Nice qualifier, there. After all, not everybody is sold on the scariness of some games.

The article goes on to quote video game industry analyst Michael Pachter of Wedbush Morgan Securities as saying that horror video game sales are up this year from last. By September 2009, they'd scared up $147 million in sales compared to the $131 million they brought in throughout 2008.

Best part, though, is where they got Freddy Krueger actor Robert Englund to explain why video games are scary:

"Halloween gives fans the chance to dress up in costumes and celebrate horror, but video games are the best way for fans to actually participate in these worlds," he told Reuters.

The second best part? Reuters says that Dead Space 2 will be out in 2010. According to the piece, "'Dead Space 2' is in development for next year." See you next year!

Horror video games scare up record sales [Reuters]
Image Cred

Join me, Michael McWhertor, Geoff Keighley, Michael Pachter and Tom Russo as we shoot the shit about video games in part one of this episode. Just don't view hungry, or you're inevitably going to ingest a KFC Snacker or full bucket of original recipe chicken within the first two minutes. And it's quote possible that putting either of those things in your system could kill you.

In part two of our Bonus Round discussion, we chat about the high-definition "Wii Plus," Project Natal (again), the possibilities for PlayStation Eye, and if the video game controller as we know it will ever go away. We also get a very up close and personal look at the naked ankles of Michael Pachter. This episode is also solid proof that going back to the gym was a good idea for yours truly.

Motion control enthusiasts, this one's for you!

Bonus Round: Episode 306 - Part 2 HD [GameTrailers]

In a 210-page annual report about the state of the gaming industry that begins with him thanking Kotaku and other websites for "keeping us on our toes and always asking us to think about the industry in real-time," Wedbush Morgan Securities analyst Michael Pachter sized up the used games industry.

And then Pachter argued why used games aren't the danger game publishers suspect them to be.

On the size of the phenomenon, he stated:

The number of games traded annually is striking; we estimate the overall used game market to be $2 billion in the U.S., with an average ticket of around $20 per used game. This means that an estimated 100 million units of used games are traded in each year, representing around 1/3 of all games sold annually.

A third — or a quarter if the 270-million games sold annually in the U.S. also cited by Pachter doesn't include used games — of games sold annually in the U.S. are used? That is a striking figure, either way you look at it. Kotaku contacted GameStop and the game sales-tracking NPD group for corroboration, but neither replied by press time. The $2 billion figure was reported earlier this year by the Wall Street Journal, citing another analyst.

If that market is so big, why shouldn't publishers, who derive no profits from the sale of used games, be shaken by it?

His analysis:

we think that used game sales benefit new game sales by providing currency to gamers with less disposable income, thereby enabling the purchase of additional games. The vast majority of used games are not traded in until the original new game purchaser has finished playing, typically well beyond the window for a fullretail priced new game sale. Thus, while there may be some limited substitution of used game purchases when GameStop employees "push" used merchandise upon consumers lined up to buy new games, the vast majority of used game purchases occur more than two months after a new game is released. Other than the potential impact at holiday (when new game lives are extended beyond the typical two month sell-through pattern), used game sales just don't impact new game purchases very much…. To the extent that there is a substitution effect, we estimate that fewer than 5% of new game sales are impacted

Pachter's analysis echoes what GameStop reps have told me about a view of the sale of used games furthering the purchase of new games, rather than cutting into such sales. As Pachter notes, many publishers have been acting as if the threat is real, bundling their games with map-pack codes and other add-ons that add value for the first purchasers of a given game disc.

Pachter argues that the ability for gamers to sell their newly-bought games back to GameStop and other retailers for store credit is one of the factors limiting consumer interest in downloadable games. Used games keep them coming into stores and keep the trafficking in new game purchases. Consumers, he writes, perceive less value in the purchase of a digital game that they can never sell back.

[PIC]

In part one of our Bonus Round discussion, Keighley, Pachter, Satterfield and I touch on the Xbox 360's Project Natal as a menu interface device, the prospects of Facebook and Twitter on consoles, Macs versus PCs, and more.

There's even quick mention of Pachter's "retarded" wife and my use of the words "novelty factor" in close relation to the Wii. Damn you, Keighley, for putting words in my mouth! (Please note, however, that I did not laugh during initial mention of the Wii's latest peripheral, then greatly anticipate my assessment of the device's capabilities in a future episode.)

See if you disagree or vehemently disagree with our thoughts on the future of video game interfaces, then feel free to suggest that I wash my hair more often, especially prior to appearing on camera.

Bonus Round: Episode 306 - Part 1 [GameTrailers.com]

Edge Online reports that Nintendo has already sold 20 million units — 50 million worldwide — and plans to sell another 26 million this fiscal year.

