# November video game sales rose 15% to $804 million. NPD's November retail sales data for the video game sector was reported last night. Video game software sales reportedly rose 15%. We believe this is generally in line with expectations, and puts the business on track for a strong finish to the year.
# Big X360 and PS2 titles dominated sales. Microsoft's (NASDAQ:MSFT) Gears of Wars reportedly grossed $62 million selling over 1 million units. Final Fantasy XII for PS2 grossed $49 million selling nearly 900,000 units. Activision (NASDAQ:ATVI) seems well situated with Guitar Hero II and Call of Duty 3 in the top 10, as was THQ's WWE 2007. EA's (ERTS) Need for Speed and Madden 2007 were also in the top 10. Nintendo's (OTCPK:NTDOY) Zelda is dominating Wii sales selling 412,000 units.
# Limited PS3 supply not slowing down Sony (NYSE:SNE). PS3 sales were reported to be 197,000 units, putting its one million holiday target in question. As a result of the PS3's constrained supply, it appears people are looking toward other Sony products to purchase this holiday season. The PS2 sold 664,000 units putting it in first place among all consoles.
# Nintendo also benefiting this holiday season. NPD reported 476,000 Wii's sold in November and the DS dominated the handheld market with 918,000 units sold. The GBA also showed strength selling 641,000 units. Moreover, one Wii title and the two DS titles were in the top 10, and both were published in-house.
# X360 market is hitting critical mass. NPD reported 511,000 Xbox 360's sold in November, more than twice its average over recent months. With no PS3 in Europe, we think Microsoft may be on track for 10 million worldwide by year-end. The Xbox 360 is getting to the point were it could support a $100 million release.
# Activision and THQ (THQI) are likely beneficiaries. Expectations were set with moderation, and both Activision and THQ look well positioned to exceed them, while EA looks overextended and in the wrong places. Take-Two's games are out in the market, and testing well, but none are huge sellers.
# The group looks overbought. ERTS has some of the wind taken out of it, but still trades at a premium. It looks like money going out of ERTS has been trying to squeeze into ATVI and THQI. Both are clearly well positioned this holiday season, but current valuations imply share shifts are carried forward to next year.