Analyst Predicts Weaker April Sales, Urges Price Cuts for Hardware

Colin Sebastian of Robert W. Baird & Co. Incorporated predicts that the month of April will offer disappointing sales number for the video game industry. He says that their latest field checks suggest continued industry weakness and that April's numbers will track slightly below his firm's expectations. For software sales he predicts a decline of 25 – 30 percent, and hardware sales under pressure because of Microsoft's decision to reduce "some co-marketing initiatives with retailers."

Sebastian goes on to say that it is time for console makers Sony and Microsoft to lower the prices of their hardware. For most software releases, they see a $49 launch price is making a lot of sense, given the late stage of the current console cycle. This can be done with a "modest cut to the royalty rates paid to Microsoft and Sony." The firm also says that Microsoft’s pending (and currently not confirmed as true) $99 Xbox 360 offering with a two-year subscription would be a "nice start to bring hardware into the value end of the consumer market." While this would be swell, the firm says that a straight price cut to these two consoles would be the most effective course of action.

Sebastian also points out "pockets of strength" over the next 12 months, driven by the spring/summer launches of Max Payne 3, Diablo III, EA Sports titles, and BioShock Infinite, as well as the autumn launches of Call of Duty: Black Ops 2, Halo 4 and the newest Assassin’s Creed. The next calendar year’s release of Grand Theft Auto V (sometime around or in March 2013) will also help the sector.

Finally the firm says that GameStop continues to generate solid results and takes market share in an otherwise dismal console game market. Based on slightly weaker April sales, they have reduced their Q2 revenue and EPS estimates to $2,085 million and $0.52 vs. the original estimates of $2,101 million and $0.53.

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