5 Things You Need to Know to Play Videogame Stocks
Lazard Capital Markets’ Sebastian has increased his growth forecast for the industry this year from 13 percent to 17 percent. He also thinks this generation could see a longer life cycle than the typical five-year peak of video game machines past.
“What may be interesting about this cycle is it may be longer than most cycles,” he said. “For publishers, that means there’s an extra year to milk the existing platform base, before they begin to program for the next [generation of consoles].”
A longer cycle could mean greater periods of profitability. An expected price cut from Sony, Microsoft and possibly Nintendo this year will boost the number of game machines in people’s homes, further boosting revenues for both publishers and retailers.
Next Point ... Not Just Guns and Violence
Look beyond GTA
While “Grand Theft Auto IV” will likely be this year’s best selling title, there are some other big ones on the horizon that could move the software sales needle.
Electronic Arts is readying “Spore,” the latest game from the creator of “The Sims,” for this winter. And many analysts expect Activision Blizzard to release “Starcraft II,” created by the group behind the juggernaut “World of Warcraft,” by the end of the year. (It’s worth noting the company has not given an official release date for that game, though, and developers Blizzard are meticulous about polishing games before release.)
Other titles to keep an eye out for include “Metal Gear Solid 4” from Konami and Wii Fit from Nintendo, which has done well since its release in Japan.
Next Point ... Just Wannan Have Fun
Don’t overlook casual games
The time investment for powering through a major game is substantial. Casual games are actually played more often, since they let players get in and out after just a couple of minutes.
Major publishers are currently looking how best to exploit these, as they bring in a largely untapped audience. Electronic Arts has an entire division focused on casual games and owns the successful Pogo.com site. And THQ recently acquired a developer to beef up its casual game catalog.
The trick is getting people to pay. Free online games have been the norm for years, making it hard to charge people for them now. Advertising supported models are being tested, as well as games that include microtransactions (small cash transactions to give the player an enhanced experience).
It’s Nintendo who has really made strides in monitizing casual games, though. Wii owners typically look for shorter gaming experiences – and by tailoring its software in that direction, the company has found a way to get people to pay $60 for quick bursts of fun.