The following is an excerpt from a report compiled by Michael Pachter of Wedbush Securities.
We expect November U.S. retail video game console software sales data to be released by the NPD Group after the market close on Thursday, December 6.
We expect console software sales of $1.57 billion, down 2% from last year’s $1.60 billion due to a difficult comparison of up 10%, persistent industry weakness, and the continuing declines of DS and Wii software sales. We do not think that several strong launches were sufficient to overcome these negative factors; notably, strong debuts for November’s high-profile releases INCLUDING ACTIVISION BLIZZARD’S (NASDAQ:ATVI) Call of Duty: Black Ops II, Microsoft’s (NASDAQ:MSFT) Halo 4, and Ubisoft’s (EPA:UBI) Assassin’s Creed III), the debut of the Nintendo (TYO:7974) Wii U (which appears to have been supply-constrained), and a number of compelling holiday bundles resulting in a reversion to close to flat sales. The net result should be a decline for November, the twelfth consecutive monthly decline.
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We expect November console software sales to be led by a slew of high-profile new releases, including Activision Blizzard’s Call of Duty: Black Ops II (360, PS3, PC, PS Vita, Wii U), Microsoft’s Halo 4 (360), and Ubisoft’s Assassin’s Creed III (360, PS3, PC, Wii U). Other top performers are expected to include Nintendo’s new release New Super Mario Bros. U (Wii U) and Take-Two’s NBA 2K13, among others.
We expect hardware sales of 450,000 Wii U units in its debut month, 435,000 Wii units (down 50% year-over-year), 1,400,000 Xbox 360 units (down 17% y-o-y), 700,000 PS3 units (down 22% y-o-y), 375,000 DS units (up 7% y-o-y), 440,000 3DS units (down 45% y-o-y), and 190,000 PS Vita units. Nintendo of America disclosed hardware sales of over 1.2 million units in the U.S. during Black Friday week, with over 400,000 Wii U units, 300,000 Wii units, 275,000 DS units, and 250,000 3DS units. We note that Nintendo cut the price of the Wii to $129 from $149 in October. On November 27, Microsoft announced Xbox 360 hardware sales of over 750,000 units in the U.S. during Black Friday week. Although the figure was down from last year, demand remains strong, and easily eclipses its peers. On November 29, Sony announced that over 525,000 PS3 units and over 160,000 PS Vita units were sold in the U.S. during Black Friday week.
We expect continued modest packaged goods weakness for the next year or so, with intermittent brief reversals, but think that even packaged goods will commence a sustainable rebound into mildly positive territory when all three next-generation consoles are in the marketplace. The Wii U should generate software sales sufficient to offset continuing declines in Wii software. In addition, a solid hardcore game lineup in 2013 led by Take-Two’ Bioshock Infinite and Grand Theft Auto V will allow software sales for PS3 and Xbox 360 to stabilize. We expect the next generation consoles to sell through very quickly due to a dedicated hardcore audience. Also, the publishers will likely plan an unprecedented number of new games for launch in the first two years of the cycle, finally providing relief from gamer fatigue.
Michael Pachter is an analyst at Wedbush Securities.
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