Video games sales rebound seen despite setback

Video games sales rebound seen despite setback

Though the investors may stay on pause until signs show a clear win

Franklin Paul

Monday, April 20, 2009

NEW YORK, US: U.S. video game makers are expected to shake off slack sales later this year as top titles like "Harry Potter" return, but investors may stay on pause until signs show a clear win.

Shares of most game makers slipped on Friday after research firm NPD said total U.S. video game sales fell 17 percent in March, surprising most analysts who had expected little change from one year ago.

"We expect the negative sales trend to reverse by May, and continue to believe that the video game software sector remains highly recession-resistant," said Wedbush Morgan analyst Michael Pachter.

However, Pachter said there was a sobering quality to the numbers, which suggest that the retail belt-tightening that has hurt every consumer sector from gasoline to gadgets has finally stung the gaming business. Until now, the video game industry was expected to be resilient even as consumers "cocoon" or choose more frugal ways to spend leisure time during the recession.

Concerns about games sales weighed on stocks, led by Take-Two Interactive, whose shares fell 4.77 percent to $9.39 on Nasdaq late Friday afternoon.

Cowen & Co analyst Doug Creutz noted that Take-Two's sales in March fell 30 percent, well below his estimate of a 1 percent drop, due in part to disappointing sales of "GTA: Chinatown Wars" for the Nintendo DS handheld device.

Shares of Electronic Arts fell 1.95 percent to $18.63 on the New York Stock Exchange.

On Nasdaq, THQ Inc was unchanged at $3.95, while Activision Blizzard Inc, which said on Thursday that its first-quarter results were better than expected, climbed 4.24 percent to $10.56.

Optimism Lingers

Analysts remain optimistic. They note that March sales data were somewhat skewed by the release of blockbuster game "Super Smash Bros Brawl" in March 2008, and as Easter -- a gift-giving holiday -- fell in April this year.

"It would be naive to be Pollyannaish about the data," Pachter added. "However, as we look at the release schedule for the balance of the year, we are confident that the hard core consumer will continue to buy games, and we think that a more robust offering of casual games ... will lure the more casual consumer off of the couch and into retail stores."

IDC analyst Billy Pidgeon said that while the economy is "an inhibiting factor that will constrain growth to a degree" the industry should see double-digit growth by the end of 2009.

"I expect slowdowns into the third quarter, with some spikes for upcoming triple-A titles, but going into the fourth quarter, we should see strong hardware and software sales driven by console price reductions, bundling and big titles," Pidgeon said.

In June, Electronics Arts will release the "Harry Potter and the Half-Blood Prince" game to coincide with the film of the same name by Warner Bros Pictures, and Nintendo has casual game "Wii Sports Resort with Wii Motion."

Also due in coming months are games such as new "Splinter Cell" from Ubisoft, THQ's "UFC 2009 Undisputed," and Take-Two's "BioShock 2." September brings "The Beatles: Rock Band," the latest in Viacom Inc's MTV Networks popular "Rock Band" franchise.

Separately, video game retailer GameStop on Friday reiterated its full-year comparable-store sales growth outlook of 4 to 6 percent, and stood by its full-year earnings forecast for an 18 percent to 22 percent increase.

©Reuters