February 2007 Video Game Sales Preview: Expect 20% Sales Growth
We expect February U.S. retail video game console software sales data to be released after market close on Thursday, March 15. We forecast sales of $415 million, up 20% compared to last years $345 million. There is some risk to variance from our estimate, as it is based on month-over-month flat sales forecasts for the PS3 and Wii. Should sales of those platforms materially differ from weekly sales levels in January, there may be upside or downside to our software sales growth estimates.
Our estimate reflects $240 million in sales contribution from new platforms (PS3, Wii, 360, PSP and DS), representing year-over-year growth of $140 million, or 141%. We expect current generation software sales of $175 million, reflecting a year-over-year decrease of $70 million (-29%).
Our forecast presumes sell through of 200,000 PS3 and 350,000 Wii hardware systems, with an attach rate of 2.4 software units. These figures reflect flat hardware sales month-over-month, adjusted for the extra week in January.
Our overall estimates assume PS2 software sales of $120 million, and presume that strong sales trends continue (PS2 software sales were down only 7% last month on a pro forma basis).
We note that our estimates include $70 million in software sales for the PS3 and Wii, which is based on our expectation of a tie ratio of 2.4 units for each hardware unit sold (350,000 Wii hardware units x $50 ASP x 2.4 plus 200,000 PS3 hardware units x $60 ASP x 2.4). Our expected tie ratio is similar to last months 2.2 tie ratio for the Wii and 2.7 tie ratio for the PS3.
We expect February sales to be driven by continued strong sales of Activisions Guitar Hero II along with other top holiday releases. The top February releases were Take-Twos MLB 2K7 (PS3, PS2, 360, PSP), Segas Virtua Fighter 5 (PS3), Microsofts Crackdown (360) and Electronic Arts The Sims 2 Seasons (PC). We note that 10 games sold over 100,000 units in January, and we expect seven in February (compared to five last year).
We expect the recent sales strength on the PS2 to continue through at least March, given strong sell-through performance over the past eight months and negative high teen percentage comparisons for the next two months. We note that the negative comparisons for PS2 software sales reverse in April, making continued sales strength less likely at that time. Due to the high level of software support expected for the PS2 platform for the foreseeable future, we expect only modest year-over-year declines (approximately 20%) for the first half of 2007. The degree of decline in the second half of the year will depend upon next generation.
