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More June Incline of 25%

More June Incline of 25%

by T.J. GoforthJuly 14, 2006

More info on the incline of game sales in June below:

Following initial results communicated late yesterday, analyst firm Wedbush Morgan Securities has confirmed that the video game industry performed better than expected across the board in June, with sales up 15 percent over the previous year, in a rebound that the firm notes may alleviate some concerns held by investors.

The firm also noted that sales of current generation games declined just $56 million over the previous year, $37 million better than the firm had previously estimated. In addition, next-generation software sales increased by $113 million, a figure that was $38 million better than Wedbush’s expectations.

The company noted that it was especially surprised by the performance of PlayStation 2 software, which was up 9 percent for the month, as well as that of the GameCube, which was up an impressive 20 percent. Overall, sales of PC software for the month were flat over last year at $78 million.

Wedbush analyst Michael Pachter commented: “We had expected next generation (360, PSP, DS) software sales to total $120 million, so the $158 million sales figure was much better than our forecast. In particular, sales of Xbox 360 software were much better than we expected, increasing sequentially from $47 million to $66 million in June. Current generation (PS2, Xbox, GC, GBA) software sales were also better than expected at $287 million, compared with our estimate of $250 million.�

According to the report, June sales were largely driven by Nintendo’s New Super Mario Brothers for the DS, as well as by new releases such as THQ’s Cars (PS2, Xbox, GC, DS, GBA, PSP, PC), Eidos’ Hitman Blood Money (Xbox 360, PS2, Xbox, PC), and Take-Two’s GTA Liberty City Stories (PS2).

Specifically, the company found that Activision’s Over The Hedge sold well above its 200,000 unit estimate, while X-Men: The Official Game came in just below this estimated figure. Atari’s software sales, which were up 47 percent from the previous month, and up 3 percent over June 2005, included positive sales of Dragon Ball Z: Shin Budokai and Driver: Parallel Lines along with Marc Ecko, The Matrix, and other Dragon Ball Z.

The report also highlighted Electronic Arts, which it noted had several impressive selling titles for the month, including NFL Head Coach, which it found sold much more than its previous estimate of 50,000 units. In addition, sales of FIFA World Cup alone represented 17.5 percent of EA’s total U.S. sales. Software sales for the month were led by Battlefield 2 Modern Combat, The Godfather, Black, Fight Night, Need for Speed, and Madden NFL 06.

Take-Two Interactive, which released both Liberty City Stories for the PS2 and Major League Baseball 2K6 for the GameCube in June, was noted to have seen an increase of 42 percent in sales over the previous month, though its sales were down slightly by 3 percent over the previous June. However, the firm commented that GTA Liberty City Stories was a solid seller for the month, beating its estimate of 300,000 units. Major League Baseball 2K6, Table Tennis, Elder Scrolls and other GTA titles also figured prominently into the company’s June sales.

Other companies included in the report were Majesco Entertainment, which saw an impressive +122 percent increase over last month, and a 14 percent jump in sales from the same period in 2005; Midway Games, which experienced increased sales of 13 percent from May, and 15 percent from the previous year due primarily to positive sales of popular releases such as NBA Ballers, Rampage, Blitz The League, and various Mortal Kombat titles; and THQ, which saw sales leap an astounding 233 percent over the previous year, and 29 percent from last June. Much of this was due to the success of games based on the Cars film franchise, which Wedbush noted sold twice its 300,000 units estimate.

Pachter stated: “We think that while this month’s sales were strong, we continue to expect uneven sales growth over the next several months, as we expect monthly year-over-year declines of 30% for current generation software sales, with next generation software sales growth largely offsetting these declines. We believe that some portion of the upside to current generation software sales in June was attributable to strong performances from movie themed titles Cars and Over the Hedge, as well as contribution from GTA Liberty City Stories, Guitar Hero, Hitman, and FIFA World Cup, each of which delivered sales with no comparable game released last June.”

He continued: “Although we believe that several current generation games will sell quite well during the summer months (notably NCAA Football and Madden NFL), we note that these big sellers are sequels to games released last summer, so year-over-year comparisons will continue to be difficult. We do not expect next generation software sales to consistently offset the decline in current generation software sales until the fall, when a strong lineup of Xbox 360 games is anticipated and launches of the PS3 and Wii are scheduled. We expect sales to be relatively flat in July and August, with sales growth likely to return to positive territory in September.”

Concerning the Xbox 360, sales of which Wedbush noted were up 26 percent sequentially, Pachter noted that “the Xbox 360 is now readily available and we expect Microsoft to sell approximately 200,000 – 300,000 hardware units monthly until the holidays when a strong lineup of Xbox 360 games is anticipated.�

The analyst added: “The Xbox 360 tie ratio was a strong 4.4, but over the next few months, we think that it is possible that software attach rates will decline to around 3.5 units per Xbox 360 hardware unit sold. This means that Xbox 360 software sales will only contribute $50 – 70 million per month, in line with the June figure. The U.S. hardware installed base currently stands at 102 million current generation consoles (including handhelds) as of the end of June 2006 (up from 95 million at year-end 2005).�

The firm’s report also added that it expects a positive market reaction to the strong sales growth, though it does expected a 4 percent decline in software sales overall for the year. In addition, the analysts continue to anticipate volatile software sales throughout the summer months due to the transition to next-generation console hardware. However, Wedbush did note that it expects that the drop in sales of current generation software will be largely offset by next-generation sales, especially once both the Wii and PlayStation 3 are launched in the fall.

Pachter concluded: “We also think that many investors are skeptical about hardware unit sales and software attach rates for the new consoles, given the relatively high prices for both hardware and software. We think that those concerns will be alleviated once the Wii and PS3 launch, with hardware sell-outs and robust software sales expected in November and December. At that time, investors should be much more comfortable owning shares of the publishers.�

About The Author
T.J. Goforth
I'm 25 and own my own home. I have one step child and a wife. I work as a Team leader at a restuarant about 50 hrs. a week. Otherwise, I surf the web or play video games.

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