NPD January: Gaming Sales Hold Steady

If you follow the earnings announcements from gaming companies, it might be easy to conclude the industry is taking its share of licks from the recession just as other sectors are.  There’s a bankruptcy here.  Plenty of guidance revised downward.  Missed numbers there.  It’s an easy conclusion to make but it wouldn’t be quite right. Register receipts at retail tell a different story.

Demonstrating a clear gap between the operational performances at individual companies and an industry’s broader health, NPD retail data for January released this week showed the gaming sector grew steadily.  All segments – software, hardware, accessories – reached double digit year over year revenue growth.  As with December results, it was slow and steady, reliant on a few key constituents more than others (namely Nintendo), but still solid.

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Square Enix Bids to Snag Eidos

eidos sale watchOn a day when Midway Games failed to find a buyer or new capital, fellow publisher Eidos had better luck.  The beleaguered publisher, suffering its own financial woes, revealed new details on a buyout overture first announced in early January.  What was initially disclosed as an unnamed suitor turns out to be Japanese publisher Square Enix.  The company has made a formal bid of £84.3m in cash  (approximately $120 to $122m depending on exchange rates) to acquire the company.

The details to emerge thus far:
Eidos’ board has unanimously agreed to endorse the Square Enix offer.  At the offer price of 32 pence per share its represents a 91% premium over the company’s three month average closing price (for the period up to February 11th). The premium is also a 258 % improvement over Eidos’ closing price on January 14th, the last day of trading prior to the company’s announcement it had been approached with a takeover offer.

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Midway Games Files for Bankruptcy

debt clamp midwayMidway Games fought the good fight, twice extending debt repayment deadlines, but ultimately extensions weren’t a solution. With time again running out, today the company gave in and sought the protection of Chapter 11 bankruptcy. (The full court document is embedded below)

Midway had been under the gun since December when then majority shareholder Sumner Redstone sold off his 87.2% stake in the company.  Redstone’s firesale triggered early debt repayment clauses that put Midway on the hook for settlement of more than $150m in outstanding notes that otherwise wouldn’t have been due before 2025.

The default on those loans (which becomes automatic with bankruptcy), in turn, will trigger another $90 million in obligations to Redstone’s National Amusements that are  shared with Mark Thomas, the buyer of Redstone’s shares through a participation agreement.

Working with Lazard since November, Midway had hoped to find a way to avoid this. Click to Read More

Blockbuster to Try Mail Order Game Rentals

bbi games metueThe U.S. video game industry chalked up almost$22b in retail sales last year and is continuing to grow steadily.   In 2008,   approximately 20.7m current generation consoles were sold (NPD data).  That number may be relatively small compared to the install base for DVD players (estimated at about 87% of TV owning households in 2007 according to Nielsen), but life to date US sales of consoles as of December were above 81.6m  units (including the PS2, 38.4m, without).  No matter how you count it, that is a substantial market and a sizable number of households. 

Blockbuster in its continuing struggles to reinvent and improve its business wants to reach the gaming market more efficiently than they currently do.  To achieve that, the company announced Wednesday they’ll begin including games in their “Total Access” mail-order rental service.

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Amazon Gets its Game On, Launches Download Portal

amazon-games.jpgAmazon was a pioneer in e-commerce. Moving well beyond the books it started with, the company built a strong business around the efficient sale and delivery of most any kind of packaged goods.  For its second act, the company now seems intent on achieving nothing less than similar success with the sale of digitally delivered merchandise. 

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Earnings: EA Stumbles in Q3, Plans to Walk in Next Fiscal Year

earningsThe game industry as a sector has been riding out the recession with reasonable success but the performance of individual companies within the industry has been less consistent.  Some companies are faring well while others are announcing subpar sales.  Electronic Arts announced its Q3 Fiscal 2009 results today and fell in to the category of the latter.  EA’s performance was dismal.

Based on GAAP standards, the net loss reported for the quarter was $641m, or $2.00 a share, in the red.  That compares to a loss of $33m, or 10 cents a share, for the same period a year ago. Sales, including deferred revenue, would have totaled $1.74b.

Excluding the onetime charges, EA said they would have earned $179m , or 56 cents a share.  Analysts had projected 88 cents on revenue of $1.9b; both targets EA failed to hit.

The news wasn’t entirely a surprise.  EA reset expectations in early December after Thanksgiving period sales turned out worse than expected.  Even so, the shortfall was worse than many anticipated.

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EA Snaps Up License for Ludlum Library

ludlum eaThey say one person’s trash is another’s treasure.  Case in point: Robert Ludlum licensing rights.  Not that it is fitting to call the gaming rights for the book catalog of a bestselling author trash, far from it, but when Activision Blizzard decided to cast the rights off, rival Electronic Arts was all too happy to pick them up instead.

EA announced today that they’ve reached a multi-year exclusive license for all of Ludlum’s written works, including the Jason Bourne series.

Vivendi Games previously held the rights.  Activision Blizzard, the company that resulted from the merger of Vivendi Games and Activision, decided to orphan its license in July.

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