Analyst: February To Show Software Slump?

EEDAR analyst Jesse Divnich says that February's upcoming NPD results will show the first time video game software sales have seen a year-over-year decrease since October 2008.

Divnich forecasts a 2 percent decline to $659 million for software thanks to a "weak but aggressive" retail environment and softness in the music genre, whose higher price points have helped contribute to large growth numbers in recent months.

But the industry is finding ways to do better numbers outside of traditional retail channels, Divnich asserts -- while sales of Grand Theft Auto IV are expected to top out at $3 million worldwide for the month of January, he says the Lost & Damned expansion likely accounts for $18 million in revenue.

"As we move forward, we expect that 6 to 1 ratio to grow even larger as digitally distributed games don’t have to succumb to retail pressures and loss of shelf space/visibility," says Divnich.

"Long-term, we expect Lost & Damned to produce up to $40 million in total worldwide revenue. We expect the original title, Grand Theft Auto IV to produce over $800 million in worldwide revenue throughout its lifetime."

EEDAR expects the lull trend in game sales to continue over the next few months thanks to tough comparisons over last year's releases of games like Smash Bros. Brawl and Grand Theft Auto IV.

But Wedbush Morgan analyst Michael Pachter is more optimistic about the industry's prospects for a strong February. Pachter predicts $710 million in software sales, which would represent a 5.6 percent increase year-over-year thanks to Street Fighter IV and Killzone 2.

"Strong software performance is sustainable well into 2009," Pachter suggests -- although he agrees with Divnich in that challenging year-over-year comparisons will affect growth.