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[sonycowboy]

Prediction Thread here:
http://forums.gaming-age.com/showthread.php?t=42588

March 2005 NPD Video Game Sales Preview

We expect the March U.S. retail video game console software sales data to be released after the market close on Thursday, April 14. We forecast sales of $460 million, up 11% over last year and we believe that investor expectations are low for industry sales growth this year, and think that expectations will change as the industry continues to deliver double-digit sales growth. We continue to recommend that investors accumulate Activision, Atari, Majesco, THQ, and Take-Two shares.


Activision’s sales should be $20 million, up 23% over last year.
Atari is expected to deliver $13 million in sales, up 8% over last year.

We expect Electronic Arts’ sales to be $85 million, down 1% over last year.
We expect Majesco sales to be $3 million, up 152% compared to last year.
Midway's sales are expected to come in at $6 million, down 42% from last year.
We expect Take-Two to deliver $18 million in sales, flat with last year.

THQ’s sales should be $30 million, up 6% over last year.

We expect March sales of $460 million (up 11% vs. March 2004’s $414 million), due to the release of several big games along with an expected strong contribution for software for the new Sony PSP. We note that a large number of PSP hardware units were sold as part of a bundle (including software). The NPD group has historically counted software sold as part of a bundle as hardware, so the tie ratio for PSP software may appear modest at first
glance. We anticipate that 450,000 PSP software units were sold over the last week of the month, not including bundled software.

In March, we expect continued strong sales of Electronic Arts’ NBA Street 3 (PS2, GC, Xbox), and Sony’s Gran Turismo 4 (PS2) along with new releases of Capcom’s Devil May Cry 3 (PS2), Sony’s God of War (PS2), and Ubi Soft’s Splinter Cell 3: Chaos Theory (Xbox, PC). In addition, we believe that several titles for Sony’s PSP launched on March 24 contributed to strong software sales. We note that there were 9 games that sold over 100,000 units in February, and we expect 12 in March (compared to 11 last year).

In 2004, ASPs held relatively steady, ending the full year down 1% ($30.76, compared to 2003’s $31.12), while full year unit sales were up 9% (from 186 million to 203 million). For 2005, we anticipate that ASPs will decline by approximately 5% (to around $29.50), reflecting a decline in current generation console game pricing partially offset by significantly higher prices for new handheld software, and an increase in pricing for NFL games. We also expect unit sales to end the year up 15%. We forecast US console software sales growth of 10% for 2005. ASPs year-to-date are down 5% and unit sales up 11%. For March, we expect ASPs to be down approximately 5% and unit sales to be
up approximately 15%.

The U.S. hardware installed base is currently at 77 million current generation consoles (including handhelds) as of the end of February 2005 (up from 75 million at year end 2004). Console prices remained stable through year-end (current U.S. prices are Nintendo GameCube $99, Microsoft Xbox $149, and Sony PS2 $149), with the next round of cuts likely some time this year (when supply and demand are back in balance). We believe that Microsoft currently loses money on each console sold, so further price cuts could be especially costly for the company. It is possible that the company will choose to maintain pricing for the current generation Xbox following the launch of the next generation Microsoft console (we expect an announcement prior to E3 on May 12th). Should Microsoft choose to maintain pricing for the Xbox, we believe that Sony will cut price on the PS2 in order to capture incremental market share in front of the launch of the Xbox Next.

Activision (ATVI—Buy, $15.60 as of close 4/11/05, $22 Price Target)
Releases during March: 3/23 Spider-Man 2 (PSP), 3/23 Tony Hawk's Underground 2 Remix (PSP).
We estimate that Activision generated approximately $20 million in sales for the month (compared with $22 million last month and $16 million last March). We believe that sales were led by the new releases of Spider-Man and Tony Hawk on the PSP, with each selling 35,000 units. We expect that catalog titles of Tony Hawk's Underground 2, Call of Duty, Spider-Man 2, Shrek 2, X-Men: Legends, and Shark Tale also sold well. We note that our estimate puts Activision’s quarter-to-date sales at $82 million in the U.S. ($66 million wholesale), and our publishing estimate for the quarter is only $90 million. This implies that the company may have some upside to guidance and consensus estimates when it
reports the quarter in early May.

Atari (ATAR—Buy-Focus List, $2.84 as of close 4/11/05, $3.50 Price Target)
Releases during March: 3/15 Act of War (PC), 3/15 Backyard Baseball 2006 (GBA), 3/15 Retro Atari Classics (DS),
3/22 Dragon Ball Z: Sagas (PS2, Xbox, GC), 3/22 DRIV3R (PC).
We estimate that Atari generated approximately $13 million in sales for the month (compared with $9 million last month and $12 million last March). We believe that Dragon Ball Z: Sagas, which we estimate sold 80,000 units in its first month, led sales. We believe that catalog sales were led by other Dragon Ball Z titles along with other various games.

