Analyst: High-Profile Releases Continue to Drive Gaming Industry
The following is an excerpt from a report compiled by Michael Pachter of Wedbush Securities.
After the market close on Thursday, NPD is expected to release June 2014 (five-week period ending July 5) U.S. retail video game software sales data.
We expect console/handheld software sales of $305 million, up 3 percent compared to last year’s $296 million. We expect sales to be up year over year for the second consecutive month, driven primarily by several high-profile May releases, including Nintendo’s (NTDOY.PK) Mario Kart 8 and Ubisoft’s (UBSFY.PK) Watch Dogs. On June 2, Nintendo announced that Mario Kart 8 sold more than 1.2 million units across the Americas, Europe, and Japan in its first weekend, making it the fastest-selling Wii U game of all time.
According to IGN, on June 27, Nintendo announced that the game had sold-through approximately 2 million units worldwide. On June 3, Ubisoft announced that Watch Dogs sold-through over 4 million copies in its first week, while on July 10, it announced sell-in of more than 8 million units, both company records for a new game and industry records for a new IP at launch.
Fellow May releases Bethesda Softworks’ Wolfenstein: The New Order and Sony’s (NYSE:SNE) MLB 14: The Show (PS4 SKU) should also be among the month’s top performers. We expect Activision Blizzard’s (NASDAQ:ATVI) Transformers: Rise of the Dark Spark (PS4, XB1, PS3, 360, Wii U, 3DS), Electronic Arts’ (NASDAQ:EA) EA Sports UFC (PS4, XB1), and Nintendo’s Tomodachi Life (3DS) to be the best-selling June releases.
Software sales should be positively impacted by the June 9 introduction of a new $399 version of the Xbox One that does not include Kinect. We do not expect sales to be up year over year for a sustained period until the December quarter, when next-gen strength is expected to fully offset current-gen weakness. We continue to expect current-gen price cuts before year-end.
May U.S. console/handheld software sales were $274 million, up 57 percent year over year driven by the aforementioned top-tier releases. The Microsoft (NASDAQ:MSFT) and Sony current-gen and next-gen consoles accounted for the bulk of May software sales, with Microsoft gamers spending more on current-gen content and Sony gamers more focused on next-gen content, particularly Watch Dogs on PS4. Mario Kart 8 drove Wii U software sales, but the console continues to lag its next-gen peers.
Exhibit 1: Estimated Console/Handheld Software Sales (by Publisher)
|Publisher||June 2014 Earnings (in Millions)||Year-Over-Year % Change||Moth-Over-Month % change|
|Take Two Interactive||$21||(11%)||55%|
|Five Covered Publishers||$200||43%||9%|
Source: The NPD Group/Retail Track and Wedbush Securities estimates.
We expect hardware sales of 150,000 Xbox One units (up 94 percent month over month), 255,000 PS4 units (up 30 percent month over month), and 67,500 Wii U units (up 61 percent year over year). For current-gen, we expect 65,000 Xbox 360 units and 42,000 PS3 units. We expect the new $399 Xbox One SKU without Kinect to help sales, but do not expect Xbox One unit sales to exceed those of the PS4. In April, Sony Computer Entertainment announced PS4 sell-through of over 7 million consoles worldwide as of April 6, while Microsoft announced Xbox One sell-in of more than 5 million consoles worldwide since launch.
Last month, we attended the E3 Expo in Los Angeles and met with a number of companies presenting products at the show. We were impressed by the graphical quality of the games on display, with several showing off the power of the next-generation consoles from Sony and Microsoft. In particular, we were impressed by Activision’s Call of Duty: Advanced Warfare, Ubisoft’s Far Cry 4 and Assassin’s Creed Unity, and EA’s sports titles.
Michael Pachter is an analyst at Wedbush Securities.