000 units, while PSP units drop 35 percent to just 65,000.

The NPD Group is expected to release its May recap this Thursday, having delayed the report three weeks due to a switch in its internal systems.

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