Electronic Arts (ERTS—Hold, $50.23 as of close 4/11/05, $58 Price Target)
Releases during March: 3/8 Rugby 2005 (PS2, PC, Xbox), 3/23 Need For Speed Underground Rivals (PSP), 3/23 NFL Street 2 Unleashed (PSP), 3/23 Tiger Woods PGA Tour (PSP).
We estimate that EA generated $85 million in sales for the month (compared with $84 million last month and $86 million last March). We expect sales to be led by NBA Street 3, which we estimate sold 150,000 units (on top of the 401,000 units it sold last month), and MVP Baseball 2005, which we estimate sold a combined 150,000 units (in addition to the 234,000 sold last month). We believe that EA’s PSP titles sold a combined 150,000 units. We expect to see continued strong sales of James Bond, Harry Potter, Need For Speed Underground, Lord of the Rings and Medal of Honor as well as from its catalog of sports games.

Midway Games (MWY—Hold, $10.36 as of close 4/11/05, N/A Price Target)
Releases during March: 3/21 NARC (PS2, Xbox).
We estimate that Midway generated $6 million in sales for the month (compared with $5 million last month and $10 million last March). We expect modest sales of 50,000 for its new release NARC. We believe other sales were led by catalog sales of Mortal Kombat: Deception along with NBA Ballers, PSI-Ops, MLB Slugfest, SpyHunter, and other Mortal Kombat titles.

Take-Two Interactive (TTWO—Buy, $39.77 as of close 4/11/05, $46 Price Target)
Releases during March: 3/22 Ford Racing 3 (PS2).
We estimate that Take-Two generated $18 million in sales for the month (compared with $21 million last month and $18 million last March). We believe that sales of GTA San Andreas were again quite solid, with an estimated 100,000 units sold in its sixth month of release (on top of the 5.5 million units sold so far). We believe that Major League
Baseball 2K5 sold 150,000 units in its second month of release. We expect continued strong sales of ESPN sports games: NFL 2K5, NBA 2K5 and NHL 2K5, and believe that each of these games sold a competitive number of units vis-à-vis its Electronic Arts counterpart. We believe that Grand Theft Auto, Max Payne, Midnight Club, and Conflict led catalog sales.

THQ (THQI—Buy, $28.53 as of close 4/11/05, $37 Price Target)
Releases during March: 3/10 MX vs. ATV Unleashed (PS2, Xbox), 3/28 Full Spectrum Warrior (PS2).
We estimate that THQ generated $30 million in retail sales for the month (compared with $27 million last month and $28 million last March). We believe that the new release MX vs. ATV Unleashed sold 200,000 units, and Full Spectrum Warrior sold a modest 50,000 units. We believe that its top holiday releases, WWE Smackdown vs. Raw, The Incredibles, and The SpongeBob SquarePants Movie led sales. We also expect continued strong sales of WWE, Nickelodeon, and Finding Nemo titles.

Market Share Analysis
Although it is difficult to estimate the total sales denominator for calculating market share, based on our estimate for total industry sales, our estimate for each publisher’s market share is as follows:

Market Share By Company (US Retail Sales)
Mar 2005E Mar 2004A
ATAR 4.3% 2.9%
ATVI 2.8% 3.9%
COOL 0.7% 0.3%
ERTS 18.4% 20.7%
MWY 1.3% 2.5%
THQI 6.5% 6.8%
TTWO 3.9% 4.4%

Conclusion
We believe that investors expect sales growth to be flat for the full year, so we think that there may be some positive reaction to the March sales data if it shows double-digit growth, as we have forecast. Should the data fall short of our estimate, we do not expect investors to become overly concerned about valuations of the video game publishers.
The publishers’ stocks have all suffered to some extent as a result of Electronic Arts’ preannouncement three weeks ago. We think that investor sentiment is relatively downbeat, and that expectations are quite low for the quarter and
for the year. Should the data come in more robust than our forecast, we expect valuations to firm up, as many may perceive sales strength early in the year as signaling a positive trend for 2005.

We expect Take-Two shares to trade in a narrow range until early returns are in from its April releases. We expect EA’s results to be in line with investor expectations, and do not foresee strong market reaction to the NPD data. We think that there could be positive reaction to the NPD data for Activision, Atari, Majesco and THQ, especially if any of
these companies delivers upside to our estimates. We do not expect Midway shares to react materially to the NPD data.

 

[Jacobi]

WTF ? Maybe the reason are the bundles.

