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US October Sales overview (Source: NPD)


Romier S
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Software:

 

Top 10 PS2

 

Titl Title Publisher Projected $'s Projected Units

PS2 1 NBA LIVE 2004 Electronic Arts $19,311,610 387,363

PS2 2 MADDEN NFL 2004 Electronic Arts $10,151,370 204,064

PS2 3 JAK II Sony $9,525,686 239,217

PS2 4 WWE: HERE COMES PAIN THQ $7,575,488 152,073

PS2 5 TONY HAWK UNDERGROUND Activision $7,166,578 144,842

PS2 6 TIGER WOODS PGA 2004 Electronic Arts $5,678,678 114,109

PS2 7 CASTLEVANIA: LAMENT Konami $4,733,432 95,177

PS2 8 SSX 3 Electronic Arts $4,559,972 91,815

PS2 9 BACKYARD WRESTLING Eidos $3,948,827 79,233

PS2 10 CONFLICT: DESERT II Take-Two Interactive $3,192,561 64,096

 

Top 10 Xbox

 

Titl Title Publisher Projected $'s Projected Units

XBX 1 NBA LIVE 2004 Electronic Arts $5,259,460 105,539

XBX 2 T. CLANCY'S RAINBOW 3 Ubi Soft $3,911,208 78,633

XBX 3 CRIMSON SKIES: HIGH Microsoft $2,948,061 59,379

XBX 4 ESPN NBA BASKETBALL Sega $2,668,353 53,567

XBX 5 MADDEN NFL 2004 Electronic Arts $2,427,489 48,870

XBX 6 CONFLICT: DESERT II Take-Two Interactive $2,353,912 48,345

XBX 7 TONY HAWK UNDERGROUND Activision $2,311,633 46,711

XBX 8 TIGER WOODS PGA 2004 Electronic Arts $2,214,646 44,551

XBX 9 SSX 3 Electronic Arts $1,936,943 38,990

XBX 10 HALO Microsoft $1,813,485 36,547

 

Top 10 GCN

 

Titl Title Publisher Projected $'s Projected Units

GCN 1 SW:ROGUE SQUADRON III LucasArts Entertainment $5,744,523 115,672

GCN 2 VIEWTIFUL JOE Capcom $4,060,866 102,231

GCN 3 KIRBY AIR RIDE Nintendo $3,063,197 61,583

GCN 4 SOUL CALIBUR II Namco $2,659,374 54,369

GCN 5 TEENAGE MUTANT TURTLE Konami $1,758,922 43,050

GCN 6 SUPER SMASH BRO MELEE Nintendo $1,532,765 51,201

GCN 7 BILLY HATCHER Sega $1,429,339 37,215

GCN 8 SIMPSONS: HIT & RUN Vivendi Universal $1,419,004 28,999

GCN 9 MARIO GOLF: TOADSTOOL Nintendo $1,326,796 26,699

GCN 10 NBA LIVE 2004 Electronic Arts $1,321,751 26,511

 

Top 10 GBA

 

Titl Title Publisher Projected $'s Projected Units

GBA 1 MARIO BROS 3: MARIO 4 Nintendo $4,543,382 158,748

GBA 2 FINAL FANTASY TACTICS Nintendo $2,030,718 58,999

GBA 3 POKEMON PINBALL: R&S Nintendo $1,356,631 43,877

GBA 4 POKEMON RUBY Nintendo $1,351,664 40,801

GBA 5 POKEMON SAPPHIRE Nintendo $1,236,279 37,323

GBA 6 DONKEY KONG COUNTRY Nintendo $856,780 28,374

GBA 7 KIRBY: NIGHTMARE Nintendo $663,853 21,036

GBA 8 SONIC ADVANCE 2 THQ $647,294 21,152

GBA 9 YU-GI-OH! WORLDWIDE Konami $646,175 18,198

GBA 10 MEGA MAN ZERO 2 Capcom $642,674 21,898

 

Hardware:

 

October NPD Hardware Sales

 

PS2: 300,000 [-10% over September sales]

Xbox: 176,000 [+3%]

GCN: 254,000 [+54%]

GBA: 401,000 [-2%]

 

Cumulative Installed Base

 

PS2: 19,439,000

Xbox: 6,178,000

GCN: 4,948,000

GBA: 16,310,000

 

Tie Ratios

 

]PS2: 7.33

Xbox: 6.04

GCN: 5.85

GBA: 3.19

 

US Top 25 Videogame Titles

 

(Ranked in $$$, not units)

 

