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Holiday Video Game Lineup Gets Smaller and Smaller

With video game sales already 12 percent behind last year's pace and the monthly year-over-year comparisons only getting worse, video game publishers and retailers have been counting heavily on a strong holiday season to help turn things around. More and more, though, it’s looking like those hopes are unfounded.

Splinter Cell: Conviction
Source: Ubisoft
Splinter Cell: Conviction

What appeared to be an incredibly strong holiday lineup during E3, the video game industry's annual trade show, in early June has gotten considerably weaker, as several publishers have delayed key titles — and the fate of others still may hang in the balance.

Ubisoft is the latest company to delay a highly-anticipated game (two, in fact). The French publisher announced on Monday that "Splinter Cell: Conviction," which won several "Best of E3" awards, and "Red Steel 2" would both be pushed back into the first (calendar) quarter of next year.

The company also moved "Ghost Recon" and "I am Alive" — which were slated for an early 2010 release — to unspecified dates in the 2010-2011 fiscal year, making both games candidates for holiday 2010 releases.

Just two weeks ago, Take Two Interactive Software announced it was delaying "Bioshock 2" — widely considered to be the company’s best chance at a major hit this year — due to apparent quality concerns with the game. Other holiday titles, including "Mafia II" and "Red Dead Redemption" were delayed earlier in the year.

Sony, meanwhile, has pushed back "Heavy Rain" until next year (ironically, the delay was partially to give the game some breathing room and the chance to stand apart from the onslaught of holiday titles). And there are rumors that its ambitious massively multi-player action game "MAG" might be moved to 2010 as well.

Even the industry’s largest publisher isn't immune from the rash of delays. Activision pushed "Singularity" to 2010 earlier this month and many analysts expect the company will be forced to delay Blizzard's "Starcraft 2: Wings of Liberty" (currently slated for an October release) as well.

All of these games will face an already substantial lineup of titles slated for 2010, many of which are expected in the first half of the year.

The delays will have notable impacts on publisher earnings. Ubisoft, in announcing the delays, downwardly revised its 2009-10 sales projections from $1.51 billion to $1.43 billion. Take Two, meanwhile, dropped its 2009 guidance to a loss of between 80 cents and 95 cents per share. Previously, it had forecast a break-even to 20 cents a share profit.

Activision seems to be in slightly better shape. While a "Starcraft 2" delay would be significant, the company's "Modern Warfare 2" (another big hit at E3) is on schedule and the delay of "Singularity" will not noticeably impact earnings.

"We view Activision's pipeline of titles as giving it the best opportunity among publishers to have something to cheer about this holiday," said Ben Schachter, an analyst with Broadpoint AmTech. "We continue to believe that 'Modern Warfare 2' will be the best-selling title this holiday and will likely outsell 'Call of Duty 4's 7 million units sold in calendar year 2007 (in less than two months worth of sales)."

It’s not just publishers who will be affected by the game delays. Retailers, specifically video game specialty store GameStop will likely see a sales hit. Following the "BioShock 2" delay, Lazard Capital Markets' analyst Colin Sebastian lowered his price target on the company from $32 to $30 specifically citing title push-outs and retail sluggishness.

The Ubisoft delays, he says, are not enough to further alter GameStop's target, but if there are other major delays in the industry, he might reconsider.

"Given the concentration of sales during the fourth quarter in this industry, it's very hard to have good visibility on what’s going to happen," he says.

Typically, the back half of a calendar year is responsible for 63 percent of the video game industry’s software sales. With the ongoing shift in titles, though, that percentage may shrink this year.

And with a fully packed 2010 looming, the balance may shift further.

That, ultimately, may mean strong sales in the first part of next year — but for many investors, holiday 2009 isn’t going to be as jolly as they were expecting.