After examining the video game sales from August, Wedbush Morgan Securities analyst Michael Pachter has issued his own NPD report reviewing the month. Overall, he was surprised by just how strong August turned out to be.

"August overall retail sales were much higher than our expectations. One surprise was stronger than expected contribution from Madden NFL, with dollar sales upside accounting for over half of the difference between the actual NPD sales figure and our estimate," he said. "With relatively strong sales so far in 2007 and the publishers delivering solid results in the June quarter, we are beginning to see signs that the industry is on solid footing, and investor confidence has returned."

In a separate report, simExchange analyst Jesse Divnich noted, "It is common to see a slowdown in software sales the month before a major release like Halo 3. Industry professionals often call this 'the calm before the storm.' This wasn't the case this year... These results reinforce the notion that the video game industry is on track for record sales this Holiday season, which are further indicated by the current pricing of futures contracts on the simExchange."

Speaking of Halo 3, Pachter stressed the importance of the blockbuster title, predicting that it will sell more than 3 million units in less than two weeks and will drive Microsoft's Xbox 360 hardware numbers in September past 400,000 units, which would be the highest non-holiday figure in a month for Xbox 360 since launch. Divnich is expecting slightly lower, but still solid numbers for 360 at 380K units for September. Nevertheless, going by simExchange's forecast, the Xbox 360 will outsell the PS3 in September by over 2 to 1.

While things are looking up for Microsoft, the dip in PS3 sales is somewhat concerning. "Trading of futures contracts on the simExchange predicted that the recent PS3 price cut would not build long-term momentum for unit sales. Actual August sales data from NPD Group indicate the drop in PS3 demand was even worse than the market expected," said Divnich. "Trading of the September and October PS3 contracts imply that the gap between the Xbox 360 and the PS3 is expected to continue to widen. As stated in previous reports, Sony's must make the PS3 more compelling to consumers. The only option they can execute quickly enough would be a hardware price cut. An announcement of a PS3 hardware price cut will propel the September and October PS3 futures to a more competitive level against the forecasts for the Xbox 360."

Indeed, Pachter said that rumors about a 40GB PS3 price at $399 in time for this holiday and a $99 PS2 "have merit." Furthermore, with Kaz Hirai keynoting next week's Tokyo Game Show, Pachter said he "cannot think of a better forum for making such an announcement, given that the event is less than a week before the launch of archrival Microsoft's Halo 3."

Another concern that some of the analysts shared was the competitiveness of third-party titles on the Wii. While Nintendo repeatedly stresses the importance of third parties, it's clear that it's first-party games that are dominating.

UBS analyst Ben Schachter said in his report: "Interestingly, neither of the two Wii-exclusives released by third-party publishers in our coverage universe sold particularly well, indicating just how difficult it is to develop compelling games to compete with Nintendo's core franchises. ERTS's Boogie sold 68k units while TTWO's Carnival sold just 29k units in August. As we've noted in the past, we see the strength of first-party publishers (particularly Nintendo) as a key risk to the third-party publishers."

Added Divnich: "The prediction market expected both of Electronic Arts' sports offerings for the Wii to under perform their counterparts for the other platforms. The market continues to imply that Wii consumers prefer Nintendo published titles for the Wii over third-party ports like Madden NFL 08 and Tiger Woods PGA Tour 08, even if the ported version includes functions that take advantage of the Wii's control system. Historical prediction market data for Nintendo published original Wii titles have always been expected to sell more than ported titles that were available on other console units. Currently, the prediction market is expecting Metroid Prime 3 for the Wii to outsell any other Wii title that is available on another major platform."

Divnich said that according to simExchange the Wii is expected to sell more than 500K units in September, which is notable since there is no major first-party software release for the console in September.