In his latest note to investors, Lazard Capital Markets analyst Colin Sebastian has indicated two potential risks to the game sector this holiday season.
While Sebastian says that "industry sales trends remain generally healthy through late October leading up to the key holiday selling season," he stresses that hardware supply constraints and falling software prices could hurt the sector.
"Holiday hardware demand may outstrip supplies. We believe one of the themes from the upcoming holiday period could be hardware supply constraints, driven by ongoing strong demand for Nintendo's Wii and a shift in Xbox 360 unit sales from 4Q into the September quarter, while Sony's PS3 and PSP may benefit from lower price points."
Sebastian adds that Wii shortages may be alleviated somewhat by the reallocation of hardware units from Japan to North America.
On the software front, Sebastian says that research conducted by Lazard indicates that PS2 and Wii software pricing may be under pressure.