January 2005 game sales will see a year-on-year increase of six percent, according to a recent memo from Wedbush Morgan Securities analyst Michael Pachter. Pachter's report is based on his predictions of January game-sales figures due this week from industry research group NPD Funworld. According to Pachter's forecast, NPD will report that game sales will tally $400 million, up from January 2004 sales of $378 million.

　　Based on Wedbush Morgan channel checks, Pachter singled out Sony's The Getaway: Black Monday (PS2) and Capcom's Resident Evil 4 (GameCube) as the "top releases" of January. However, the month's positive numbers were mostly due to continued brisk sales of top holiday games, including Microsoft's Halo 2 (Xbox), Take-Two Interactive's Grand Theft Auto: San Andreas (PS2), Konami's Metal Gear Solid 3: Snake Eater (PS2), and LucasArts' Star Wars Knights of the Old Republic II: The Sith Lords (Xbox).

　　There were also many multiplatform best-sellers, like Electronic Arts' Need for Speed Underground 2, Activision's Call of Duty: Finest Hour, and THQ's The Incredibles. Across the board, game software sales reached $1.7 billion in December of 2004, according to figures already released by NPD.

　　As for which companies took home the most profits during the first four weeks of 2005, Pachter said that EA will likely tally $80 million in January game sales, 19 percent lower than its $99 million in sales during the same month in 2004. Of all companies covered, EA, Atari, and Midway are predicted to come in with less market share relative to the same month a year ago, while Activision, Majesco, THQ, and Take-Two are all predicted to increase market share in the area of software sales.

　　Activision could see a solid January, if Pachter is correct, with sales topping $30 million with titles like Tony Hawk's Underground 2 and Call of Duty: Finest Hour leading its lineup of games. That would give Activision one of the biggest growth rates, with sales 50 percent higher than in January 2004. Take-Two is predicted to generate $28 million in sales, primarily on the strength of San Andreas and its line of now-moribund ESPN-branded sports games, according to Pachter. "We believe that each game (NFL 2K5, NBA 2K5, and NHL 2K5) sold a competitive number of units vis-à-vis its Electronic Arts counterpart," he said.

　　THQ was next, likely generating an anticipated $26 million in sales from games such as WWE SmackDown! vs. Raw and the movie tie-in The Incredibles. THQ was one of the few publishers to launch new games in January, releasing The Punisher for PS2, Xbox, and PCs, and Banjo Pilot for the Game Boy Advance.

　　Pachter said that Atari will show it generated sales of about $11 million, Midway $5 million, and Majesco about $4 million in software sales despite having no new releases for the month. He added that Majesco's forecasted sales should be up 220 percent over January 2004, scoring with BloodRayne 2 for the Xbox as well as a line of budget titles for the GBA.

　　January 2005's numbers are predicted to increase from 2004, but were probably hurt by a scarcity of PS2 and Xbox consoles, Pachter said. "We believe the hardware shortage continued through January." December software sales declined 1 percent between 2003 and 2004 due to those shortages, though the popularity of Halo 2 and GTA: SA kept the bloodletting to a minimum. Pachter predicted that as supplies catch up and handhelds like the Nintendo DS and the Sony PSP take off, hardware sales will grow as much as 10 percent this year.

　　Friedman Billings Ramsey analyst Shawn Milne echoed those sentiments. "Investors have been less concerned regarding the hardware shortages and the upcoming console transition," Milne said in a memo this week. He reiterated FBR's view that the upcoming transition to next-gen versions of consoles from Sony, Nintendo, and Microsoft would be smoother than past transitions.

　　Pachter added that investors' expectations overall seemed low when compared with the growth among game sales. "We continue to recommend that investors accumulate Activision, Atari, Majesco, THQ, and Take-Two shares," he said. Milne noted that, in the year to date, game-company share prices have grown by 10 percent versus a 5 percent decline among shares on the NASDAQ Composite Index.