Xbox 360 | DJ Hero preorders augur weak sales - Analyst

Cowen and Company's Doug Creutz cuts sales projections for Activision's latest rhythm game by 61%, citing online demand that is "well below" expectations.

Beyond Call of Duty: Modern Warfare 2, arguably Activision Blizzard's biggest release for the holiday quarter would have been Blizzard Entertainment's Starcraft II. However, in the lead-up to Starcraft II's eventual delay into 2010, analysts and investors skittered away from the publisher's stock, fearing the impact it would have on Activision Blizzard's full-year earnings.

DJ Hero's slick new peripheral apparently isn't building prerelease hype.

Now, at least one analyst is once again less optimistic about Activision's earning prospects. But, the cause has nothing to do with a delay and everything to do with the sales performance of the publisher's flagging rhythm game business. In a note to investors today, Cowen and Company's Doug Creutz reined in Activision Blizzard's estimates, cutting full-year revenue projections by 10.8 percent to $4.49 billion and lowering earnings-per-share guidance to $0.75.

"The largest factor in our estimate reduction is the recognition that the declines in the music genre earlier in the year were not temporary, and are likely to persist going forward," he said. "We have significantly reset our expectations for Activision's various music genre Hero franchises in 2009 and 2010."

Notably, Creutz drastically cut projections for Activision's newest rhythm game franchise, DJ Hero. Having previously expected DJ Hero to sell 1.6 million units through the end of December in the US, Creutz lowered those projections to 616,000 units, a 61 percent drop. Looking at first year sales, the analyst trimmed expectations from 2.5 million copies to 950,000 of the turntable-equipped rhythm game.

"Despite some recent positive comments from company management about preorders, we remain very cautious about the title's prospects at launch," Creutz said. "A survey of online retailers indicates a demand profile that is well below what we would have expected to see just a few days before launch for a title that was destined to be a big (or even modest) hit."

Speaking with GameSpot, Wedbush Morgan Securities analyst Michael Pachter agreed with Creutz's downsized assessment of DJ Hero sales in the US through December. He also noted that his own projections indicate the game will sell 1.2 million worldwide by the end of the year, though this figure could rise depending on how well Activision markets the game.

Looking at Activision's broader rhythm game portfolio, Creutz scaled back projections by 54 percent, on the weakness of Guitar Hero 5's September launch and Band Hero's expected slow start. According to the NPD Group's September US sales report, Guitar Hero 5 finished behind MTV Games' The Beatles: Rock Band, selling just 499,000 units for the 360, PS3, PlayStation 2, and Wii. Creutz trimmed sales expectations for the game to 1.2 million units through December, a 51 percent cut.

Developed by FreeStyleGames, DJ Hero will be available later this week for the Xbox 360, PlayStation 3, PlayStation 2, and Wii. For more information, check out GameSpot's previous coverage.

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Source: http://www.gamespot.com/xbox360/puzzle/djhero/news.html?sid=6237976