Analyst: Hardware Will Fall, Videogames Will Rise

2009 was by no means a good year for videogames. After the industry basically declared itself “recession proof,” it faced a decline over 2008 during most of the months. The fall was steeper when it came to hardware, especially in terms of revenue, mainly after Microsoft, Sony and Nintendo all brought down the prices of their consoles. And it seems that this trend will continue in 2010 as the software market will see a significant rebound just as consoles are continuing their downward slide.

The prediction comes courtesy of Michael Pachter, the industry analyst who works for Wedbush Morgan. In an investor note in which he evaluates the perspectives of specialist retailer GameStop, he says that “industry sales will rebound in 2010” and that “GameStop is well-positioned to reap the rewards” of growing videogames sales.

The retailer has the advantage of controlling about 30% of the videogame market, which assures strong sales in a rebound, while only controlling about 12% of the hardware market, meaning that the continued decline will not hit it too hard.

GameStop and the market in general will begin seeing the first green shoots of 2010 when titles like Splinter: Cell Conviction, Army of Two: The 40th Day, BioShock 2, and Gran Turismo 5 arrive. All of them have the potential to sell very well and have been pushed back from the fall of 2009, probably because of the release of Modern Warfare 2, which made it difficult for other titles to perform well.

With gamers having less disposable income to spend on new titles, GameStop is also well positioned to make a profit from its used game sales business. More players will be interested in bringing back those titles, most of them still recent, that they have finished or grown bored with, and trade them in so that they can pick the newest releases.