Seth Gilbert, 02-24-2008
About a week ago, Electronic Arts CEO John Riccitiello acknowledged many of EA’s past merger efforts proved disappointments. The post merger integration process, and EA’s style at the time, simply didn’t accommodate the needs of incoming creative talent. Effectively, the company ended up buying existing game titles but doing a poor job of leveraging the human capital behind them to build for the future. Now, about 7 months after restructuring the company and creating an organizational hierarchy designed to better balance creative development and fiscal accountability, EA is setting out to prove they can acquire assets without stiffling (and losing) their creative game development talent.
The first test of the new approach began several months ago with the acquisition of Bioware and Pandemic. The second test began to take shape today.
In a press release, EA made public a proposal to buy struggling game developer Take Two Interactive for approximately $2b in cash. Click to Read More
Seth Gilbert, 02-20-2008
With the gaming industry setting records at retail, content creators are increasingly looking to bring development activity in house instead of having to share the revenue pie with third party developers. To that end, it’s been previously reported that video game tie-ins for the next installment of Disney/Pixar’s Toy Story franchise will be developed inside Disney instead of with previous partner THQ. Now, to keep on top of similar online and casual gaming initiatives, and streamline internal management, Disney has announced they will create a new division within the Disney Online Internet Group.
The new organization will be called Disney Online Studios. While not exciting news to those uninvolved, the reorganization hints at Disney’s recognition of the increasing value of their online entertainment offerings and shows a concerted plan to accelerate development of new offerings.(Disney made related moves to strengthen its M&A focus in late November. )
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Seth Gilbert,
On July 11, 2007 famed video game designer Shigeru Miyamoto took the stage at a Santa Monica gaming convention to reveal a peripheral and game designed to bring exercise and fitness to the Nintendo Wii gaming platform. Wednesday, Nintendo took advantage of another trade show, this time in San Francisco, to announce the Wii Fit launch schedule for the U.S. and Europe.
Part of Nintendo’s ongoing strategy to expand the gaming market by appealing to mainstream audiences, the Wii fit package uses a specially designed balance board controller to turn exercise into games (or games into exercise). Like the Wii’s other innovative controllers, the board (which is primarily designed to be stood on) senses motion and movement. The device is also sensitive to shifts in weight. Reportedly its scale-like design was inspired by Sumo wrestlers who often need to weigh themselves with two scales.
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Seth Gilbert, 02-19-2008
Much like in the movie industry, the brand awareness associated with a popular franchise title can decrease marketing expenses, reduce customer acquisition costs and lower market adoption risk (e.g. hedge against high production and development costs). So long as a game sequel offers enough new challenge or enhancements over the prior version, it stands a high probability of commercial success.
A game like Guitar Hero can be phenomenally expensive to develop across multiple platforms. According to a report on an edition of radio station KCRW’s “The Business” program, rival title Rock band cost Electronic Arts and Viacom’s Harmonix/MTV Games approximately $200million to develop. By the same token, however, successful titles can be famously lucrative. The various sequels in the Guitar Hero franchise are regular visitors to NPD’s monthly top ten sales lists. Combined, in total, they’ve generated more than $1b in retail sales.
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Seth Gilbert, 02-18-2008
Post holiday sales notwithstanding January is typically a soft period for the retail industry when compared to the results November and December holiday rush. The monthly NPD numbers released last week, showed the skyrocketing returns for the gaming industry weren’t immune. Hardware sales, in particular, were off but overall, there was plenty of value to be mined from the latest monthly results report from NPD.
Total U.S gaming sales were $1.18b in January, a 6% drop versus the same period a year ago (though that has largely been attributed to an extra week of reporting included in last year’s tally). Taking into account the calendar adjustments, NPD notes that sales were up about 18% on a week by week accounting.
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Seth Gilbert, 02-12-2008
Licensing exclusivity can be a major factor in video game success or failure. The right title, for instance, can drive customers to a console; just look at what Halo has done for the Microsoft Xbox platform or how Sony’s PS3 struggled early on without an equivalent “Tent Pole” title. Similarly, exclusive content licensing can help define, or destroy, an individual title. Where would Guitar Hero be without the rights to use popular songs? What kind of draw would there be for a sports game without the rights to replicate pro teams and players?
Electronic Arts understands these equations as well as any game publisher. Good games are important. Good games tied to the right content licenses are essential. As a result, today the Redwood City game publisher expanded their 3 year old contract with the NFL and the NFL Players Union. Click to Read More
Seth Gilbert, 02-7-2008
It’s been a good year for video games and the holidays were especially good for game publisher Activision. Much like a movie studio with two huge summer blockbusters in the theaters at the same time, Activision’s Guitar Hero and Call of Duty sequels powered the company to record results (thanks, in part, to strong November and December sales.)
In what may be the company’s last earnings report before the completion of their merger with Vivendi Games, Activision reported stellar third quarter results. This is now the 16th consecutive year that sales are up for the company.
CEO Bobby Kotick said “broader audiences are responding to products like Guitar Hero, and we expect that the demographics for video games will continue to expand.” He also added in the conference call with analysts that the company, and game industry, are “taking mindshare away from traditional forms of entertainment like movies and television.”
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