We expect NPD Funworld TRSTS U.S. retail video game console software sales data for the month of February (fourweek period ending February 26, 2005) to be released on Thursday, March 10, after the market close...
...Sales typically build up dramatically in the holiday months and then fall back to much lower levels after the holidays. We expect February sales of $375 million (up 8% vs. February 2004s $348 million), due to the release of several big games along with continued catalog sales of key holiday releases. US videogame console software sales for 2004 were $6.2 billion compared with 2003 sales of $5.8 billion (a yearover- year increase of 8%). Comparable sales over the back half of 2004 were strong, but declined 1% in December due to the impact of a significant hardware shortage along with a greater number of budget-priced games sold and lower contribution from the mega hits Microsofts Halo 2 and Take-Twos GTA San Andreas. January 2005 software sales were flat compared with January 2004, but we expect to see growth accelerate during the next several months, primarily due to easy comparisons for the February through May time period.
In February, we expect continued strong sales of Take-Twos GTA San Andreas (PS2), Microsofts Halo 2 (Xbox), and Electronic Arts NFS Underground 2 (PS2, Xbox, GC, GBA, DS). The top February releases were Electronic Arts NBA Street 3 (PS2, GC, Xbox), Namcos Tekken 5 (PS2), and Sonys Gran Turismo 4 (PS2). We note that there were 11 games that sold over 100,000 units in January, and we expect 8 in February (compared to 7 last year). We expect to see continued contribution from software sales for Nintendos DS platform.
In 2004, ASPs held relatively steady, ending the full year down 1% ($30.76, compared to 2003s $31.12), while full year unit sales were up 9% (from 186 million to 203 million). These figures compare to our forecast at the beginning of the year for an ASP decline of 5% and unit sales growth of 17%. In part, we believe that the higher ASPs are attributable to a larger than expected number of full-priced, high quality games. We believe that the lower unit sales growth is attributable to lower than expected hardware unit sales, primarily due to supply issues. We note that our early-year forecast assumed a PSP launch in 2004, higher sales of PS2 (by over 2 million units), and slightly higher sales of Nintendos DS.
For 2005, we expect to see hardware sales grow as supply issues are addressed and handheld units ramp production. We anticipate that ASPs will decline by approximately 5%, reflecting a decline in console game pricing offset by new handheld software prices that are significantly higher than prices for older generation handheld software, and an increase in pricing for NFL games. In January, ASPs were down 5% while unit sales were up 5%.
We forecast US console software sales growth of 10% for 2005. For February, we expect ASPs to be down approximately 3% and unit sales to be up approximately 11%. The U.S. hardware installed base is currently at 76 million current generation consoles (including handhelds) as of the end of January 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 will be especially costly for the company. It is possible that the company will choose to maintain pricing for the current generation Xbox (we expect an announcement at E3 in May).
