Username Password Remember me
Forgot your password? | Need confirmation email?


July Review

Jesse Divnich
August 24, 2007

Key Points

  • Nintendo Wii is no "fad"
  • Xbox 360 will continue to lead the PS3 in unit sales
  • NCAA Football 08 franchise still strong
  • Market had anticipated strong Y-o-Y July 2007 sales growth
  • Market off on total hardware by -2.4%, total software by 16.79%

While July tends to be one of the slower months of the year in terms of sales, July 2007 broke tradition. July's results, coupled with Gamestop's most recent earnings, indicate the industry is in a very healthy state of growth.

Since the release of the Nintendo Wii, other console makers and some key people in the industry have claimed that the Nintendo Wii will just be a "fad." July sales for the Wii came in at 425,000 units, surpassing the simExchange prediction market's expectation for 353,000 units.

The Wii's stock has always forecast that it will lead the other home consoles this generation. The Wii's August sales future is currently predicting 433,000 units will be sold this month. This implies momentum will continue through the holidays even up against strong software titles for other systems, including BioShock, Halo 3, and Lair. These forecasts combined with July results indicate the Wii is no fad.

According to NPD's findings, the Xbox 360 outsold the PS3 in July 2007. Trading on the simExchange had originally forecast that Xbox 360 sales would surpass those of the PS3 despite the price cut for the PS3, but the market overreacted to the leaked upcoming Xbox 360 price drop and the warranty issues as deterrents to July purchases. Current trading of the Xbox 360 and PS3 August futures imply the Xbox 360 will outsell its rival once again, with the Xbox 360 selling 254,000 units and the PS3 selling 155,000 units. Given the lifetime unit sales predictions for the Xbox 360 and the PS3, the Xbox 360 will continue outselling the PS3 every month through the holidays.

Sales of NCAA Football 08 for Xbox 360 and PS3 were below market expectations. As stated in our July Preview Report, the lack of a Nintendo Wii release would hold back this title from exceeding last year's unit sales. The simExchange's market predictions for the lifetime sales of both the PS3 and Xbox 360 SKU stand at 370,100 units and 1.10 million units respectively. Any Y-o-Y decrease in unit sales should not be interpreted as a sign that the series is on a possible downtrend.

Overall, traders on the simExchange had expected higher growth this month. For Electronic Arts software tracked by July futures, market trading expected 8.99% more unit sales. For Take-Two software tracked by July futures, market trading expected 29.90% more unit sales. For Nintendo software tracked by July futures, market trading expected 22.11% more unit sales. For all software tracked by the simExchange, the market expected 16.79% more unit sales.

The following tables compare market expectations on the simExchange and actual results as reported by the NPD Group. Expectations for console hardware by leading analyst Michael Pachter of Wedbush Morgan are also presented for comparison purposes.


* NPD Group sales data
** The simExchange trading data
*** Games Industry, August 20, 2007

How exactly does this work?

Gamers and developers sign up on the simExchange for a free trading account. Using virtual currency called DKP, players buy virtual futures contracts that are under-predicting sales and short sell futures that are over-predicting sales. This concept is widely known as "the Wisdom of the Crowd" and this system is known as a "prediction market."

About the predictions

All unit sales forecasts on the simExchange are from market trading of game stocks and futures on the simExchange prediction market, and not the forecasts of an individual analyst employing conventional means of forecasting. Stocks and futures contracts on the simExchange directly forecast the unit sales of video game SKUs, with 1 DKP stock price corresponding to 10,000 units sold. Stocks forecast global lifetime sales while futures contracts forecast the US sales for a particular NPD Group monthly report. Through market trading, the simExchange can efficiently aggregate the forecasts of thousands of gamers, developers, and industry watchers.

Predictions on the simExchange should become more accurate over time as (1) the diversity of the pool of traders increases and as (2) more accurate players are rewarded with more virtual currency for their accuracy (thereby enabling them to form more predictions) and less accurate players lose virtual currency (thereby discounting their ability to form more predictions).

Publishers, Retailers, and Investors

Contact us below to find out how you can stay ahead of the competition by using some of our private services.

Interview Requests

Both Jesse Divnich and Brian Shiau are available for interviews and direct comments from the media or the investment community. Please see this reports footnote for their contact information.

Media

Jesse and Brian will offer quotes and/or analysis for your articles or any current event pertaining to the video game industry upon request. Please contact us using the contact us form.

Jesse Divnich
Analyst

Brian Shiau
Founder

About The simExchange

The simExchange (www.thesimexchange.com) is the online prediction market for video games. Launched in November 2006, The simExchange allows thousands of gamers, developers, and industry watchers to forecast the video game industry. Participating in The simExchange is completely free and no real money is involved.

About Jesse Divnich

Jesse Divnich has been working in the video game industry for over 10 years. During that time he has assumed many professional roles including: beta tester, programmer, publisher analyst, and for the last 6 years, a private analyst and consultant for buy-side investment firms. Jesse Divnich has received many awards for his work in the private investment sector as an analyst covering publicly traded video game companies. Currently, Jesse Divnich has switched from the private sector to the public sector as an Analyst for The simExchange where he writes analytical articles on various industry topics.

The simExchange does not issue any investment ratings or investment recommendations for any publicly traded company. The accuracy of the opinions or data in this report is not a guarantee.

Copyright and reprinting

The simExchange, LLC retains the right to the content of this article but permits the reprinting of this article with proper credit to The simExchange and Jesse Divnich.

Copyright © 2007 The simExchange, LLC. All rights reserved. THE SIMEXCHANGE, graphics, logos, icons, and other service names are trademarks of The simExchange, LLC



The simExchange, LLC does not issue any investment ratings or investment recommendations for any publicly traded company. The accuracy of the opinions or data in this report is not a guarantee.

Permanent Link | Digg | del.icio.us | Facebook