Will 'Red Dead' Rev Up Video Games?
Video game sales may have plummeted 26 percent in April, but now there's hope that a new game will get the industry moving.
"Red Dead Redemption" goes on sale today, and based on rave reviews and some anecdotal reports of huge lines outside Game Stop stores, this game could be a blockbuster.
The game comes from Take Two Interactive's Rockstar games, which is famous for the "Grand Theft Auto" franchise, which sold over 100 million copies over a dozen years. Now Rockstar is hoping it has another gold mine on its hands.
"Red Dead Redemption" is a violent, gritty shooter game set in the wild west. Rockstar games spent five years and a reported $80-$100m developing the game. Rave reviews indicate that the investment will pay off. Games run $60 bucks, an investment, that people are likely to make for this kind of "event" launch. The decline in game revenues last month is somewhat attributed to the product cycle - if this game is huge, that will certainly prove to be the case.
Between four and five million copies are expected to sell in "Redemption's" first year on sale, and it's expected to establish a following for sequels. Take Two Interactive needs this kind of hit - in its last fiscal year, the company reported a loss of adjusted net income of $85.7 million.
The company is incredibly dependent on Grand Theft Auto, and this could be one of a couple of new games to move the company to profitability and a more stable revenue stream.
"Redemption" could also bolster console sales, which plummeted 37 percent in April. It's only available on Playstation 3 and Microsoft's XBox 360, so Nintendowon't reap any benefits. Retailers like Gamestop , which draw those hard-core gamers, should also see a boost.
On the flip side, if this his a huge hit it could cannibalize revenue from rival game companies Activision Blizzard and Electronic Arts. Pacific Crest Securities Analyst Evan Wilson tells me that consumers are still watching their spending, and buying one game will likely be at the expense of another. This is a far cry from the big video game spending we saw just two years ago. Now it's almost exclusively a hit-driven business.
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