Wedbush Securities expects April U.S. retail video game console software sales data to be released by the NPD Group after the market close on May 12. The brokerage said April may be an anomalous month for software sales, with a rebound likely due to an outstanding lineup of blockbuster title.
Our forecast is based upon a combination of channel checks, company press releases and intuition, with the greatest dependence upon intuition. We note that for a given game, a difference of only one unit per store per week could result in a difference of 100,000 units in volume, or $3 million to 6 million in retail sales for the month. Therefore, we caution investors to use our estimates as only one data point in a sea of information, said Michael Pachter, an analyst at Wedbush Securities.
We forecast software sales of $460 million, up 15 percent compared to last year’s $399 million, due to a very strong release schedule during the month. The slate was skewed toward non-covered publishers, with only Electronic Arts benefiting from a distribution deal during the month, said Pachter.
Pachter said the month benefited from a strong release slate, easier comparisons of down 22 percent, the Easter calendar shift (April 24 this year versus April 4 last year).
Pachter expects April sales to be led by new releases Valve’s Portal 2 (360, PS3, PC, distributed by Electronic Arts) and Warner Bros. Interactive’s Mortal Kombat (PS3, 360), with continued sales of Nintendo’s Pokemon Black and White and Ubisoft’s Just Dance 2. He also expects some contribution from sales of Nintendo 3DS (launched late last month).
Pachter expects hardware sales of 215,000 Wii units (down 22 percent year-over-year), 315,000 Xbox 360 units (up 70 percent year-over-year), 210,000 PS3 units (up 16 percent year-over-year), 300,000 DS units (down 32 percent year-over-year) and 200,000 3DS units in its second month (down 50 percent from its first month).
Overall, Pachter expects current generation hardware unit sales to be up 15.7 percent, with console hardware unit sales up 15 percent, and handheld hardware unit sales up 16.5 percent. Wii hardware sales likely received a modest lift due to the price discounting during the month amid speculation of a price cut to $149 (which was made official in early May).
Pachter said the long-awaited introduction of the 3DS has so far had a smaller impact than he originally expected, leading him to be more skeptical about an industry rebound in 2011.
We initially expected the launch of the 3DS to spike overall software sales growth back into positive territory beginning in April, but the handheld is off to a slow start, as a lack of compelling software has kept many consumers on the sidelines for the expensive hardware, said Pachter.
Until hardware sales rebound for an extended period of time, consistent software sales growth will remain elusive, and Pachter does not expect console hardware sales to grow consistently until the console manufacturers cut prices.
Nintendo cut the price of the Wii to $149 from $199 in May, and Pachter expects Microsoft and Sony to follow later this year. Price cuts for PS3 and 360 could be positioned as early as the E3 Expo; in any event, he expects Microsoft to act before Sony.