Wedbush Morgan Securities' Michael Pachter has issued his NPD preview note in advance of the September data coming this Thursday. He expects software sales to be down six percent to $620 million, mostly due to the tough comparison with last September when Halo 3 accounted for $226 million. Ignoring Halo 3 would likely show an increase of 44 percent, he said.

Pachter expects the Wii and DS to dominate as usual, with 600K and 550K sold, respectively. The Xbox 360 should sell around 300K, while the PS3 could drop below 200K, to 175K for the month. The PSP is expected to sell around 200K.

Although the economy remains in poor shape, Pachter is quite confident in the game industry. "Notwithstanding this month's anticipated decline, we believe that the video game software sector remains highly recession-resistant... We do not think that the decline in software sales is demand driven; rather, we think it is attributable to a difficult comparison. With that said, we believe that negative sales growth in September will likely cause investor confidence to wane, with the likely consequence that video game publisher stocks will continue to perform weakly until sales growth resumes in October," he commented.

Pachter continued, "We think that games fit within a larger category of discretionary spending that encompasses all entertainment and leisure. In a recession, we think that the number of hours spent by consumers engaging in leisure and entertainment activity is likely to increase, with a shift from higher cost forms of leisure and entertainment to lower cost forms. No one would dispute that, in a vacuum, the cost of seeing a new release film in the theater exceeds the cost of waiting a few months and renting the same movie at the video store. We think that this analogy applies to virtually all forms of entertainment, although the substitution effect is more difficult to discern when the shift is from travel to Las Vegas or Disney World in favor of game purchases, rather than a shift from movie theater to video rental. In our view, some categories of entertainment (free commercial television, for example) are likely to see increases in use, due to their relatively low cost, while other categories (the aforementioned travel to Las Vegas or Disney World) are likely to see decreases, due to their relatively high cost. As a category, games are one of the lowest cost forms of entertainment, particularly to those households that have already invested in a home console."