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Analysts: Software Up 12 Percent In January, Wii Supply-Demand To Balance In Spring

Analysts predict January's upcoming NPD results will show a 12 percent year-over-year boost in software sales for January to the tune of $690 million -- although Wii's volatile supply-demand balance makes its numbers hard to call.
As the NPD prepares to release its monthly sales figures for the video game industry, analysts predict a 12 percent year-over-year boost in software sales for January to the tune of $690 million. "December sales were solid, even factoring the favorable calendar shift offset by the early effects of the recession," notes Wedbush Morgan's Michael Pachter. "In addition, December next generation hardware unit sales were up significantly year-over-year, giving us confidence that solid performance will be sustainable well into 2009." "We expect more modest 12 percent growth in 2009, and think that January is a representative month," Pachter adds. EEDAR's Jesse Divnich suggests that unit sales themselves are up 5 percent with sales increases driven by a 7 percent boost in the average selling price. "We expect hardware unit sales for the next-generation systems to increase by 58 percent over last year," Divnich forecasts. Pachter sees a more muted increase of 35 percent year over year, specifically with 550,000 Wii units, 275,000 Xbox 360 units, and 225,000 PlayStation 3 units -- a narrowing of the gap between the two next-gen platforms. EEDAR's predictions suggest, however, that the PlayStation 3's sales are set to show a year-over-year decline of 22 percent. As usual, the forecast's wild card remains the Wii: "Our console sell-through forecasts reflect our belief that supplies for Wii hardware were up year-over-year," says Pachter. Divnich has a higher prediction for Wii unit sales, a 170 percent year-over-year increase to 740,000 units, but outlines the difficulty in forecasting Wii sales thanks to their strong dependency on the supply channel. "Microsoft hardware sales have been up modestly over the last three months (while Sony’s PS3 hardware sales were modestly down), due to a higher value proposition and by having its 'core' model priced below $300, and we expect this trend to continue in January," says Pachter. "In contrast, the long-awaited Wii production increase (which started in July) finally arrived late in September and we have seen significant increases each month since, although supply was flat sequentially in December. We expect Wii hardware to show solid year-over-year growth in early 2009, with supply and demand finally in balance by March or April."

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