Mixed results for industry's health
Ahead of the official NPD Group's sales figures for April, analysts as well as mixed earnings reports are painting varying pictures of the videogame industry's current health.
Wedbush Morgan analyst Michael Pachter is predicting that when compared to 2008, April 2009 will see a 17 percent fall from $660 million to $522 million in sales.
Like others, Pachter is pointing to the weak release of games in this time period as the main contributing factor for the decline.
By comparison, last year's release of "GTA IV" and "Mario Kart" for the Wii propelled sales with more than 4 million units sold between the two games
He also stated that waning sales of last generation software are another factor for the weaker numbers.
Unfortunately, this forecast does not bode well for Sony, as its aging Playstation 2 had proven to be a reliable moneymaker for the electronics giant and was a key element in offsetting the monumental losses incurred by their newer Playstation 3 console.
Pachter said, "We expect PS2 software sales to continue to erode, with a 60 percent year-over-year decline, following declines of 60 percent in Q1 2009, and 31 percent for all of 2008. After this month, we will no longer highlight PS2 software sales, as the platform's impact on the current cycle is becoming less relevant."
However, for rival console maker Nintendo, a 10 percent rise in sales for the year has boosted the company's profits to a record setting $2.82 billion.
For the year ending March 31, Nintendo easily managed to post $18.1 billion in sales despite the global recession.
In a statement, Nintendo explained that, "The videogame industry, which was less impacted by the economic downturn than most industries, remained relatively stable in spite of the large consumer spending decline."
Nevertheless this good news has been tempered by a fiscal report from Activision Blizzard, which stated that sales of their Wii products fell from 22 percent to 14.
This unexpected fall has prompted worry among analysts who fear that the popularity of the Wii may have reached a plateau.
Activision Blizzard CEO Robert Kotick said in a statement about the Wii's affect on his company that, "It certainly causes concerns generally, but from a product strategy standpoint, we don't have the percentage of market share that other companies have."
Fortunately the CEO is correct in his assessment, as the same report also found that while interest in the Wii may be waning, Activision Blizzard still managed to pull in nearly $1 billion in sales for the first quarter of 2009.
This figure beat company estimates by more than $100 million and caused the publishing giant to raise their full 2009 estimates from $4.2 billion to $4.3 billion with expected earnings of 24 cents per share.
Kotick said, "Our better-than-expected first quarter results were driven by strong global consumer response to the "Call of Duty" and "Guitar Hero" franchises and Blizzard Entertainment's "World of Warcraft," despite challenging economic times."
He added that, "We are raising our calendar year 2009 financial outlook. Additionally, we expect to deliver record calendar year non-GAAP operating margins of 25 percent. Our high-quality franchise portfolio, industry leading operational capabilities and solid balance sheet should enable us to take full advantage of the opportunities afforded by the expanding interactive entertainment market and enable us to deliver continued superior returns to our shareholders."
