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Pachter: Industry in permanent decline

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Pachter: Industry in permanent decline

Analyst says May was “stacked in favour of dramatic growth”; Nintendo decline is “remarkable”; Digital ascendancy is upon us

“We expect investors to remain spooked by the May results, as they are beginning to reinforce the notion that the video game industry is in a state of persistent secular decline.”

That’s the somewhat startling assessment of famed games analyst Michael Pachter in light of further declines in the US market in both April and May.

“The May line-up was indeed stacked in favour of dramatic growth, but despite May’s easy percentage and dollar comparisons and long-anticipated debuts for a handful of games, it became clear that several of May’s games performed well below expectations as the month progressed,” he stated in his official reaction.

In particular, Pachter singled out Nintendo for the fact that software sales continue to dwindle despite its growing install base.

“Wii software sales were down 29 per cent year-over-year and DS software sales were down 13 per cent, while PS3 software sales were up 58 per cent and Xbox 360 software sales were up 29 per cent,” he added.

“We think this is remarkable, given growth in the Wii hardware installed base of 44 per cent and growth in the DS installed base of 33 per cent over the last 12 months. In our view, this indicates that Nintendo’s customers either are not finding enough software to satisfy their needs, or need less software than the typical Sony or Microsoft customer.”

That’s not to say that Nintendo was the only offender. Pachter also laments the fact that a number of key titles – Alan Wake, Prince of Persia, Blur, Shrek, Lost Planet 2, Iron Man 2 and Skate 3 all sold fewer than 200,000 units.

The conclusion Pachter draws from the continued slump in the US market is a dark one. He thinks that the games industry isn’t just in the downward part of the current cycle – he reckons it’s facing a permanent decline.

“We expect investors to remain spooked by the May results, as they are beginning to reinforce the notion that the video game industry is in a state of persistent secular decline,” he warns. “We think it is inevitable that there will be a shift in delivery of video games away from packaged products and toward digital downloads, but we don’t expect the shift to manifest itself in a material way in 2010.

“Rather, we believe that the publishers and developers of games have created more robust multiplayer content in recent years that has resulted in core gamers playing the same games for much longer, on average, than they did in the past, leading to lower sales of new games.

“We expect the publishers to monetise the value created by online play, led by Activision. We continue to expect Activision to find a way to monetize the 1.75bn hours of Call of Duty Modern Warfare 2 online play on the Xbox 360 in the first five months following the game’s release.

“We expect investors to stay on the sidelines until they see evidence of a sustainable rebound in sales. The modest rebound in May is likely to be insufficient to convince anyone of sustainability, and we do not expect share prices to begin to rebound until later this summer.

“The central thesis behind investment malaise is that the packaged goods business is in a state of decline, and that packaged products will continue to compete with alternative interactive entertainment experiences such as Facebook games and iPhone games.”

source mcvuk.com



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Can we stop posting this guy?

I mean, he's an idiot.

Let's not even analyze his incorrectness. Just ignore him.



Kimi wa ne tashika ni ano toki watashi no soba ni ita

Itsudatte itsudatte itsudatte

Sugu yoko de waratteita

Nakushitemo torimodosu kimi wo

I will never leave you

It could be about time for a new hardware cycle. That would help revive the industry right? 



^Not neccissarily.



Bet between Slimbeast and Arius Dion about Wii sales 2009:


If the Wii sells less than 20 million in 2009 (as defined by VGC sales between week ending 3d Jan 2009 to week ending 4th Jan 2010) Slimebeast wins and get to control Arius Dion's sig for 1 month.

If the Wii sells more than 20 million in 2009 (as defined above) Arius Dion wins and gets to control Slimebeast's sig for 1 month.

Of course, this comes from the guy who is never right and twists his previous statements to somewhat matchup with reality.

I am so going to take every word he says to heart x_x



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Lastgengamer said:

It could be about time for a new hardware cycle. That would help revive the industry right? 


If by "help" you mean "completely kill," then yes.



Man, i am sick and tired of patcher and his mediocre predictions and analysis. This guy needs to stop being posted. How he became so famous in the gaming media? What a failure.



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Well to be honest he isn't completely wrong in his analysis. I think it depends greatly on perspective. Looking at his figures for Nintendo I can see his point. Nintendo basically makes up half of the console market, and almost three quarters of the hand held market. So when the sales of software slip there it shows up as being a downward trend for the market as a whole. That said he is correct as far as investors should be concerned. Lets be real here the Wii caused a major expansion in the market. Basically Nintendo created a bubble, and it isn't looking sustainable as far as software goes. Given the polar nature of its offerings early in the generation it is easy to see how it probably glutted the market, and probably doesn't have a strong core or hardcore base to pick up the slack. 

Where as Microsoft and Sony do have strong core and hardcore bases which will buy in no matter what. That said I think he was expecting too much for all the great titles to be massive sellers. The fact that sales were up year over year I would say probably points to gamers buying more on these platforms, but they couldn't afford to buy all. This should be a lesson to developers to launch accordingly. A number of these titles would have had far greater sales if they got into the holiday season last year, or waited into the summer. Gamers can't simply buy more then a game a month, and during the first half of this year we had months that had three or four.

Speaking to digital downloading this just isn't going to happen, and woe to the developer who tries to deliver a sixty dollar game to market that is download only. He needs to acquaint himself with the used game market, lending, and the limits of storage. This shit is never going to fly for gamers until there is real financial incentive. Such as digital download games being twenty dollars cheaper, and that isn't going to happen with discs and cases being relatively cheap to produce, and recycle.



All of that twisted and spun to say we are moving towards digital downloads.  That's rather funny considering that instead of using credit cards to buy stuff directly on their system, they instead bought the MS points in the store (number one accessory due probably to the Modern Warfare 2 maps).  I mean does this guy even pay attention to what he says haha.  I mean even with the digital downloads we have, retail sales are still heavily involved.  

I hate people who do stuff like this.  Whenever a decline starts happening, or on the opposite end, an increase happens they make some outrageous truth claims.  It's nothing but sensationalist journalism and really its dangerous when you have a stock market.  All just so this guy can act like what he is saying is correct after being proven wrong for the past year.  



Lastgengamer said:

“Rather, we believe that the publishers and developers of games have created more robust multiplayer content in recent years that has resulted in core gamers playing the same games for much longer, on average, than they did in the past, leading to lower sales of new games.

This is the reason. The consumer actually gets so much more value out of each game nowadays, while games have remained at the same price, so people simply don't have to buy as much new games anymore to get their gaming needs satisifed.

A typical light-core gamer can buy only Guitar Hero, Madden and Call of Duty and those games in multiplayer will give him hundreds of hours of entertainment and  satisfy his gaming needs for years.