1 PS2 NBA LIVE 2004 Electronic Arts

2 PS2 MADDEN NFL 2004 Electronic Arts

3 PS2 JAK II Sony

4 PS2 WWE: HERE COMES PAIN THQ

5 PS2 TONY HAWK UNDERGROUND Activision

6 GCN SW:ROGUE SQUADRON III LucasArts

7 PS2 TIGER WOODS PGA 2004 Electronic Arts

8 XBX NBA LIVE 2004 Electronic Arts

9 PS2 CASTLEVANIA: LAMENT Konami

10 PS2 SSX 3 Electronic Arts

11 GBA MARIO BROS 3: MARIO 4 Nintendo

12 GCN VIEWTIFUL JOE Capcom

13 PS2 BACKYARD WRESTLING Vivendi

14 XBX T. CLANCY'S RAINBOW 3 Ubi Soft

15 PS2 CONFLICT: DESERT II Take Two Interactive

16 GCN KIRBY AIR RIDE Nintendo

17 PS2 SIMPSONS: HIT & RUN Vivendi

18 XBX CRIMSON SKIES: HIGH Microsoft

19 PS2 ESPN NBA BASKETBALL Sega

20 XBX ESPN NBA BASKETBALL Sega

21 GCN SOUL CALIBUR II Namco

22 PS2 NHL 2004 Electronic Arts

23 PS2 TEENAGE MUTANT TURTLE Konami

24 XBX MADDEN NFL 2004 Electronic Arts

25 XBX CONFLICT: DESERT II Take Two Interactive

 

Source: CSFB estimates based on NPD Funworld data.

 

 

Oct Videogame Sales Results

 

? As expected video game industry software revenue declined 14.6% due primarily to the tough comparison with the release of Grand Theft Auto: Vice City last year (accounted for 16.4% of the decline in sales). For comparison purposes, without Vice City in last year?s numbers sales would have grown by 2%. With October certainly the weakest month in the quarter, we continue to expect US industry software sales for the quarter to grow by roughly 15%.

 

? 128-bit hardware sales were down 23% y/y due to the lack of a holiday price cut on Xbox and PS2. However, on a sequential basis sales were up 9% driven by a 54% increase in GCN sales, bringing the install base of new consoles to 30.6 million in the U.S. GBA hardware sales grew 28% y/y, bringing the install base to 16.3M in the U.S. GBA software sales grew 10% y/y.

 

? Electronic Arts? (ERTS, $100.08, OUTPERFORM, TP $120.00, OW) U.S. videogame sales for the month of October were up 12% versus last year due to the strength of Tiger Woods 2004, NBA Live 2004 and Madden Football 2004. EA placed 5 games in the top 10 in terms of dollars sold and saw its share jump nearly 800bp (though it benefited from the comparison with last year?s Take-Two driven October).

 

? THQ, Inc.?s (THQI, $17.82, OUTPERFORM [V], TP $22.00, OW) U.S. sales increased 49% year over year in October due to a strong performance from the company?s WWE and GBA products. Finding Nemo continues to sell well, and Tak & The Power of JuJu had a strong debut, selling over 100,000 units in two weeks of sales.

 

? Activision, Inc.?s (ATVI, $15.59, OUTPERFORM [V], TP $17.00, OW) U.S. sales declined 30% year over year for the month of October. The company?s Tony Hawk Underground was released late in the month and sold approximately 215,000 units. By comparison last year?s Tony Hawk Pro Skater 4 sold 234k units in October, though it launched 5 days earlier. November should be a better month for Activision with the launch of True Crime and a full month of THUG.

 

? For Take Two Interactive, (TTWO, $38.20, OUTPERFORM [V], TP $50.00, OW) sales in October were down 80% y/y, but up 44% month over month. November should offer a much better comparison with the launch of Rockstar?s Manhunt this week. Midway Games, Inc.?s (MWY, $2.62, UNDERPERFORM [V], TP $1.50, OW) U.S. sales in the month of October were down 32% year over year.

 

Dev analysis:

 

October 2003 NPD Video Game Sales Data (Wedbush Morgan Report)

 

NOTE: NPD Funworld reports U.S. retail sales data (does not include wholesale sales such as into the rental market), based upon reporting from an estimated 60% of U.S. retailers. Our analysis compares ?projected? unit sales and ?projected?

retail sales in order to determine which publishers are meeting, exceeding, or falling short of our own internal estimates. The revenue and earnings estimates in our models are based upon worldwide wholesale sales, and each company?s retail performance will vary from the wholesale projections in our models. While we cannot be certain that the NPD Funworld data is accurate, we believe that it provides a relevant benchmark for tracking U.S. retail sell-through.

