Shrinking January game sales predicted

Analysts point to shortened reporting period, weaker release schedule as reasons for lowered expectations.


After months of exuberant gaming growth expectations, analysts are bracing for this week's release of the NPD Group's January US retail sales figures, expecting game software sales to shrink year over year.

In a note to investors, Pacific Crest Securities analyst Evan Wilson predicted that last month's software sales will wind up down 5 percent from the $549 million posted for January 2007, due to a combination of factors. One main reason for the expected decline is that the NPD Group's reporting period for last month was four weeks long, whereas the previous year's reporting period encompassed an extra week. If the two reporting periods had covered the same stretch of time, Wilson believes last month's figures would actually show growth for the industry of a little more than 10 percent.

Wedbush Morgan Securities' Michael Pachter also the shorter reporting period to turn what would have been a growth month for the industry into one in which it lost ground. Projecting that the NPD Group will report a sales shortfall of 9 percent for the month, Pachter said that the figure, when adjusted for the four-week reporting period, would actually show sales growth of 14 percent.

Lazard Capital Markets analyst Colin Sebastian was similarly reserved about the market's prospects. While he didn't put a concrete number on his expectations, he did warn that software sales would be "flat to up slightly," again noting the truncated reporting period as a main factor.

The "wisdom of the crowds" is siding with the professional analysts this month, as the simExchange prediction market is expecting game sales to be down a little more than 5 percent for the month. However, in his NPD preview note, simExchange analysts Jesse Divnich suggested that had the January reporting period been the same five weeks as it was last year, software sales likely would have been up 18 percent.

The shorter reporting period wasn't the only culprit mentioned for a projected software sales slide. Pachter pointed to a lighter early release schedule this year, and Wilson also suggested that this year's lineup doesn't measure up to that of January 2007. While both analysts expect Burnout Paradise to take the checkered flag in new release sales, Wilson said it can't compare against last year's slate of big new releases like Lost Planet on Xbox 360 and WarioWare: Smooth Moves for Wii.

On the hardware side, Pachter put the Wii first with the DS a close second, while the simExchange had the same pair topping the charts, albeit in a reversed order. Pachter placed the Xbox 360 atop the rest of the field, followed by the PlayStation 3 and the PlayStation Portable. On the simExchange side, the Xbox 360 still takes third, but the PSP outsells its console counterpart to round out the field.

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