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Game sales way up, Wii way down in October--analyst

Wedbush analyst Michael Pachter says software sales will be up 14 percent when NPD announces October game-industry revenue figures this week.

The tide might finally be turning for the game industry.

U.S. software sales in October likely hit $690 million, representing a 14 percent gain over the $605 million game makers generated last year, Wedbush analyst Michael Pachter has reported in a research note to investors today. Perhaps most important, he said that October should mark the first month of double-digit year-over-year sales growth since April.

The growth is attributable to the strong portfolio of games that hit store shelves last month, Pachter says, including "Battlefield 3" and "Batman: Arkham City." Largely thanks to the retail success of "Battlefield 3," Electronic Arts should post $230 million in game revenue in October, Pachter said.

All that, if true, would provide a glimmer of hope to an industry that has suffered through an inordinately difficult year. May proved to be the worst month the industry endured in five years. And during the second quarter alone, total U.S. consumer spending on video games hit $4.5 billion, down significantly from the $5.9 billion generated during the first quarter of 2011.

But the industry's troubles aren't just related to software. Over the last several years, Nintendo's Wii console and DS portable have helped keep the industry's revenue figures afloat. However, the Wii's sales have been plummeting and on the portable front, Nintendo's latest launch, the 3DS, has fallen short. The 3DS has been such a disappointment, in fact, that Nintendo was only able to sell 710,000 units of the device worldwide during the second quarter.

Last month, the Wii continued to fall short at retail, Pachter says. During the month, Pachter believes only 180,000 Wii units were sold, representing a 22 percent drop year-over-year. The 3DS saw unit sales hit 250,000 units, Pachter says, which, while notably higher than sales in the second quarter, still fail to match the Game Boy or DS at the same point in their respective lifecycles.

Not surprisingly, the Xbox 360 once again won the console market in October, selling 350,000 units around the U.S. and jumping 8 percent compared to October 2010. PlayStation 3 sales hit 265,000 units last month, Pachter says.

Looking ahead, Pachter sees some brighter times for the industry, due mainly to the many highly anticipated games launching this month, including "Call of Duty: Modern Warfare 3" and "Elder Scrolls Skyrim," among many others.

"It appears that October will mark the second consecutive month of industry software sales growth (the first two-month positive period since October-November 2010), and we think that the rebound is sustainable," Pachter said in the note.

That said, the analyst isn't the final word on game sales--NPD is. And the research firm is expected to announce October game sales on Thursday, so be sure to check back later this week for the actual sales figures.