Data Filter: The News You Need in Easy-to-Swallow Gel Cap Form

Electronic Gaming Business, August 27, 2003

News-o-Matic

Whassup?: Walt Disney Interactive Group and Terra Lycos Spain agree to
distribute the Disney Connection, a bundle of rich media assets including
games, as a part of Lycos's high speed access product. Broadband
customers will have access to premium Disney streaming media, learning
activities and games. Apart from AOL Time Warner's own AOL,
Disney's bundle is the first in broadband to draw from across the
many assets that one of the major media conglomerates has to offer: TV,
film, games, and music. Disney tells EGB that the upcoming MMOG Toontown
is not part of this bundle but may be introduced to other bundles to allow
high-speed users time limited trial access. Disney is in talks with
several U.S. ISPs.
So What?: The cable TV distribution model is coming to broadband, with
high speed ISPs looking for value adds, high profile brands, and premium
content to distinguish their services. The problem for game companies
who want a piece is going to be packaging. Disney has the brand and
the content breadth to offer itself as a channel unto itself, but individual
game publishers do not. Unless game companies partner with each
other or a third-party portal like Yahoo Games (or EA's recent
deal with AOL), they won't be able to offer these ISPs a rich,
diverse content offering. EverQuest alone will not sell a particular
provider's high-speed access subscriptions.

Whassup?: Bankrupt 3DO unloaded its assets at auction for a disappointing
$4.6 million. Namco drives away with the Street Racing Syndicate license
for $1.5 million, while Ubi Soft gets Heroes of Might and Magic for $1.3
million. The Army Men property force marched to Crave Entertainment
for $750,000. An attorney overseeing the auction says that three major
companies had considered a total buy-out of 3DO but reconsidered
after the SEC probe launched its probe of game company accounting
practices.
So What?: 3DO is a cautionary tale for the industry about obsessive
reliance on franchises. The company served the Might and Magic
series poorly overall and ran the good Heroes of Might and Magic
concept into the ground while others innovated on the fantasy strategy
genre. The company's porting, tweaking and chronic regurgitation
of the profoundly mediocre Army Men property was downright bizarre.
The wonder is not why these IPs went for a song but whether any game
company can salvage their reputation.

Whassup?: Hollywood is looking for scapegoats, and new media is the
easiest kid on the ranch. Paramount film executive were quoted recently
complaining that the poor quality of Eidos's Tomb Raider: Angel
of Darkness was to blame for the latest film's poor box office. Now
Miramax CEO is saying that instant messaging among young moviegoers
is spreading negative response about summer blockbusters
so quickly that high-profile films like The Hulk, Charlie's Angels,
and Terminator 3 are experiencing record drop-offs of audience between
their first and second weeks in circulation. Typical summer drop off is
40% but this year it climbed to 51%.
So What?: Let's dispense quickly with the obvious -- that Hollywood
is in deep denial about the mediocrity of its product and looking for anyone
else to blame.
More important is whether and how game companies will tie their games'
fortunes to a blockbuster system that is becoming more tenuous and derailed
by savvy, communicative consumers. On one hand, games can be released
before the film, as with the Hulk, to effectively increase that small window
of public attention a blockbuster gets. Then again, there may be a larger
lesson in this for the gamer industry. Hollywood's cynical reliance on
franchises continues to underestimate its audience, strangle innovation,
and invite this kind of audience rejection. Hmm. Who will the game industry
try to blame when consumers revolt?

Whassup?: Acclaim reported dismal earnings and tenuous prospects. Revenues
for 2Q (fiscal Q1) were $33.1 million, down 47% from same period last
quarter and well below estimates. Acclaim also went from the back to the
red, with a net loss of $18 million, down from a net profit of $2.5 million
in the same period/2002. The company warned that any failure to meet
current business goals could end company operations.
So What?: Which goes first, Midway or Acclaim, both of which continue
to sink deeper towards 3D0-ville? Alias, NBA Jam and Burnout 2 are
all slated for release in the fall/winter at the earliest, so Acclaim is
likely to have another losing quarter with a lot riding on three titles
that don't have a substantial amount of buzz around them.
Of course, buzz didn't help the terrifically bad
Turok: Evolution and BMXXX making a splash in a tough field.

Whassup?: Interplay reports only $1.3 million in revenue for the fiscal Q1,
down from $11.8 million same period last year. Losses amounted to $5.4
million, even less than $9 million the company predicted.
So What?: Dark Alliance II and Fallout are the only titles on the horizon
that might stem the tide for Interplay.

Whassup?: WorldWinner.com, the casual games-for-wager site, has partnered
with Game House and FreshGames to wager-enable their respective games,
Collapse! and Cubis. Players interact with Web-based versions of the
programs and wager against each other online for prizes. The company
claims 450,000 people play these two games regularly.
So What?: This is the first instance we know of when simple but wildly
popular downloadable games have been available for wagering.
WorldWinner.com shares revenues from its cut of the action with the
game developers. This is an interesting move forward, and its success
could bode well for applying the betting model even to simple puzzle
games that have gathered a wide audience already.

Whassup?: Both Electronics Boutique and GameStop came in with eerily similar
and impressive quarterly earnings. EB rang up $302.1 million in revenue, up
15%, and net income of $1.7 million, up 180% over same year period.
GameStop sales were $305.7 million, up 11%, with earnings at $6.1 million,
up 8%. Major titles like Matrix and NBA Street drove sales, and EB mentioned
that used game sales helped increase margins.
So What?: Piper Jaffrey analyst Anthony Gikas raised stock targets on both
companies, citing that that they had beaten estimates. Hardware price cuts
are the critical component here, since their relative absence this year has
depressed same store sales relative to last year. Gikas says that Sony may
well decide to bundle titles with their unit to stimulate sales rather than
lower prices further this year. It may want to save the $149 and $99 price
points for 2004 and 2005.

Top 10 Video Game Rentals
Rank       Rank       Title                             Total Earnings
This Week  Last Week                                    in Millions
1          New        Madden NFL 2004\PS2               $0.40
2          2          Enter the Matrix\PS2              $0.37
3          1          NCAA Football 2004\PS2            $1.75
4          -          Ghost Recon: Island Thunder\Xbox  $0.23
5          New        Madden NFL 2004\Xbox              $0.18
6          3          Midnight Club II\PS2              $6.23
7          5          Downhill Domination\PS2           $0.51
8          -          Silent Hill\PS2                   $0.21
9          4          Knights of the Republic\Xbox      $0.91
10         8          Mario Golf                        $0.31