July 31, 2009

New Videogame Titles May Boost Slowing Industry

The videogame industry hopes potential price cuts for consoles and the release of big-name titles will help stimulate sales in the suddenly stagnant gaming market, according to Reuters.

Game publishers, such as Activision Blizzard Inc and Electronic Arts Inc, will report quarterly financials next week after miserable June sales.

The second half of 2009 is weighted with big-name releases similar to the first half of 2008. 

Some of the titles to be released included installments of "Left 4 Dead," "Assassin's Creed," "Call of Duty" and "Halo," all of which have become among the industry's top franchises.

Analysts believe the titles could give sales a much needed boost.

"There are some big games coming out," said Janco Partners analyst Mike Hickey.

Hickey also emphasized the need for console price cuts to energize the consumer base.

"The spark needs to come from price cuts on the hardware side to get the installed base breathing again. Once that happens, software will follow," he told Reuters.

Currently, consumers can purchases the Nintendo Wii for $250, the lowest level Microsoft Xbox 360 for $200, or the PlayStation 3 for $400. 

Game publishers have been focused on console price cuts in the midst of the recession, hoping lower prices could increase game sales.

"People were saying the videogame industry is recession-proof, but it was fantasy," said Pacific Crest Securities analyst Evan Wilson.

"The correct thing to say is that videogames are more tied to the hardware cycle than they are to the economic cycle."

According to market research firm NPD Group Inc, industry sales are currently down 12 percent year-to-date, but could exceed 2008 marks if high-profile releases are not postponed.

Activision, creator of the successful "Guitar Hero" franchise, has done well despite the economic downturn, and merged with Blizzard Entertainment last July.

Wall Street investors expect Activision to post 7 cents per share profit on $811 million in revenue for June, says Reuters Estimates.

According to NPD, Activision's new game "Prototype" was the best selling title in the U.S. in June, and analysts believe it will continue to grow stronger through the holiday season.

Electronic Arts has had a difficult year, but analysts believe the release of titles such as "Sims 3" and "Tiger Woods" golf will improve sales.

Wall Street expects the company to post an adjusted loss of 13 cents a share on $731 million in revenue, compared to a 42 cents a share loss on $609 million a year earlier.

Despite the problems, both companies have seen their shares increase by nearly 30 percent this year.

Brian Farrell, chief executive of game publisher THQ, Inc, said he expects price cuts before the holiday season.

"Just look at the hardware numbers and it would seem that a price cut would be in order by at least two of the three manufacturers," he said.

On Thursday, Nintendo reported a 66 percent drop in quarterly operating profit due to slowing demand for its industry leading Wii console.