In his latest Video Game Monthly report, Wedbush Morgan Securities analyst Michael Pachter provided his December console hardware sales forecast and an overall assessment of the industry going forward.

While Nintendo's Wii racked up 350,000 unit sales during Thanksgiving week in the U.S., Microsoft's Xbox 360 wasn't very far behind with 310,000 units sold during the same period. Pachter estimates that the PS3, which has seen its sales rise considerably since the $399 model was introduced, sold around 150,000 to 200,000 units during turkey week.

Based on these figures, Pachter believes it will be a fairly tight battle between the Wii and 360 during December, with the Wii having a slight edge. "These figures imply that Microsoft will sell 1.5 million Xbox 360s in December in the U.S., that Nintendo will sell 1.7 million Wiis, and that Sony will sell around 800,000 PS3s. This is about double the number of consoles sold last December, and suggests that the holiday will be a good one for the U.S. publishers," he said.

Pachter also continues to be surprised by the ongoing success of the aging PS2. "We continue to believe that better than expected PS2 software sales this year (down only 24% year-to-date compared to our forecast of down 32%) will drive overall growth well into next year," he said, adding, "and we expect next generation console software sales growth to highly correlate to any increase in the rate of PS2 software sales decline."

He continued, "We have heard speculation about a redesigned PS2 priced at $99 (from the current $129), with a likely U.S. launch in early 2008 (we note that this new PS2 has already been released in Japan with no price cut). We believe that the lower-priced PS2 will sell at least as well in 2008 as it has in 2007, with sales running at the 4 million unit level next year."

Interestingly, concerning the Wii, although some have predicted that supply and demand wouldn't level out until nearly the end of 2008, Pachter believes it will be in balance by about April, with sales of "around 6 – 6.5 million units per year in 2007 and 2008."

Overall, 2007 is sizing up to be an incredible year for the U.S. game industry with software sales tracking ahead 26 percent. Pachter estimates that software sales will finish up 19 percent (including PC, which he thinks will decline three percent).

2008 should be strong as well, he noted. "We expect industry sales to be strong for the first several months of 2008, with the strong release schedule early in the year sustaining double-digit sales growth. We are already well into this holiday selling season and all signs are that video games are top sellers. Should we be right, we think that video game investors' concerns about the economy will subside, and expect the U.S. publisher stocks to continue to appreciate. It may take until after the holidays when concerns about the 'stalled' cycle are fully alleviated, and we expect volatility for video game stocks through the remainder of the year, although we retain an upward bias," he concluded.