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Madden: Video Game Blitz or Holiday Scramble?

It’s only August, but the holiday season is officially underway for the video game industry.

“Madden NFL 10,” the latest installment of the long-running series, hit store shelves at 12:01am Friday, letting armchair quarterbacks live out their fantasies. It’s an annual event,

Madden NFL 10
Source: Electronic Arts
Madden NFL 10

typically heralded by avid fans calling in sick to work and a major marketing blitz by EA.

This year, though, it’s also the game that publisher Electronic Arts hopes will turn around what has, so far, been a disappointing 2009. The company reported a net loss of $234 million for its first fiscal quarter earlier this month.

And analysts haven’t been forgiving, with Broadpoint AmTech’s Ben Schachter saying in late July that he sees “few reasons to give management the benefit of the doubt that things will improve much this year.” Madden typically makes up between 5 and 6 percent of EA’s annual revenues, typically generating sales somewhere in the neighborhood of $250 million.

But it’s also the title that heralds the beginning of a rush of anticipated AAA-games for the rest of the year – both from EA and from other publishers. EA says pre-orders for this year’s “Madden” (the 21st in the series) were slightly higher than they were in 2008, indicating solid support for the game.

Its predecessor – July’s “NCAA Football 10” - posted fairly disappointing sales in July, though. Could that bode poorly for the longevity of “Madden”? Analysts say probably not.

“I don’t think people buy both games,” says Michael Pachter, senior vice president of research for Wedbush Morgan Securities. “I think the poor sales of ‘NCAA’ reflect the recession. … You don’t play ‘NCAA’ because you care about the players. They’re basically anonymous in that game. In ‘Madden,’ you play as a known pro athlete.”

As a safety precaution, though, EA plans to aggressively market the game. It was prominently featured in Thursday’s first pre-season game – a rematch of last year’s Super Bowl contenders, the Pittsburgh Steelers and the Arizona Cardinals - on ESPN. EA and ESPN also featured the game on other programs, including “SportsCenter,” and the company’s Web operations.

Pachter estimates the company will spend roughly $40 million marketing the game this year.

Beyond the retail environment, EA is exploring online micro transactions with this year’s “Madden”. For $1 or $2 per perk, avid players can pay to keep players out of retirement, play the difficult All-Madden difficulty level online and more.

The company has also struck deals with advertisers, including Snickers and The Weather Channel, to appear in the game for undisclosed amounts.

“Madden,” while important, is obviously not the only big game in EA’s catalog this year. It may, however, have to do a bit more heavy lifting than it planned.

Many of the company’s holiday releases are new franchises, which can work against a game when casual- or non-gamers are shopping for gifts. Those consumers tend to go with familiar names or whatever the stores are marketing heaviest – which, typically, are existing franchise. Other than “Madden,” the biggest mass-market gun in the company’s arsenal is “The Beatles: Rock Band”.

Because that title wasn’t developed in-house, though, the company’s margins will be lower.

And, with so many music-themed games saturating the market (including multiple “Guitar Heroes” and “DJ Hero” from Activision), the genre isn’t the powerhouse it used to be.

"Of all genres, the music/dance genre has suffered the greatest declines this year, with nearly $390 million less revenues than the same time period last year," says NPD analyst Anita Frazier.

If ever there was a time that “Madden” needed to provide a strong defensive line, this is it.