"We note that consumer sentiment in October thru December was as bad as we have seen this decade, and yet sales growth was still quite solid.
"We think that publisher share prices may begin to appreciate over the next several months if software sales continue to be up year-over-year, and we are hopeful that solid gains in hardware sales will continue for the full year, resulting in growth of the installed base and allowing for continued double digit software sales gains."
He noted that strong sales of hardware over the holidays indicated that videogame consumers are unfazed by the "looming recession."
Third Parties to Break Through on Wii
The Wii has sold phenomenally, with 45 million units sold as of the end of December 2008, but first-party software continues to provide stiff competition for third-parties such as Electronic Arts and Activision Blizzard. But Pachter expects market share between first- and third-parties to even out on the Wii as time goes on.
"...We believe that most of the publishers we cover will manage market share gains on the Wii over the next year," Pachter wrote. "We saw Nintendo capture 60 percent of Wii software sales during 2008, but note that Nintendo’s share dropped to 40 percent in December, indicating that third parties are beginning to capture market share."
Consumer appetite for mainstay genres such as sports, movie tie-ins and superhero games could be an "in" for third-parties on the console.
While there is sentiment that first-party Nintendo games are the only ones that can find success on Nintendo platforms, company president Satoru Iwata said last week, "Third-party titles sold more [in the U.S.] on Nintendo hardware than on any other platform for two consecutive months"
He added that as of the end of March 2008, there were only 12 third-party Wii titles with sales totaling over 1 million units. But as of December 2008, that number had jumped to 30 titles.
Overall, Pachter is confident the U.S. games industry can overcome the poor economy. "We expect industry sales to be strong in 2009, with a strong release schedule early in the year allowing the industry to sustain double-digit sales growth for the full year."
He expects 2009 industry software sales, including PC, to rise 12 percent.