US needs new consoles sooner than later

US retail sales of video games have not been good at all this year, with monthly declines regularly in the double digits. In an NPD data preview note, Wedbush Securities analyst Michael Pachter said that September's results (to be published this Thursday) won't be much better and that the industry really needs new consoles from Microsoft and Sony to push sales into positive territory again. Even big software this holiday (Halo, Call of Duty, etc.) and the launch of the Wii U won't be enough to really reverse the damage done throughout the year. "We expect October - December to be relatively flat, and expect a return to negative territory again next year, at least until the launch of a next-generation console from Microsoft or Sony," Pachter said. He continued, "A new console cycle is likely to reverse the negative sales trends of the last several years, with next-generation consoles expected from each of the three manufacturers over the next 18 months. Nintendo will launch the Wii U on November 18, and, while neither Sony nor Microsoft has yet announced new hardware, we expect a PS4 no later than November 2013, and a next Xbox no later than March 2014." "Competition from social and mobile games hurt packaged goods sales over the last three years, but should serve to expand the market for console games over the long run, although it appears that the addressable market for handheld games will continue to erode. We expect the publishers to address the "problem" of free online multiplayer with evolving business models, adding increased opportunities to purchase virtual items, creating subscription-only serialized content, and adding premium subscription layers to the free offerings currently provided." Ultimately, Pachter sees the next-gen consoles selling very quickly even if they are only a "modest improvement" over the current generation. He believes publishers are all planning big lineups for new systems from Microsoft and Sony, and that these games will help bring software sales back to prominence. "We believe that the publishers plan an unprecedented number of new games for launch in the first two years of the next generation, providing relief from the gamer fatigue we've seen over the last three years," he said.