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US game software sales to decline 5% in 2009 - Analyst

Wedbush Morgan's Michael Pachter revises projections downward on declining Wii sales, but predicts double-digit recovery in 2010.


Even after the economy went south last year, gaming analysts like Wedbush Morgan Securities' Michael Pachter remained optimistic, saying the "recession resistant" industry would see 2009's full-year game sales hit record highs. By mid-2009, Pachter--like some of his colleagues--had toned down his "double-digit" software sales growth prediction to a more modest 5 percent.

Pachter's revision was attributed partly to lowered expectations for Wii hardware and software sales.
Pachter's revision was attributed partly to lowered expectations for Wii hardware and software sales.

But with the year drawing to a close and sales continuing to underwhelm, the analyst has soured on the idea of full-year growth for software entirely. Pachter released a note to investors today warning that he now expects total 2009 game software sales at US retailers to decline 5 percent from 2008's level.

"Through September, U.S. video game software sales are down 12 percent compared with last year," Pachter wrote in a note to investors, "and although we expect a rebound over the final three months of the year, it is clear that annual sales will be down…The biggest contributor to our lower forecast is a downward revision to our Wii hardware and software sales expectations. While it is likely that Wii sales will rebound as a result of the recent price reduction, we think it is prudent to forecast conservatively."

Despite the gloomier near-term projection, Pachter reiterated his faith in the industry's longer-term prospects.

"In our view, the decline in 2009 occurred as consumers experienced 'console fatigue' in the middle part of the year, and we think that the recent hardware price cuts and a better release slate will drive double-digit growth in 2010," Pachter said, adding, "The combination of a solid release schedule and easy comparisons (March through August software sales averaged down 21 percent), leave us quite optimistic that the industry will record double-digit sales growth each of the first eight months in 2010." (Emphasis in original.)

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