Noting that a price cut is not an "almighty weapon," Nintendo president Satoru Iwata said recently that the company plans to address a slowdown of Wii sales by introducing strong new software rather than reducing the cost of its hardware.

But Pachter says a price drop is highly likely. In a research note, the analyst said, "Wii supply has finally exceeded demand, so we expect hardware sales to show year-over-year decreases for the first half of 2009. In order to hit its full-year Wii shipment forecast, we expect Nintendo to cut the price of the Wii before [the] holiday, likely to $199.99."

Despite his hard line on the PSPgo and subsequent apology, Pachter is still regarded as the guy who knows from games and marketing strategies. Besides the Wii prediction, he's also calling price cuts for the PlayStation 3 and Xbox 360 over the next year:

"In the second half of the year, we expect Sony to cut price for the PS3, and if the cut is deep enough, we expect Microsoft to respond (either with bundles or with a price cut of its own, even as Microsoft just introduced a Xbox 360 Elite bundle with free games Halo 3 and Fable II)."

Analyst Expects Wii Price Cut This Year [Edge Online]

That analyst is Wedbush Morgan's Michael Pachter, who commented on the most recent episode of GameTrailers' Bonus Round that "$249 is too much. Period." Pachter agreed with host Geoff Keighley that Sony is "ripping off the consumer" at that price point, claiming that the PSPgo costs less to make than the already profitable PSP-3000. Sony, on the other hand, thinks it's priced appropriately.

We talked to Pachter today to get more of his thoughts on the device and its asking price.

Michael Pachter says that Sony execs "made it clear that the PSP Go pricing strategy was intended to compete with the iPod Touch."

"I don't disagree with them that the comparison is favorable from a technology perspective, so I can't fault their logic," Pachter said."However, the iPod Touch has a ridiculously loyal fan base, tremendous brand awareness, gigantic advertising support, a touch screen, an app store, and a LOT of music."

But the PSP is not an iPod Touch, despite sharing some capabilities. Its strengths lie in its gaming functions, Pachter admits.

"The PSP Go has a better gaming architecture and better games, but lacks many of the features that the iPod Touch has," he said via e-mail. "In my view, its price should be compared to the PSP 3000, which does pretty much all the same things and is $80 cheaper."

Pachter said during his Bonus Round screen time that pricing the new PSP at a price above the Xbox 360 Arcade and at the Wii's price point was reflective of the handheld costing too much.

"I just am not going to pull punches and say that the price of the PSP Go is justified, since I don't think it will work at that level," the analyst said. "If it cost them $80 more, I would not have answered Keighley the same way. However, I think it costs the same or less to produce, so the increase in price means an increase in profit at the expense of the consumer. I think that Apple rips off consumers as well (look at THEIR profits), but wasn't asked that question."

Sony's John Koller has said over the past week that the device will carry a higher profit margin for retailers, a tactic I inferred as reflective of the higher suggested retail price. But Pachter disagreed.

"I don't think it has anything to do with retail, and truly think that Sony is right to charge what the market will bear," Pachter said. "The fact is that Sony has been subsidizing the cost of the PS3 since launch, so to say that they are 'ripping off' consumers now is not really fair, and if I could retract the statement, I would do so."

But the Wedbush Morgan analyst believes the product will sell, even at that price.

"I think that they genuinely believe that the market will support this price point, I just happen to disagree. It's hard to believe that Sony is giving much away to GameStop, perhaps they are allowing a 15% margin instead of the more typical 6 – 10%, but most of the "profit" on the device will go into Sony's coffers."

In an industry newsletter (as reported by Edge), Pachter wrote "We do not expect the ‘next' generation to begin before 2013, if at all." The "if at all" is really curious. But considering that's about four years away, by then who knows what will be playing, delivering or hosting our games. Or he could be imagining a future so ravaged by swine flu and economic hardship that we're all back to rolling hoops with a stick for our entertainment.

More definitively, Pachter said "no 'new' console(s) in 2010," which anyone could tell you, but to some investors it might not be so obvious. But he adds "other than the long-rumored high definition Wii, which is likely to upgrade the Wii to current console technology." That he does expect by the end of next year.

The chief force against premature next gen-eration would be game publishers, Pachter says. They "have as yet to capitalize on the immense investments made in being competitive in the current cycle," and so would resist a new console generation, with new software and development demands.

"We therefore think it is likely that the ‘next' generation will begin after 2013, meaning that software sales are likely to grow by a compounded annual rate of 6–10 percent for another five years," he concludes.