 

OVERVIEW

On Monday afternoon, NPD Funworld released its October 2003 (four-week period ending November 1, 2003) TRSTS data for U.S. console video game software sales. Total sales were $355 million, up 11% sequentially from September?s $319 million, but down 15% compared to October 2002?s $416 million. Year-to-date sales are $3,335 million compared with prior year-to-date of $3,283 million (a year-over-year increase of 2%).

 

We expected software sales of $375 million (down 10%), so the overall sales figures were lower than our expectations. In our view, the year-over-year decrease is largely attributable to the difficult comparison to the 74% comp growth in October 2002 driven by huge release of Take-Two?s Grand Theft Auto Vice City. We think that it is important to note that unit sales declined by only 2% year-over-year, while average selling prices (ASPs) declined by 12.8%. Notwithstanding the sales decline, we expect growth in software sales to resume in the coming months, with console and handheld software dollar sales for the year ending up 10% from 2002. We expect growth to continue in the mid-teens through 2004.

 

Top October releases included Electronic Arts? NBA Live 2004 (PS2, Xbox, GC) and SSX 3 (PS2, Xbox, GC), Sony?s Jak II (PS2), THQ?s WWE Smackdown Here Comes The Pain (PS2), LucasArts? Star Wars: Rebel Strike - Rogue Squadron III (GC), and Activision?s Tony Hawk's Underground (PS2, Xbox, GC, GBA).

 

Sales were also driven by continuing catalog sales of Electronic Arts? Madden NFL 2004 (PS2, GC, Xbox, PC, PSX, GBA) and Tiger Woods PGA 2004 (PS2, GC, Xbox, PC). There were 10 games selling more than 100,000 units apiece in October (compared to nine last month). The top 200 games (out of 3,000 games sold in October) captured 62% of unit sales and 72% of dollar sales, compared with 62% of unit sales and 71% of dollar sales in September, while the top 10 captured 22% of dollar sales in October versus 24% last month. The average selling price of all games (console and handheld, legacy and current generation) was $32.09, down from last year?s $36.79 ASP but up from September?s $30.47, indicating that new releases were a larger portion of the mix than last month. We expect a proliferation

of full-priced best sellers to drive ASPs higher over the balance of the year, and expect relatively easy comparisons for the key months of November and December to drive strong unit sales gains.

 

ANALYSIS

In our October preview note of NPD Funworld data dated November 13, we projected retail sales figures for the six companies we cover. Our models typically assume sell-through of approximately 50% of the units shipped within the first four weeks of release.

The following is an analysis of each company?s results.

 

Acclaim Entertainment (AKLM?Hold)

Releases during October: None.

October Retail Sales--$ 5 million

WMS Estimate--$5 million

 

Acclaim?s market share decreased sequentially from 1.6% last month to 1.4% while retail sales were flat at $5 million (compared with $7 million last October). Acclaim?s sales were led by NBA Jam 2004, which sold 22,000 units combined. Catalog sales of All-

Star Baseball 2004, ATV Quad Power Racing, Burnout, Mary Kate & Ashley, Legends of Wrestling, and Turok continue to generate incremental sales. The company?s ASP for all units sold was $23.10, down from last year?s $31.78. This decline of 27% was greater than the industry average 12.9% decline, and reflects a shift in the mix of Acclaim?s sales toward lower-priced catalog games.

 

Activision (ATVI?Buy and Focus List)

Releases during October: 10/21 Empires: Dawn of the Modern World (PC), 10/27 Tony Hawk's Underground (PS2, Xbox, GC, GBA), 10/29 Call of Duty (PC).

October Retail Sales--$19 million

WMS Estimate--$25 million

 

Activision?s market share increased sequentially from 3.5% last month to 5.4%, and retail sales from $11 million to $19 million (compared with $27 million last October). Tony Hawk's Underground sold 216,000 units compared with our estimate of 250,000 units across all platforms. We think that this sell-through figure is respectable, given that this year?s version of Tony Hawk was available for only five days during the month, and sold through nearly as many copies as last year?s version, which sold 231,000 copies in 12 days of release during October. Catalog sales were driven by Cabelas Deer Hunt, Tony Hawk, Spider-Man, Return to Castle Wolfenstein, and X-Men games. Activision?s ASP for all units sold was $32.22, down from last year?s $36.09. This decline of 10.7% was better than the industry average 12.9% decline, and reflects a favorable shift in the mix of Activision?s sales toward

higher-priced new releases.

