Analysts are still weighing in on the disappointing U.S. video game sales results for January. According to Wedbush Morgan Securities' Michael Pachter, the sales slump can be largely attributed to the decline of Nintendo hardware and software.
"It seems that monthly software sales declines will never end, with January marking the 10th month of sales declines in the last 11. It was disconcerting that after relatively solid results of -3% and -7% in November and December, January saw a return to double-digit declines, and the magnitude of the decline in the face of a solid software lineup gives us pause," he commented. "We attribute a portion of the large decline to lackluster sales of Nintendo hardware, which we think were caused by supply shortages. Nintendo’s monthly hardware sales have been quite volatile, with outrageously high figures in December for the DS (3.3 million, up 9% year-over-year) and Wii (3.8 million, up 77%) followed by outrageously low figures in January (down 17% and down 77%, respectively). The combined decline in Wii and DS hardware was over 300,000 units, suggesting that the two Nintendo platforms contributed to a year-over-year decline of around $30 million in software sales overall."
While Xbox 360 software sales were flat and PS3 software sales increased $26 million, Wii software sales fell $49 million compared to January 2009. And the Wii hardware was the only console of the three to see a year-over-year decline. Xbox 360 hardware was up 8% and PS3 hardware was up 36%, but Wii hardware dropped 31%.
And yet, it almost seems like this is something Nintendo is proud of. "Holiday shoppers depleted our supplies even after our fourth holiday season," boasted Cammie Dunaway, Nintendo of America's executive vice president of Sales & Marketing. Note to Cammie: They shouldn't have depleted it; Nintendo clearly is having trouble properly allocating shipments, which is quite strange this far into the game.
Looking ahead to the next few months, Pachter is now not as optimistic as he once was. The industry should still bounce back in 2010, but it could take longer, and investors are now becoming more cautious, waiting for evidence of growth.
"We had expected January sales to come in only modestly lower, and the magnitude of the decline suggests to us that February will present another down sales month. We previously had high hopes for the February release schedule, but lower than expected review scores for the two key games released in the month (BioShock 2 and Dante’s Inferno) make us less confident that February sales will rebound to positive territory. However, we think that the release schedule in March, with Battlefield Bad Company 2, Final Fantasy XIII and God of War III is sufficiently strong to drive sales back into the plus column," Pachter said. "In April, comparisons become much easier, and we think that hardware sales will drive year-over-year software sales growth into the double-digits."
He added, "Now that most of the publishers we cover have reported, we think the January sales results may drive prospective investors to the sidelines. Activision and Electronic Arts each expect 2010 industry sales to be flat to down, while Ubisoft expects sales to be flat, and THQ expects them to be flat to up slightly. We think that software sales growth, which is the product of console/handheld unit growth, price declines and tie ratio declines, is virtually certain to be positive for the year, as we see overall hardware sales growth of 25%, relatively stable pricing, and tie ratio declines of no more than 15%."