Analyst: No New Console Before 2013 [Edge]

We're sure it's more of an informed estimate than a guess, really, considering the source is Wedbush Morgan analyst Michael Pachter. Mr. Pachter pegs The Lost and Damned sales at a cool 1 million, according to GameSpot, expecting to see that download figure double to more than 2 million by the end of October.

That would mean approximately $40 million in revenue, should Rockstar Games hold the price steady.

If the second Xbox 360 exclusive episode does similar business, it could make that $50 million investment in securing the two GTA IV episodes a financial success for those involved. Possible forthcoming bundles and greatest hits version could eventually make that big payout a drop in the bucket.

The second episode, which is rumored to feature Liberty City resident Luis Fernandez Lopez, is planned for a release later this year.

According to Pachter's note, he also has a "reasonable expectation" that the next fully-fledged Grand Theft Auto game would hit between November 1, 2009 and October 31, 2010. With Rockstar creative bigwigs Sam Houser, Dan Houser and Leslie Benzies only locked in to a contractual agreement until January 2012, we'd bet Take-Two want the developer to get the next one (and its expected downloadable episodes) as soon as is humanly possible.

Analyst: 2 million Lost and Damned, next GTA by Nov. '10 [GameSpot]

Pachter and his Wedbush Morgan crew of prophets thinks, in writing, that Netflix "subscriber growth will continue at super-normal levels for quite some time" thanks to Xbox Live Gold membership. We interpret "super-normal" to mean "like, pretty good" in non-analyst speak.

The analyst house estimates another five to six million Xbox 360s sold in the United States this year, with Pachter pegging Live Gold subscription rates at "around 35% of these owners."

Netflix announced yesterday that it ended the fourth quarter of 2008 with approximately 9,390,000 subscribers, showing 26% year-over-year growth from 7,479,000 subscribers at the end of the same quarter from 2007. Time to go buy some NFLX stock!

Xbox Live is 'Proverbial Gold Mine' for Netflix, says Pachter [GameDaily]

How can that be? Surely both mouthpieces, whether they're boasting "official leadership in this industry" or whether they're claiming the other is "out of touch with where the industry and consumer is today" can't find common ground. Or can they? Pachter speaks!

"Aaron Greenberg is right that Sony likely won't catch Microsoft in the U.S. until at least 2014. Kaz is right that Sony will likely catch Microsoft globally," said Pachter. 2014! That's probably not what Sony's thinking.

Mr. P puts both the PlayStation 3 and Xbox 360 in a "dead heat" by 2011, according to his comments to GameDaily. He also points out Sony's besting of Microsoft in Japan year after year, as reason why this global fight isn't quite over.

The analyst expects that upcoming price drops from Sony on the PS3 will certainly help the console's chances.

Pachter: Aaron Greenberg and Kaz Hirai Are Both Right [GameDaily]

Wedbush Morgan analyst Michael Pachter has consulted the spirit world (and probably a spreadsheet or two, to be fair) bringing back word that he expects a $299 PlayStation 3 to appear at retail in just three months. Again, not his job to officially date price cuts, but to make with the predictions.

And, given Microsoft's foreknowledge of said price drop, Mr. Pachter is supposing that Microsoft will undercut Sony once more, shedding $50 from the Xbox 360 "Pro" model soon after Sony moves.

With Sony reported to show its first annual loss in 14 years, a price drop at this point might seem unlikely. But if the PS3 wants to step out of third place in this console generation, cuts are going to have to come.

Pachter: $299 PS3 due in April, $249 360 in June [GameSpot]

The GameTrailers folks were kind enough to invite us on to the Geoff Keighley-hosted Bonus Round not too long ago, the first part of which went live this weekend. In it, we talk about video games!

The panel included the ever present Michael Pachter of Wedbush Morgan analysis fame, Ryan Davis from Giant Bomb and me of this site you're reading. The topic? The year in review, which starts off sales heavy — expect later segments to be less numbers focused and potentially more embarrassing.

Before anyone inquires or offer suggestions, I will note that I'm fairly certain I'd washed my hair within three of taping the episode. Give or take.

Wedbush Morgan's Michael Pachter predicts that some titles, like Tomb Raider Underworld and Shaun White Snowboarding simply don't have the buzz surrounding them. (Pachter calls the PlayStation 3 and Xbox 360 versions of Shaun White "not positioned well" which I would absolutely agree with — I thought it was a Wii-only title for longer than I'd like to admit.)

Were they to be released during a less crowded time of the year, I could see them doing well, but game budgets get a little tighter this time of year and the list of must haves is typically bloated.

Jesse Divnich of EEDAR points to other titles, things like Banjo Kazooie: Nuts & Bolts and Spider-Man: Web of Shadows as destined to be ignored. "Any other title that squeaks by with quality scores below 80 percent" is also due to suffer, Divnich adds.

