The following is an excerpt from a report compiled by Michael Pachter of Wedbush Securities.
We expect May U.S. retail video game software sales data to be released by the NPD Group after the market close on Monday, June 17. We note that the data release has been delayed by a few days due to E3 the previous week.
We expect console/handheld software sales of $215 million, down 16% compared to last year’s $255 million. Despite an easy comparison of down 32%, we expect record-low monthly sales for May (the fourth decline in a row, and seventeenth in the last eighteen months) due to continued industry weakness, sluggish catalog sales, and a relatively light release slate. Our forecast calls for the lowest monthly software sales figure since April 2001, and we expect sustained positive growth to remain elusive until 2014.
Exhibit 1: Estimated Console/Handheld Software Sales (by Publisher)
By publisher ($ millions) YoY MoM
May-13E % change % change
Activision Blizzard (NASDAQ:ATVI) $24 -16% -7%
Electronic Arts (NASDAQ:EA) $22 -8% -1%
Majesco (NASDAQ:COOL) $2 -57% -4%
Nintendo (TYO:7974) $33 16% 13%
Take Two Interactive (NASDAQ:TTWO) $23 -47% -20%
Ubisoft Entertainment (EPA:UBI) $9 -74% -11%
Covered Publishers $113 -31% -4%
Overall Industry $215 -16% -15%
Publishers as % of Market 52%
Source: The NPD Group/Retail Track and Wedbush Securities estimates.
We expect May sales to be led by new releases Capcom’s Resident Evil: Revelations (360, PS3, Wii U) and Nintendo’s Donkey Kong Country Returns 3D (3DS), April release Warner Bros.’ Injustice: Gods Among Us, and Activision Blizzard’s Call of Duty: Black Ops II. We expect EA’s new release Fuse (360, PS3) to sell only 100,000 units, hurt by a release date late in the month and lackluster reviews. Nintendo’s Luigi’s Mansion: Dark Moon and Take-Two’s BioShock Infinite and NBA 2K13 are also expected to be among the month’s best sellers, with the latter helped by the NBA Playoffs.
We expect hardware sales of 32,000 Wii U units (down 13% month-over-month), 34,000 Wii units (down 51% yearover-year), 124,000 Xbox 360 units (down 23% y-o-y), roughly 96,000 PS3 units (down 26% y-o-y), 41,000 DS units (down 59% y-o-y), 123,000 3DS units (up 7% y-o-y), and 15,000 PS Vita units (down 72% y-o-y). In April, combined current-generation home console (PS3, 360, Wii, Wii U) hardware unit sales were down 38% year-over-year, while handheld hardware unit sales were down 38% as well, resulting in overall hardware unit sales being down 39% for the month.
Until current-generation consoles see price cuts, demand is likely to continue to subside as anticipation for the nextgen consoles builds. Price cut announcements are expected at E3. We expect the prices for the PS3 and Xbox 360 to drop by at least $50 as we approach the holidays, with the Wii dropping to $99. Nintendo may look to spur Wii U sales through either a price drop of $50 or a bundle that includes some of its more popular software. Sony will likely cut price for its PS Vita handheld, which has struggled since release due in part to its high starting price point of $249.
We expect double-digit packaged goods declines to persist for much of 2013. While we expect positive growth to return in September (the launch month of Take-Two’s Grand Theft Auto V), we do not expect sustained growth until 2014, as new consoles from Sony and Microsoft are expected to launch late this year. In our view, the very poor performance of March releases suggests that only the hardest core gamers are interested in purchasing new games, and then only in the month of launch. Should this phenomenon persist, it may particularly impact Grand Theft Auto V reorders later this year.
Michael Pachter is an analyst at Wedbush Securities.
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