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US analysts warn of declining sales for March

Just ahead of the release of NPD sales figures expected on Monday, top industry analysts from Wedbush Morgan Securities and Lazard Capital Markets are warning investors of a serious year-on-year decline in software sales.

Just ahead of the release of NPD sales figures expected on Monday, top industry analysts from Wedbush Morgan Securities and Lazard Capital Markets are warning investors of a serious year-on-year decline in software sales.

Earlier this week, Michael Pachter of Wedbush Morgan offered estimates of a total March sales figure of USD 445 million, marking a drop of 18 per cent on the previous year.

Despite strong sales of The Godfather, Elder Scrolls IV: Oblivion and Kingdom Hearts II, Pachter suggests that no title will come close to last year's sales of Gran Turismo 4 - nor the significant revenue generated from PSP software sales that accompanied the handheld's US launch.

Aside from the difficulty of direct comparisons with the previous year, consistently waning sales of current generation titles and a noticeable lack of next-generation software to redress the balance are going to have a major impact on sales figures, analysts suggest.

"It appears that 2006 is following a similar pattern to 2000, when the last console transition began," Pachter stated. "Consumers have slowed purchases of current generation console software while waiting for the opportunity to purchase an incredible next-generation console, the Xbox 360, and its associated software."

The glum forecast has been echoed by Colin Sebastian of Lazard Capital Markets, who attributes the decline to a rather vague "challenging retail environment", but further specifies that a lack of baseball games could also be a contributory factor when comparing to the previous year. March 2005 saw the release of a baseball title from Take 2 and EA, both of which sold over 900,000 copies in the month of release.

Both analysts predict overall console sales for 2006 will be down approximately three per cent, though Michael Pachter suggests that the drawn out console hardware transition is far fro complete, and its effect on the industry as a whole has only just begun.

"The worst effects of the transition lie ahead," Pachter told investors. "Although we expect a brief respite from double-digit sales declines in April, when Microsoft is likely to double the supply of Xbox 360 hardware units, we expect a return to software sales declines over the next several months."

Presumably, it is not until Nintendo and Sony fully enter the next-generation market with their respective hardware launches that the US software market, and the industry as a whole, will finally be able to redress the balance and begin to shape an increase in sales.

Author

Paul Loughrey

Contributor