 

[UbiSoftologist]

You forgot Phantom Dust

Michael Pachter's prediction:

Majesco Entertainment

Releases during March: 3/8 Phantom Dust (Xbox).

We estimate that Majesco generated $3 million in sales for the month (compared with $3 million last month and $1 million last March). We expect modest sales of 15,000 for its new release Phantom Dust. We believe that sales were led by GBA Video products, which we estimate sold 70,000 units combined (compared with February’s 79,000 units), along with catalog sales of BloodRayne and various GBA budget titles.

 

[jarrod]

Yow, pretty low PSP sales. :/

THUG2 Remix~ 35,000
Spider-Man 2~ 35,000
EA catalogue (3 SKUs)~ 150,000

 

[Ignatz Mouse]

Worth noting that those are all the $50 games. I'd like to see how Untold Legends, Ridge Racer, WO, TM:HO, Lumines all did.

It's also possible that the large number of titles meant that no single one did knockout business.

 

[sonycowboy]

Yow, pretty low PSP sales. :/

THUG2 Remix~ 35,000
Spider-Man 2~ 35,000
EA catalogue (3 SKUs)~ 150,000

... due to the release of several big games along with an expected strong contribution for software for the new Sony PSP. We note that a large number of PSP hardware units were sold as part of a bundle (including software). The NPD group has historically counted software sold as part of a bundle as hardware, so the tie ratio for PSP software may appear modest at first
glance. We anticipate that 450,000 PSP software units were sold over the last week of the month, not including bundled software.

Well, he seems to be under the impression that the bundles will be reported under the hardware, which I haven't found to be the case, when the software isn't packed in with the hardware and so he seems to be cutting the software numbers by what could be over 1/2.

It just doesn't fit with what I've seen in the NPD database, beyond a few random skus here and there.

 

[jarrod]

Worth noting that those are all the $50 games. I'd liek to see how Untold Legends, Ridge Racer, WO, TM:HO, Lumines all did.

It's also possibel that the large number of titles meant that no single one did knockout business.

Good observations, I hadn't even noticed they were all the $50 titles. That could affect things greatly. I'd agree that the crowded launch could generally mean lower sales all around too. There was no singular "gotta have it" game like Mario 64 or Halo to push ahead of the pack... I'm wondering if any PSP title broke 100,000 now actually.

Well, he seems to be under the impression that the bundles will be reported under the hardware, which I haven't found to be the case, when the software isn't packed in with the hardware and so he seems to be cutting the software numbers by what could be over 1/2.

It just doesn't fit with what I've seen in the NPD database, beyond a few random skus here and there.

Yep, NPD only counts manufacturer bundles iirc and any PSP bundles wouldn't been done at retail alone. I dunno what they're thinking then?

 

[Ignatz Mouse]

I'm actaully happy that the $50 may have doen badly-- so that we'll see mroe games at $40.

Unless, of course, that means making shovelware.

 

[jarrod]

I'm actaully happy that the $50 may have doen badly-- so that we'll see mroe games at $40.

Unless, of course, that means making shovelware.

Actually, given that 450,000 figure... there then only would've been about 220,000 sales total between all the $40 games (Lumines, DarkStalkers, Ridge Racer, WipEout, Ape Escape, Twisted Metal, Untold Legends, Dynasty Warriors & the 989 Sports stuff). I'm not sure lower than expected sales will be attributed to the price points given that... though all these numbers could be fucked since we're not sure exactly what's consituted in bundle sales or not.

 

[Ignatz Mouse]

A little more thought:

1) 450,000 K means a bad tie ratio, unless hardware sold less than we think it did.

2) 220,000 of that was EA and Activision. Meaning that 230,000 are other titles. Of those other titles, contenders for big sellers (IMHO): Ridge Racer, Untold Lengeds, Wipeout, Twisted Metal, Metal Gear Acid (on name alone). UL seems to be the big seller at EB, but that doesn not always translate into being top dog elsewhere.

Yeah, probably no game over 100K (yet) in that case.

 

[Jonnyram]

I would guess the PSP tie ratio would be around 1:1 for launch period anyway, so there's nothing too outrageous about those estimates. Same goes for most launch hardware really.

 

[heidern]

You know, it would be really funny if the the tie ratio was 1:1 and there were only 450,000 sales for the month. That would be a fun thread to see

But I bet Wedbush did something really simple like say there is s 1:1 with unbundled and bundled games meaning total software sales of 900,000 and a tie ratio of 1.5:1 which isn't too bad. It would put Tony Hawk and Spiderman at 70K each, and probably one or two of the EA games htting 100K which was roughly inline with the prior expectations.