November 13, 2008

Video Game Makers Expect Strong Sales Despite Economy

Industry executives said on Thursday video game sales are expected to be strong this year and in 2009, despite the economic troubles that have hurt some of the retail stores that sell the games.

The optimism is fueled by solid sales of advanced gaming consoles made by Nintendo, Sony and Microsoft, executives said at the BMO Capital Markets Interactive entertainment conference in New York.

Given that the Wii, PlayStation 3 and Xbox 360 are expected to be popular during the holiday shopping season, consumers are also likely to buy games to play on them.

Mindy Mount, chief financial officer of Microsoft's entertainment and devices division, said they are remaining cautiously optimistic. "I think it's going to hold up a lot better than other industries," she added.

The outlook for video games looks pretty good compared to some other industries.

Just two days after Circuit City Stores filed for bankruptcy, big box retailer Best Buy, the No. 1 U.S. electronics chain, slashed its profit forecast. This year both companies have fallen victim to reduced consumer spending and tighter credit from suppliers.

But Yves Guillemot, the chief executive of France's Ubisoft Entertainment SA said he expects 2008 North American and European video game industry software sales to grow by more than the 20 percent rise forecast by BMO analyst Edward Williams.

He thinks 2009 will be another great year as business may fare better in stores with a different demographic than Best Buy, such as low-cost retailer Wal-Mart and game-seller GameStop.

"In general, there's a lot of competition (from other publishers), but we see that software is selling well, just due to the fact there are a lot of machine owners who need software."

However, analysts maintain that the global financial meltdown and rising unemployment, which has prompted shoppers to curb spending, will hurt some game makers, particularly those lacking major hit franchises.

THQ, for example, posted a dismal third quarter earnings report last week and cut jobs, canceled some games and said it plans to retool.

"Overall holiday shopping doesn't look very promising for those who do not have huge hits on the shelves," said Strauss Zelnick, executive chairman of Take-Two Interactive Software Inc, maker of the blockbuster "Grand Theft Auto" series.

"I'm concerned that it's going to be a pretty rough holiday season," he said. "Everyone's going to be shopping less. First you are going to see less foot traffic and then less inventory on the shelves."

Peter Moore, president of Electronic Arts EA Sports unit the business is entering uncharted water from an economic standpoint.

"We are holding our breath and hoping the consumer comes out to play."


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