 

Electronic Arts (ERTS?Hold)

Releases during October: 10/14 NBA Live 2004 (PS2, Xbox, GC), 10/20 SSX 3 (PS2, Xbox, GC), 10/28 Harry Potter Quidditch World Cup (PS2, GC, Xbox, GBA, PC), 10/28 The Sims Magic Expansion (PC).

October Retail Sales--$86 million

WMS Estimate--$85 million

 

Electronic Arts? market share decreased sequentially from 25.1% last month to 24.3%, but retail sales increased from $80 million to $86 million (compared to $77 million last October). Electronic Arts had another outstanding month driven by the release of NBA Live 2004 selling 519,000 units combined. SSX 3 sold 152,000 units combined compared with our estimate of 200,000 units. Madden NFL 2004 continued to sell well with 307,000 units sold across all platforms (on top of the 2.5 million units sold so far), compared to 286,000 units last October. The company?s catalog sales of NCAA Football 2004, Tiger Woods Golf, NASCAR Thunder 2004 were also quite strong. The company?s ASP for all units sold was $42.11, down from last year?s $42.71. This decline of 1.4% was significantly better than the industry average 12.9% decline, and reflects Electronic Arts? ability to maintain a favorable mix of sales toward higher-priced new releases.

 

Midway Games (MWY?Hold)

Releases during October: 10/14 RoadKill (PS2, Xbox), 10/20 Super Duper Sumos (GBA), 10/27 NFL Blitz Pro (PS2).

October Retail Sales--$5 million

WMS Estimate--$6 million

 

Midway?s market share increased sequentially from 1.2% last month to 1.4%, and retail sales from $4 million to $5 million (compared with $7 million last October). Midway?s overall sales were about in line with what we expected. RoadKill sold 17,000 units combined compared with our estimate of 15,000 units. The company?s best-selling title was Mortal Kombat Deadly Alliance, which sold 53,000 units across all platforms. Midway?s ASP for all units sold was $24.56, down from last year?s $32.80. This decline of 25% was greater than the industry average 12.9% decline, and reflects a shift in the mix of Midway?s sales toward lower priced catalog games.

 

Take-Two Interactive (TTWO?Buy and Focus List)

Releases during October: 10/7 Conflict: Desert Storm II (PS2, Xbox, PC), 10/14 Celebrity Deathmatch (PS2, Xbox, PC, PSX), 10/14 Max Payne 2 (PC), 10/14 Space Colony (PC), 10/21 Grand Theft Auto Double Pack (PS2), 10/21 Hidden & Dangerous II

(PC), 10/21 Railroad Tycoon III (PC).

October Retail Sales--$16 million

WMS Estimate--$13 million

 

Take-Two?s market share increased sequentially from 3.4% last month to 4.4%, and retail sales from $11 million to $16 million (compared with $79 million last October). Its biggest release this month was Conflict: Desert Storm II selling 112,000 units

combined, significantly higher than our estimate of 40,000 units. Its Grand Theft Auto Double Pack for PS2 showed decent sellthrough in October with 30,000 units sold in only a week, and competed with the individual titles for each game, which sold a

combined 120,000 units. The company also showed continued sales strength from its catalog games of Max Payne, Midnight Club, and Conflict: Desert Storm games. Take-Two?s ASP for all units sold was $28.18, down from last year?s $45.05. This decline of 37.4% was greater than the industry average 12.9% decline, and reflects a considerable shift in the mix of the company?s sales toward lower-priced catalog games. The ASP decline was expected, given that sales of Grand Theft Auto: Vice City comprised

86% of last October?s sales for Take-Two.

 

THQ (THQI?Buy)

Releases during October: 10/16 Tak and the Power of JuJu (PS2, GC, GBA), 10/21 Hot Wheels World Race (GC, PS2), 10/28 WWE Smackdown Here Comes The Pain (PS2), 10/29 SpongeBob SquarePants: Battle for Bikini Bottom (PS2, Xbox, GC).

October Retail Sales--$27 million

WMS Estimate--$35 million

 

THQ?s market share was flat at 7.7%, with retail sales increasing from $25 million to $27 million (compared with $18 million last October). THQ?s biggest seller was WWE Smackdown (PS2), selling 152,000 units compared with our estimate of 150,000 units. Tak and the Power of JuJu did relatively well with 101,000 units sold across all platforms. THQ again had sales that were broadbased, with 25 titles (eight Game Boy games) selling 10,000 or more units, compared with 21 titles (seven Game Boy games) that sold 10,000 or more units last month. We expect THQ to continue to benefit from strong Nintendo GBA SP sales over the

remainder of the year. THQ?s ASP for all units sold was $31.10, up from last year?s $29.42. This increase of 5.7% was significantly better than the industry average 12.9% decline, and reflects a favorable shift in the mix of THQ?s sales toward higher priced new releases. It is significant to note that the company?s WWE titles generated over 35% of total sales at an ASP of $49.79, driving up the overall ASP.