Analysts Predict Misses Of 2008 Holiday Season [Gamasutra]

In fact, it's those cooling hardware sales on the DS that may force Nintendo to react, making an end-of-year announcement more likely, Pachter writes. The DS has been regularly outsold by the PSP for the past few months in Japan, with marquee software releases doing little to boost matching hardware sales.

Sure, the company is still selling DS hardware at a massive rate in the U.S. and Europe, and it just announced a very, very profitable quarter, but the dates match up.

The Nintendo DS Lite launched just fifteen months after the original, fugly DS, making the timing seem right for a hardware refresh.

We'd heard just prior to E3 that Nintendo was planning on releasing a smaller, cheaper DS, one with a a built-in accelerometer. Obviously, that didn't happen, but that talk was based on an IGN rumor, citing "trusted insiders."

Besides, Europe's shirtless models have become bored with the current DS. They need something desperately to reignite their passion for handheld video games. Won't someone at Nintendo think of the models?!

Nintendo DS Successor Ready? [Edge]

The "core" may still be hanging its head, waking up in cold sweats to the sound of Wii Music clanging through their heads, but that doesn't mean Nintendo isn't doing spectacularly on the financial side.

Pachter figures that the Big N will pull in some $3.9 billion for the quarter, adding up to a $17.7 billion take for the entire year. If Nintendo has indeed abandoned the core, who could blame 'em? That's "fuck you" money, right there.

Pachter: Nintendo To Report $3.91b In Q1 Sales, Hasn't Abandoned Core [Gamasutra]

Pachter's reasoning, in comments to GamePro, is that the next-gen consoles are not truly mass-market items yet, and won't be until their price point dips to $199.

"Around 90% of last-generation console sales were made at the $199 price point or below," he says. "Only wealthy or hardcore gamers have purchased consoles so far, given that the PS3 is still $399, the 360 is still $349, and the Wii is still $249. When prices drop below $200 (probably in 2010), the mass market [for 360 and PS3] will emerge."

Pachter's been on the warpath for console price cuts, predicting a $50 drop this holiday season for the PS3 and 360 as the console makers try in vain to duplicate last year's stellar sales figures. He's also said the current next-gen line is going to drop below 10 percent growth by 2010 unless they lop $150 off current prices.

The Wii below $200, that's a solid bet. But good gosh, considering Sony's lost more than $3 billion so far, pricing the PS3 below its production cost, can anyone really think we'll see that unit below $200? Or the 360, for that matter? And if makers did follow his predictions, there would be about a one-year mass market for these consoles before market forces dictated the next next-gen console for us wealthy hardcore gamers, around 2011. If that's when these consoles finally enter the mass market, and how long they'll stay, how many good games will we really see in that span?

Price, not GTAIV to Blame for Slow PS3, 360 Sales Analyst Says [GamePro]

You may recall our Very Special Kotaku Feature earlier this year titled "Analyzing the Analysts," in which tireless former Kotaku intern Tori Floyd weighed game industry analysts against one another. The result? Wedbush Morgan's Michael Pachter scored the highest among his peers in terms of how often he was correct. Yeah, we totally called it.

In an email sent to the press titled "Some Tireless Self-Promotion," Pachter discussed the award:

"I take more than my fair share of criticism for being 'the worst analyst in the industry, bar none'(paraphrased from a quote last week)," Pachter said.

"Sell-side analysts are paid to understand the earnings potential of the companies they cover, so our earnings accuracy is quite important. The closer we are to the mark, the more credible we are to buy-side clients. Notwithstanding many of my outlandish (and often wrong) predictions, I take a great deal of pride in my ability to forecast the earnings of the companies I cover."

"I’m happy to continue to take shots on the many occasions when I’m wrong; just thought you would be interested in seeing that I am recognized as being competent in the one area most important in justifying my compensation ... Thanks to all of you for your continued indulgence."

Congrats Michael!

Speaking at the Electronic Gaming Summit this afternoon, Pachter said that he expects an overall slowdown in video game sales over the next three years.

Pachter expects the industry to see 19 percent growth in the U.S. and 20 percent in Europe this year, with his predicted price drop this holiday. Next year, Pachter expects growth to dip to 16 and 18 percent, unless the consoles drop another $100, which would add another five percent to growth. In 2010 growth will slow to 10 percent and seven percent, unless consoles drop in price by $150, Pachter said.

By the year 2011 Pachter predicts that the industry will flatline unless a new console is introduced.

Wait. That means that game sales will flatten out after six years unless we get a new console. There goes Microsoft's hopes for a seven year console and Sony's plans for a ten year one.