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Electronic Gaming Business, Feb 11, 2004

News-O-Matic

Whassup?: Warner Bros.' recent announcement that it was forming a games division to move beyond mere licensing of properties has set the industry rumor churning. By appointing former Monolith CEO Jason Hall to run the effort, WB signals that it is serious about making games under its own brand. With Time Warner properties like Harry Potter and Lord of the Rings in its stable, the main beneficiary of these properties, Electronic Arts, must be watching carefully. So What?: There is rampant speculation that WB Games will have to buy their way into the industry and make an acquisition to get the production and distribution heft to make this work. Atari is an oft-mentioned target. WB might look to VUGames as a cautionary tale of the cons of media conglomerate game units. The value of the brand is seriously diluted when the games unit is obliged to support mediocre film properties (i.e. Cat in the Hat) and rely more on license recognition than game quality (The Hobbit).

Whassup?: Gaming and broadband finally get a mini-conference of their own on April 27-28 at the Hyatt Regency, Long Island Beach, Calif. At the Game Networks Conference and Expo, put on by Shorecliff Communications (800/608-9641, http://www.scievents.com ). On the docket are discussions about collaborations between game companies and ISPs and Internet backbone providers. So What?: Game companies remain behind the curve on this opportunity to get much-needed mainstream marketing exposure for their online worlds via the broadband ISPs that are wiring America. The music subscription services are a good model as ISPs like Comcast use free trials to companies like Rhapsody to promote their cable modem service. MMOGs need to position themselves with the broadband entryway, and Sony and Microsoft need to work with ISPs to make console connectivity easier and more attractive to a wider base.

Whassup?: Microsoft's Home and Entertainment division reduced the flow of its red ink in the most recent quarter off of steady sales for Xbox hardware and especially better console software sales. Overall revenue dropped from $1.33 billion to $1.27 billion. The division lost $394 million in the holidays quarter vs. a $412 million loss in same period 2002. A 6% drop in hardware sales was counter-balanced by a spike in software sales.

So What?: While overall margins are improving for Microsoft, the Xbox missed a brilliant opportunity this Christmas to distinguish itself as the high-end console platform. With Halo 2 missing its initial ship date and no other title to take the lead, it failed to exploit the PS2's own weak line-up. Rumor has it that Microsoft is contemplating a serious price cut sometime before Labor Day to re-ignite sales. If they offered Xbox at $129 or even $99 at the same time Halo 2 hits, they could secure the buzz for 2004 and position themselves better for the next-generation.

Whassup?: Electronic Arts partners with Marvel to cross-pollinate character properties across an upcoming line of fighting games and comics. For games being developed by its Canadian unit, EA will be able to use most Marvel Superheroes. For EA, the exciting part is that it gets to develop superhero characters as well that can be turned in to comics and other licenses via Marvel, which will serve as EA's licensing agent.

So What?: We won't see the first games for more than a year, and this represents EA's first serious foray into a fighting genre that has been dominated by Japanese companies. It may also be a shot across the bow of other publishers like Vivendi (which licenses Hulk) and Activision (Spiderman) that EA has its eye on this franchise, especially now that Marvel has been a hot box office. Creating compelling comic books or other IP out of a fighting game, however, is a challenge. Anyone remember the Mortal Kombat flicks? We didn't think so.

Whassup?: According to NPD Funworld data supplied to EGB, two of the most critically acclaimed titles of the holiday season actually came up short in terms of sales. As UbiSoft itself admits, Beyond Good and Evil was a major disappointment, and NPD reports only 45,000 copies of the game sold across the console platforms. Ubi claims it has sold 2 million copies of Prince of Persia, but NPD shows only 576,000 in October and November in the U.S. Granted POP may be doing much better overseas, but for a U.S. gaming market in which the game got hits on every major industry mag cover and loads of advance hype, those sales are disappointing.

So What?: Given the quality of both of these titles, and the greater sales of much less impressive game experiences this holiday, the industry has to wonder whether gamers themselves are really ready to see this medium mature. One imagines both of these titles should have traction outside of core gamers, and yet the marketing never reached them, or at least it never reached them in a way that compelled them to buy and play the games.

Top Video Game Rentals (week ending 2/1/2004)
This Week  Last Week  Game\Publisher\Platform             Turns (in millions)
1          1          Need for Speed Underground\EA\PS2     0.05
2          7          NFL Street\EA\PS2                     0.04
3          2          True Crime\Activision\PS2             0.04
4          3          Dragonball Z: Budokai 2\Atari\PS2     0.03
5          4          Madden NFL 2004\EA\PS2                0.03
6          8          Socom II\EA\Sony                      0.03
7          5          Tony Hawk Underground\Activision\PS2  0.03
8          6          Medal of Honor: Rising Sun\EA\PS2     0.03
9          10         WWE Smackdown\THQ\PS2                 0.03
10         19         Manhunt\Take-Two\PS2                  0.02
11         9          Sims: Bustin' Out\EA\PS2              0.02
12         *          Mafia\Take-Two\PS2                    0.02
13         15         NFL Street\EA\Xbox                    0.02
14         11         LOTR: Return of the King\EA\PS2       0.02
15         12         Mario Kart: Double Dash\Nintendo\GC   0.02
16         16         True Crime\Activision\Xbox            0.02
17         14         Need for Speed Underground\EA\Xbox    0.02
18         13         Max Payne 2\Take-Two                  0.02
19         23         Rainbow Six 3\UbiSoft\Xbox            0.02
20         24         Counter-Strike                        0.01

This Week  Last Week  Revenue (in millions)  Weekly Revenue Change
1          1          0.24                   28%
2          7          0.2                    95%
3          2          0.18                   25%
4          3          0.14                   11%
5          4          0.14                   8%
6          8          0.13                   40%
7          5          0.13                   18%
8          6          0.13                   21%
9          10         0.12                   37%
10         19         0.12                   98%
11         9          0.12                   27%
12         *          0.11                   -
13         15         0.1                    46%
14         11         0.1                    18%
15         12         0.09                   24%
16         16         0.09                   32%
17         14         0.08                   20%
18         13         0.08                   15%
19         23         0.08                   48%
20         24         0.08                   45%

This Week  Last Week  Revenue to Date (in millions)
1          1          4.62
2          7          0.37
3          2          4.21
4          3          2.25
5          4          6.44
6          8          3.28
7          5          4.44
8          6          4.92
9          10         2.95
10         19         2.22
11         9          1.31
12         *          0.11
13         15         0.2
14         11         2.51
15         12         1.78
16         16         1.93
17         14         1.51
18         13         1.47
19         23         2.48
20         24         1.69

Source: Rentrak/Video Business