NPD Data Preview: Entertainment Software Sales and More

The following is an excerpt from a report compiled by Michael Pachter of Wedbush Securities.

We expect October U.S. retail video game console software sales data to be released by the NPD Group after the market close on Thursday, November 8.

We expect console software sales of $435 million, down 25% from last year’s $577 million due to a worse-thanexpected debut for Electronic Arts (NASDAQ:EA)’ Medal of Honor: Warfighter, difficult comparisons and a thinner release slate than in past years. Although the comparison this October of down 5% isn’t particularly challenging at first glance, October 2011 and October 2010 had other top-tier releases in addition to EA’s annual shooter and a non-sports September release that performed well. October 2011’s new releases included EA’s Battlefield 3 (which outperformed Warfighter), Warner Bros.’ Batman: Arkham City, and Bethesda Softworks’ Rage, in addition to the previous month’s Microsoft’s (NASDAQ:MSFT) Gears of War 3, while October 2010’s new releases included EA’s original  Medal of Honor, Bethesda Softworks’  Fallout: New Vegas, and Microsoft’s Fable III, in addition to the previous month’s Halo: Reach. This year, the most high-profile top-tier releases were the aforementioned Warfighter, which EA has already disclosed has underperformed expectations, and two new Pokémon games on a struggling hardware device, the DS. As a result, software sales will be lower than we previously anticipated.

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Exhibit 1: Estimated Console Software Sales (by Publisher)

By publisher ($ millions)                                                                                         YoY                                  MoM

Oct-12E                  % change                         % change

Activision Blizzard (NASDAQ:ATVI)                            $35                             -1%                                     25%

Electronic Arts                                                                             $90                           -44%                                  -58%

Majesco (NASDAQ:COOL)                                                     $4                                16%                                    42%

Nintendo (TYO:7974)                                                         $60                              73%                                    49%

Take Two Interactive (NASDAQ:TTWO)               $110                            103%                                      8%

THQ (NASDAQ:THQI)                                                             $8                              -23%                                  -28%

Ubisoft Entertainment (EPA:UBI)                            $22                              -39%                                 131%

Covered Publishers                                                              $329                                 -2%                                 -20%

Overall Industry                                                                   $435                              -25%                                  -13%

Publishers as % of Market                                                   76%

Source: The NPD Group/Retail Track and Wedbush Securities estimates.

We expect October console software sales to be led by Activision’s new release Skylanders: Giants (Wii, 360, PS3, 3DS), EA’s new release Medal of Honor: Warfighter (360, PS3, PC), Nintendo’s new releases Pokémon Black Version 2 (DS) and Pokémon White Version 2 (DS), Take-Two’s September release Borderlands 2, and Ubisoft’s new release Just Dance 4 (Wii, 360, PS3). We note that Ubisoft’s Assassin’s Creed III (360, PS3, PS Vita) and EA’s Need for Speed: Most Wanted (360, PS3, PS Vita, PC), the latter of which is typically a better performer overseas, were released on October 30, three days after the retail close, and as a result, the sales of these games will be reflected in November’s NPD results.

We expect hardware sales of 85,000 Wii units (down 66% year-over-year), 305,000 Xbox 360 units (down 22% y-o-y), 226,000 PS3 units (down 9% y-o-y), 105,000 DS units (down 42% y-o-y), 220,000 3DS units (down 12% y-o-y), and 40,500 PS Vita units. Hardware trends continued their weak pattern in September, and we expect weak sales once again. Unit sales were down y-o-y for every platform for a tenth consecutive month, despite price cuts for nearly all models over the last year or so. PS3 and Xbox 360 unit sales were down 46% and 38%, respectively, while Wii sales were down 67% and under 100,000 units for the sixth consecutive month. Combined 3DS and DS unit sales were down 9% compared to last September, and have not shown positive growth since October 2011. Combined PSP and PS Vita unit sales were down 23% in the PS Vita’s eighth month.

Michael Pachter is an analyst at Wedbush Securities. 

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