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Video Game Industry Braces for Ugly Earnings Season
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Special to CNBC.com
The third quarter of 2009 was a fairly horrendous one for the video game industry as year-over-year sales plummeted amid a lack of "must have" games. Now, as earnings season draws near, game makers are about to face the consequences.
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Source: EA Madden 2010. Will lackluster sales of the game force Electronic Arts to shave its guidance? |
Some are pretty obvious. Last year saw a strong slate of games that resonated with audiences, including "Wii Fit" and "Grand Theft Auto IV," so the comparisons were tough to begin with. Delays among some of this year’s big games haven’t helped either.
But it’s the system that caused the boom in video games—the Nintendo Wii—that is also causing some of the current agita. Nintendo's [NTDOY
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] gaming dynamo was largely responsible for the industry’s big gains last year, both in hardware and software sales. But after an astonishing run at retail, the magic has seemingly worn off. That has hurt the industry numbers on the whole.
You can’t pin poor earnings on Nintendo, though. Very few publishers have been able to capitalize on the Wii’s popularity. Electronic Arts [ERTS
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] found a bit of gold with its “EA Sports Active” title and Ubisoft [UBSFF
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] has a moderate hit in its “Raving Rabbids” franchise, but few others have really made a dent.
The suffering music genre plays a bigger role on the bottom line of companies like EA and Activision [ATVI
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]. Though titles like “Guitar Hero” and “Rock Band” account for 9 percent of the industry’s software sales year-to-date, they are behind 2008’s pace by 40 percent.
“The genre is past its prime,” says Broadpoint.AmTech analyst Ben Schachter.
Activision bears the brunt of this slowdown—and it may feel further pain. “DJ Hero,” the company’s effort to expand the genre beyond the world of plastic guitars and drum sets, is only seeing modest sell-through at retail. Its high price point (suggested retail is $120) is proving a tough pill for consumers to swallow.
Data is a real-time snapshot *Data is delayed at least 15 minutes
