Analyst: Industry needs next gen consoles to reverse retail decline

The negative sales trends currently plaguing retail will likely be reversed by the next console cycle, industry analyst Michael Pachter believes.

Unfortunately, until whenever that time comes about, things will remain relatively down – including during this holiday season.

"We expect October – December to be relatively flat, and expect a return to negative territory again next year, at least until the launch of a next-generation console from Microsoft or Sony," Pachter said in a statement reported by GI.biz.

"A new console cycle is likely to reverse the negative sales trends of the last several years, with next-generation consoles expected from each of the three manufacturers over the next 18 months. Nintendo will launch the Wii U on November 18, and, while neither Sony nor Microsoft has yet announced new hardware, we expect a PS4 no later than November 2013, and a next Xbox no later than March 2014."

Competition from social and mobile games hurt packaged goods sales over the last three years, but should serve to expand the market for console games over the long run, although it appears that the addressable market for handheld games will continue to erode. We expect the publishers to address the "problem" of free online multiplayer with evolving business models, adding increased opportunities to purchase virtual items, creating subscription-only serialized content, and adding premium subscription layers to the free offerings currently provided."

Pachter states that robust launch window line-ups packed full of new games for Microsoft and Sony’s respective console, regardless of overall improvements from the previous generation, should cause both hardware and software to fly off the shelves.

We believe that the publishers plan an unprecedented number of new games for launch in the first two years of the next generation, providing relief from the gamer fatigue we’ve seen over the last three years.”