At least according to Michael Pachter, in this interview on Gamesindustry.biz. Pretty interesting if true - there was a lot of angst about this year being the trough of the console cycle, and to end the year +5-10% year-over-year (versus predictions of -6% or so) is pretty significant. To quote:

 "In a nutshell, the publishers all based their forecasts on industry sales that would be flat to down 5 per cent this year," Pachter told GI.biz.

"We're at almost 6 per cent year-to-date growth, and all signs point to the next three months being up 8 to 10 per cent. That would cause the year to end up 8 per cent, and so most of the publishers were too conservative in their modelling.

"We've all been caught by surprise," he continued. "I think that the current generation consumer is not slowing purchases as drastically as most of us predicted, likely because he or she knows that they will not be getting a new console for Christmas."

Looks like the major game stocks have potential of doing well this holiday... but next holiday will be where the magic happens, and all hardware vendors are unconstrained in retail. Should be a fun time!

Few folks wrote to ask what I thought about the news that Sony had cut launch volumes from 4 million units to 2 million, and delayed the European launch until March of 2007. In addition, Sony also announced that they would have just 500k units for launch, with 100k going to Japan and the remaining 400k to the US. The stated reason is production issues with the blue laser diode.

Frankly, there's not much to say. Launching a console worldwide is really, really hard, and I'm not terribly surprised. The game industry seems to not be overly-surprised either. Most game company stocks are down by maybe 1%, and even GameStop is only down a point (as of 9:45 this morning). That's noise for these traditionally volatile stocks. I suspect you'll see analysts speaking up in the coming days and basically pointing to the "Wii60" picking up the slack that Sony can't fulfill - people need to put something under their tree, after all.

I think the biggest impact on Sony is that this reduces the number of Blu-ray sockets in the market for holiday. I can guarantee you that Sony's conversations with movie studio execs would have included promises about the number of PS3s that would be sold this holiday, and those numbers would have been used to help justify the investment those studios would have to do in Blu-ray movie mastering and manufacturing. This news is going to make a lot of those studios look twice at their Blu-ray strategy. Sony will likely have to make good on those missing sockets (which could be expensive), and it's quite possible you'll see some of the Blu-ray only studios hedge their bets and start supporting HD-DVD as well.

I don't think Sony will delay their Japanese and US launches until next year, however. Not having Blu-ray in the market for holiday would effectively give HD-DVD a huge boost, and Sony simply can't afford that. Blu-ray (not video games) is what Sony is betting the company on; they can't afford to not launch in some fashion, even if the games aren't there.

Don't know how closely you watch the market, but this AP article highlights the news out of NPD that game sales were up 15% in June, and game stocks are reacting appropriately. The industry has been in a bit of a slump overall this past year due to the console transition, but my personal opinion is that we're nearing the end of it. Xbox 360 is out the gate and running hard, and Sony and Nintendo will be launching as well this Fall. Take into account strong software support for all platforms and we're looking at a pretty healthy ramp-up over the next few years.

I'm going to avoid making any recommendations as to companies and stocks as I'm not a financial analyst, nor do I wish to influence anyone in this particular area. I've lost money in the stock market just as easily as I've made it, and I encourage you all to do your own research before investing. The one comment I will make is that it appears the next few years are going to be good ones for video game stocks in general, and a buy and hold philosophy has good potential to pay off well.