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Wedbush: July U.S. Chart Estimate Up 15%

Analyst firm Wedbush Morgan has released its preview of the July NPD U.S. video game charts, which will be released this Thursday, forecasting relatively burgeoning sales...
Analyst firm Wedbush Morgan has released its preview of the July NPD U.S. video game charts, which will be released this Thursday, forecasting relatively burgeoning sales of $365 million, up 15% compared to last year. According to Wedbush's Michael Pachter: "Our estimate reflects a decline of $25 million in current generation software sales (PS2, Xbox, GameCube, GBA), more than offset by an increase of $103 million in next generation software sales (Xbox 360, PSP and DS). Overall, we expect next generation software sales to total $135 million." In particular, July sales were expected to be driven by recent releases including Nintendo's New Super Mario Bros for DS, Take-Two’s GTA: Liberty City Stories for PS2 and THQ’s Cars for multiple platforms, alongside Take-Two’s Prey for Xbox 360 and PC and Electronic Arts’ NCAA Football 07 for multiple platforms. Pachter notes that 13 games sold over 100,000 units in June, and the company is expecting 6 in July (compared to 5 last year), also outlining NPD data that shows Xbox 360 hardware sales in the U.S. were 2.0 million units, and the company expects sales of 250,000 units in July. The firm commented: "Though the Xbox 360 is now readily available, we expect Microsoft to sell approximately 200,000 – 300,000 hardware units monthly until the holidays when a strong lineup of Xbox 360 games is anticipated." The U.S. hardware installed base currently stands at 102 million current generation consoles (including handhelds) as of the end of June 2006 (up from 95 million at year end 2005). Wedbush Morgan's analysis of the market noted: "The first part of 2006 followed a similar pattern to 2000, when the last console transition began. During the first few months of the year, consumers slowed purchases of current generation console software while purchasing next generation software for only one console, the Xbox 360, while waiting for the launches of the PS3 and Wii later this year." "The slowing trend reversed in April with a return to positive sales growth, reversed again in May with negative sales growth, and rebounded yet again in June with another positive month. We think that the rebound may be sustainable, given strong sell-through performance at the over 100 stores we visited and called during the month. It appears to us that consumers have continued to purchase compelling content for current generation consoles in spite of the imminent launches of the PS3 and Wii, and have embraced software for the DS and PSP, driving monthly sales higher in July." In fact, Wedbush Morgan's Pachter had an overall very positive conclusion to its report: "Given recent sell-through strength at retail, we are no longer certain that declines in current generation software sales will continue to be greater than contribution from next generation software sales. Much depends upon the launch timing and quantities for the PS3 and Wii, but should both consoles launch as represented by Sony and Nintendo, we believe that overall 2006 U.S. sales could be higher than 2005 levels. Our current forecast calls for a decline of 4% in the U.S., and we now think that overall sales growth for the year may be positive."

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