We expect September U.S. retail video game software sales data to be released by the NPD Group after the market close on Thursday, October 17. We expect console/handheld software sales of $910 million, up 83 percent compared to last year’s $498 million due primarily to the record-breaking performance of new release Take-Two’s (NASDAQ:TTWO) Grand Theft Auto V.
In August, sales were up y-o-y for the first time since January, with the first month of true growth (same number of weeks for August and its comparison period) since November 2011.
The growth was driven by the timing and better-than-expected performance of this year’s Madden release, as well as a strong release slate. We believe the drop-off in Madden sales this September from this timing issue will be more than offset by GTA V strength, likely the year’s top seller.
Source: The NPD Group/Retail Track and Wedbush Securities estimates.
We expect September console/handheld software salesto be led by three new releases: Grand Theft Auto V, EA’s FIFA 14, and Take-Two’s NBA 2K14. The sales of fellow new release Nintendo’s The Legend of Zelda: The Wind Waker HD will likely be light due to the Wii U’s much smaller installed base. We also expect August releases of Disney’s Infinity and EA’s Madden NFL 25 to perform well.
Sales will be up y-o-y for the second consecutive month and third month this year due to GTA V, which benefitted from superb reviews and pent-up demand from a five-and-a-half-year wait. Last month, Take-Two announced worldwide retail sales of over $800 million for GTA V’s first day of release, and over $1 billion for the first three days, both industry records. Sales could also be up y-o-y in October due to continuing GTA sales, the release of EA’s Battlefield 4, which has an easy comp against last year’s Medal of Honor: Warfighter, and the first week of sales for Assassin’s Creed Black Flag (which falls in the last week of the retail month.)
We expect hardware sales of 55,000 Wii U units (up 79 percent month-over-month), 145,000 Xbox 360 units (down 46 percent y-o- y) and 175,000 PS3 units (down 13 percent y-o-y). Wii U will benefit from a $50 price cut for the Deluxe set, and the introduction of a Zelda bundle that includes a free download code for The Legend of Zelda: The Wind Waker HD. Xbox 360 will benefit from a promotion at leading retailers that featured a $50 discount and a $50 gift card at several retailers on select consoles. PS3 should see a unit boost from the new $199 12 GB model and its GTA V bundle.
We do not think three hardware price cuts will be enough to offset current general demand weakness at year-end. We believe the response to the new $199 PS3 model will wane, likely as the small storage limits the gamer’s ability to download games digitally. The $50 price cut for the Nintendo Wii U will have a minor impact on console sales until the release slate improves significantly. Finally, the $50 price cut for the PS Vita does not address its biggest competitive obstacle, the plethora of mobile devices that many gamers have gravitated towards in recent years.
Michael Pachter is an analyst at Wedbush Securities.