 

CONCLUSION

October overall retail sales were lower than we expected, coming in at $355 million compared to our estimate of $375 million. We are encouraged that the overall decline was in large part attributable to a decline in ASPs, with unit sales off only 2% year-over year. We expect growth to resume at a strong double-digit pace in November and December and anticipate overall industry growth to end the year up 10% over 2002. We expect November sales to be led by strong releases of Activision?s True Crime: Streets of LA (PS2, Xbox, GC), Electronic Arts? Lord of the Rings: Return of the King (PS2, Xbox, GC, GBA, PC) and Medal of Honor: Rising Sun (PS2, Xbox, GC), Take-Two?s Manhunt (PS2) and Grand Theft Auto Double Pack (Xbox), Nintendo?s Mario Kart Double Dash (GC), Sony?s SOCOM 2 (PS2), and Ubi Soft?s Prince of Persia: The Sands of Time (PS2, Xbox, GC, GBA, PC).

 

Electronic Arts continues to generate sales well in excess of last year?s levels and we expect it to maintain its market share in the last two months of 2003. THQ?s and Activision sales were lower than we expected, but both companies? key releases for the

month performed within expectations. Acclaim, Midway, and Take-Two results were about in line with our expectations.

 

We believe that the market may react negatively to the NPD data, as we believe that the investment community will be disappointed with ?only? 2% growth so far this year, and we anticipate some reaction to another negative growth month. However, we think that it is important for investors to recognize that last year?s explosive growth was attributable not only to console price cuts, but to the relatively rapid penetration of the Xbox and GameCube consoles, both of which debuted in late 2001. This year, we expect a crescendo in sales over the last two months of the year, as the substantial installed base of console owners makes their market presence felt.

 

October 2003 Market Share Rankings (Top 30 Companies)

T o ta l 355,355,391 $

Company Projected $'s Market Share

1 ELECTRONIC ARTS 86,218,660$ 24.3%

2 NINTENDO OF AMERICA 30,369,090$ 8.5%

3 THQ 27,413,360$ 7.7%

4 SONY 21,235,340$ 6.0%

5 ACTIVISION 19,147,470$ 5.4%

6 KONAMI OF AMERICA 18,539,030$ 5.2%

7 TAKE 2 INTERACTIVE 15,742,340$ 4.4%

8 SEGA OF AMERICA 14,608,810$ 4.1%

9 NAMCO 14,030,460$ 3.9%

10 VIVENDI UNIVERSAL 13,046,710$ 3.7%

11 CAPCOM USA 11,012,100$ 3.1%

12 ATARI 10,966,550$ 3.1%

13 UBISOFT 10,222,980$ 2.9%

14 MICROSOFT 9,964,066$ 2.8%

15 LUCAS ARTS ENTERTAINMENT 9,860,034$ 2.8%

16 EIDOS INTERACTIVE 8,264,116 $2.3%

17 ACCLAIM ENTERTAINMENT 4,930,708$ 1.4%

18 MIDWAY 4,884,293 $1.4%

19 SQUARE ENIX USA 3,181,460$ 0.9%

20 TDK MEDIACTIVE 2,580,983 $ 0.7%

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It's great to see Viewtiful Joe racking up so many sales, and this is coming from someone who doesn't even own a GameCube (though thanks in part to Joe, I might pick one up if there's ever a lull with my XBox). I thought it might be a little too niche-y to appeal to a wide audience, and I'm glad to see that I was completely off the mark. Interesting that Tony Hawk Underground and SSX 3 didn't make the GCN top 10, though.

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Interesting that Tony Hawk Underground and SSX 3 didn't make the GCN top 10, though.

 

Not really, actually. I'm hardly surprised at all. I'd wager that most people with Cubes (except me :P) have another system and with the PS2 designed to do SSX3 properly in terms of controls and online play, and the X-Box version almost certainly being more crisp, that leaves the Cube as the odd man out.

 

I'd wager that is the source of a large part of the multiplatform system woes with the Cube's line-up, lacking the installed PS2 base versus the X-Box's hardware oomph.

 

However we still have Viewtiful Joe, so that's something. I'm pleased to see it in the upper end of the sales rank because it's not only a unique piece of gaming but it's in 2D too. I doubt it will signal a return to 2D or innovative new gaming concepts, but it's nice to see they aren't sales poison anymore.

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