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2012: The Year of Gaming Woes

Every industry has down cycles, but for several companies in the videogame space, 2012 can't end soon enough.

Video game on tablet
Jonathan Alcorn | Bloomberg | Getty Images
Video game on tablet

While the year is likely to finish stronger than it started, with the launch of Nintendo's Wii U console and the return of popular franchises like "Halo 4" and "Call of Duty Black Ops 2," pretty much everything that could go wrong in the first half of the year has.

Here's a look at some of the more notable woes the industry has faced this year.

THQ Delisting Threat

THQ's Delisting Threat:

THQ
Source: THQ.com
THQ

Not too long ago, THQ was the industry's third largest publisher. A lack of real breakout hits and some poor strategy decisions, though, have sunk the company's stock, which has stayed below $1 since Dec. 8, 2011.

After Nasdaq threatened to delist the company in January, THQ laid off 240 employees, cut its CEO's salary by 50 percent and jettisoned its children's licensed games division (which, at one time, was responsible for much of its fortunes).

That didn't help shares noticeably, though, and now THQ has announced a reverse stock split to remain on the exchange.

That takes care of one problem, but investors still worry that the company has yet to show any upcoming games that will be real breakout hits. Without those, THQ's troubles could be far from over.

Sony's Vita Stumble

Sony's Vita Stumble:

Nintendo 3DS
Source: Nintendo.com
Nintendo 3DS

The launch of the Nintendo 3DS in 2011 got off to such a rocky start that the company was forced to cut prices almost immediately to lure buyers. That strategy worked — and many observers thought would reconsider the $250-$300 launch price of the PS Vita handheld gaming system as its February U.S. launch date drew near.

But it didn't — and the Vita has had a hard time finding traction at retail. It's not entirely a matter of price, of course. The launch lineup of games didn't fare well with critics. And Apple's iPhone has claimed a big share of the portable market.

What's surprising is how the Vita has failed to rebound. Worldwide sales as of mid-May are a so-so 1.8 million units, but in Japan (where handheld gaming is even more popular than the U.S.), the Vita continues to hit record low sales numbers.

Zynga's Rocky Road

Zynga's Rocky Road:

Source: zynga.com

Zynga shares got off to a slow start when they began trading in late 2011, but by February and March, things were looking up, with the stock closing in on $15. Since then, a combination of factors has sent it spiraling.

Investors questioned the wisdom of the company's $200 million purchase of OMGPOP, maker of the iPhone hit "Draw Something" — and were even less happy when that game began to fall out of favor with fickle iGamers. Insiders also began cashing in their shares in a volume steady enough to further raise concerns.

When Facebook's IPO stumbled, though, the company really took a hit, as investors began to question the investment viability of social media. At the end of May, shares stood at an all-time low.

Guilt by Association?

Modern Warfare 2
Source: Modernwarfare2.com
Modern Warfare 2

Guilt by Association:

While videogames get tied to violent crime regularly, it's usually a loose connection — often made by advocates who have an agenda against videogame publishers.

But when Anders Behring Breivik, who has confessed to killing 77 people in Norway last summer, said he used "Modern Warfare 2" to "train" for the killings, it caught people's attention. (He also called out the game in a 1,500-page manifesto he wrote prior to the attacks.)

While experts and the industry reject his claim that the game could be used to prepare for such horrific crimes, that didn't stop Breivik's claims from making headlines worldwide — and putting the industry under a microscope it thought it had finally escaped after last year's Supreme Court decision, which granted games First Amendment protection.

38 Studios Collapses

Kingdom of Amular Reckoning
Source: Reckoning.amalur.com
Kingdom of Amular Reckoning

38 Studios Collapses:

Former Boston Red Sox pitcher Curt Schilling was gung-ho about the videogame industry when he retired from baseball.

His company's first title — "Kingdoms of Amalur: Reckoning" — is the year's 10th best-selling game to date. But enthusiasm and a moderate hit weren't enough to keep the company afloat.

Studios fold all the time, but rarely in such a public fashion. On May 24, the company abruptly laid off all 379 employees.

The developer, which had obtained a $75 million loan from the state of Rhode Island when it moved to the state from Massachusetts, initially failed to make a $1.125 million payment — though it eventually scraped together the funds at the expense of payroll. But it seems unlikely it will be able to make the next one, leaving Rhode Island taxpayers to foot the bill.

Retail Sales Woes

Retail Sales Woes:

Dan Kenyon | Stone | Getty Images


Digital distribution is on the rise, but that doesn't soften the blow retailers have had to face this year.

Overall industry sales are down 27 percent compared to this time in 2011. And while May is expected to show some rebound — and there are a couple heavy hitters in the pipeline for this fall — most analysts agree 2012 will once again show negative retail growth, making this the fourth consecutive such year for the industry.

'The Force' is Weak with This one

The Force is Weak with This One:

Star Wars: The Old Republic
Source: Swtor.com
Star Wars: The Old Republic

Electronic Arts bet big on "Star Wars: The Old Republic" — to the tune of up to $200 million in development costs, according to some reports.

The game, which was meant to steal market share from "World of Warcraft," came with good credentials (EA spent time getting the game right and had its top-tier development studio overseeing it), but it launched at a time when player interest in persistent world games (with their $15-per-month charges) was waning.

EA recently revealed subscriber numbers have slipped from 1.7 million paid members in February to 1.3 million in May, citing casual customers who decided not to keep up their subscriptions. The development team behind the game has since laid off a portion of its staff.

-By CNBC's Chris Morris
Follow Chris Morris on Twitter: @MorrisatLarge

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