Total software revenues in the United States and Europe will grow at a rate of approximately 6.2 percent per year through 2013, predicts Wedbush analyst Michael Pachter.
Pachter's model further estimates that unit sales – across consoles, handhelds, and personal computers – will grow by over 8 percent over the same period of time.
These gains would follow the sharp contraction seen in 2009, when American and European software revenues fell by over 12 percent compared to 2008.
While the European market was more directly affected by the downturn last year, Pachter's estimates show that that region will actually show more robust growth in the coming year.
By 2011, the report shows that software revenue will have reached $22.3 billion, and that in 2012 the market will have completely recovered from the losses of 2009 and grown to $24.0 billion. In the final year covered in the report, software revenue is expected to have exceeded $25 billion.
The figure below shows the report's estimates for software revenue, in billions of dollars.
While retail PC software revenue is expected to fluctuate, according to these figures handheld software market revenues are expected to decline each year from 2010 to 2013. All of the growth seen in the figure above is driven by an expected 32 percent growth in console software revenues over the next four years.
The figures given in the report are for retail software sales only. Therefore, revenue generated through any system's online store, like Xbox Live Arcade or the PlayStation Store, or through distribution services like Steam is not included. Moreover, revenue generated through downloadable content, virtual item sales, and subscriptions is not included.
In previous reports, Pachter has asserted that strong hardware sales are an indicator of future strong software sales. So it is no surprise that his report shows strong hardware sales for the three main consoles through 2013.
In the United States, Nintendo's Wii is again expected to be the annual sales leader for the next four years. During calendar 2009, Sony's PlayStation 3 was outsold by its main rival, Microsoft's Xbox 360. However the report's data show that Sony's console should outsell the Xbox 360 during 2010 and each year after that.
The figure below demonstrates how the three consoles have sold since their respective launches (as reported by the NPD Group), along with the estimated annual sales given by the Wedbush report.
The report suggests that PlayStation 3 hardware sales for 2013 will be nearly at the level of Wii hardware sales, at least in the United States, with both systems moving over 5 million units that year.
The figure below again combines data reported by the NPD Group and the estimates provided by Wedbush Securities, this time to show the history and expected growth of each system's installed hardware base in the United States.
With Xbox 360 hardware sales to remain relatively static throughout the modeled period and PlayStation 3 sales to surpass them only by a few million, the current rankings of the three consoles in the United States should remain unchanged.
Under this model, the Nintendo Wii will surpass the installed hardware base of Sony's PlayStation 2 sometime in 2012, finishing that year with over 48 million consoles in the U.S. alone. By 2013 the Wii installed base would total 53 million systems.
The report also provides hardware sales estimates for Europe. Regrettably, installed base data for prior years was not available and therefore we are unable to provide as full a picture as we could above for the United States.
However, as the figure above shows, the annual sales figures would show trends similar to those expected in America. Namely, annual Wii sales would diminish year-over-year each year until 2013 while PlayStation 3 and Xbox 360 hardware sales each year would remain relatively static.
We point out, however, that the Wedbush report shows that in Europe the Wii and PlayStation 3 will be very close in annual sales for the year 2012. Moreover, in 2013 Sony's console should outsell Nintendo's by about 300,000 units, at least in Europe.
[Data in this article from the 2005 - 2009 period was provided by the NPD Group. Estimates for the 2010 - 2013 period are part of the Wedbush report.