Analysts: You Gotta Love Them Edition: Part Deux


Where do these guys come from? This morning a new doom and gloom analyst report came out from Goldman Sachs about the game business. Apparently, for the first time in the history of the business, software sales will peak mid cycle. Thank you for the clarification Mr. Higginbotham. Don't listen to me though, this is what he says:

Goldman Sachs analyst Robert Higginbotham has stated that video game sales may have peaked this year. And as one of the biggest beneficiaries of the video game boom, leading retailer GameStop may be negatively affected by a slow down, he said.

"We see GameStop shares as poised for a pullback as industry growth remains on a path toward deceleration from its current peak," Higginbotham wrote, according to MarketWatch.

Assuming his analysis is correct on the software side, which I will address below, apparently, Mr. Higginbotham does not believe Gamestop will enjoy any benefits from the inevitable price decrease in consoles. As I wrote in the last analyst post, these guys assume a static console base. In the real world, console sales increase exponentially each year. They increase even more when the prices fall, which they are likely to do this holiday season. New console buyers want to feed software to their machines. This means average unit sales and unit sales of hit titles increase. Don't forget Gamestop has a margin on those consoles as well.

He continues:

GameStop shares have risen 30 percent in the last month, but fell 2.5 percent in midday trading to $55.21. Although the next couple months are poised for further growth thanks to huge releases like GTA IV and Wii Fit, Higginbotham is concerned about the back half of the year. "...the remainder of the year lacks any big releases, and comparisons get tougher throughout the year as we lap titles such as Halo 3 and Guitar Hero III," he noted.

Before I talk about titles in the pipeline, Mr. Higginbotham should recognize the strength of GTA. GTA will open big, but it will have a long and robust tail. The game is one of the few games which will hold full retail price for a year. It will be one of the top sellers of the holiday season, even though it is released in Q2. As far as a dearth of strong titles, I wish this were the case. I sit in meetings with publishers trying to avoid the release of mega titles against our launches. I don't know about stock prices, P/E ratios or neat analytics, but I do know a sure thing when I see it. Especially this close to release. This holiday season, like all others, will be a blood bath for publishers at retail and a gift to consumers and software retailers. Let's take a look at the titles announced so far:

Titles you would mortgage your mother's house to have a piece of (all multi million sellers):

Gears of War 2
Fallout 3
Midnight Club Los Angeles
Madden Football '09
Soul Caliber IV
Star Wars: The Force Unleashed
Brothers in Arms Hell's Highway
SOCOM: Confrontation
Spore
Metal Gear Solid 4

Titles you would borrow on margin to have a piece of (all million plus sellers):

Too Human
Saints Row 2
Just Cause 2
Far Cry 2
Mercenaries 2
Bourne Conspiracy

Titles you would dip into your savings to have a piece of (likely million sellers and great breakout possibilities):

Sonic Unleashed
Little Big Planet
Lego Batman
Borderlands
Afro Samurai
Project Origin
Legendary
Jason: Rise of the Argonauts

Contrary to Mr. Higginbotham's advice, I would not short software sales today, but thank for the tip.





Comments

Post a Comment

Popular posts from this blog

The Media is Reporting the Game Industry is Over: Why are They Such Babies Edition

Image
My posting continues to move at a glacial pace. For a while, there was nothing new to say. Then, all of sudden, the world exploded with new ideas and I had no time to write. I attribute the plethora of new ideas - things other than marketing gaffes, publishers' hosing of developers, the need for independent finance and the folks who are saying they have it or xBox becoming cable - as a reflection of increased sensitivity attributable to too much travel and too little sleep. But bubbles are growing, companies are reacting, and CEOs seem to be turning into either Chicken Little or ostriches with heads in the sand. Some of the new stuff floating around in my head is: - The abandonment of seasoned game designers in favor of metric driven design - catering to metrics let you keep more players, but are those players worth keeping? - The complete lack of game sales data for XBL and PSN - Do the platforms really think they are helping us by cloaking sales in a shroud of mystery? - Th
Read more

The Game Business Is A Year From Irrelevance:Where are Our Easy Riders and Raging Bulls Edition

Image
Every time I told people in suits and ties - or my parents - I was in the game business, they started to talk about kids. They viewed our business as the toy business. Games are for children. This was when I pulled out my silver bullet. I had The ESA's (then IDSA) latest report showing the average age of gamers. I started when it was 27. The "average age" went up a year each year, but was still a neat statistic when I could say 30 or 31. Whether it was directed at a school parent or an audience at a conference, It inevitably led to a dropped jaw and a "wow, I didn't know that." The industry instantly became relevant to their business. I haven't really paid much attention to this number because my proselytizing for the business was taken over by outlets like the Wall Street Journal, Newsweek and USA Today, which all have a larger reach than this blog or my speaking engagements. But this past week I saw some slides for an ESA speech indicatin
Read more

Game Marketing: The Proctologists are Doing Brain Surgery Edition

Image
[ Let me apologize in advance for the length of the large gaseous stream of consciousness belch which follows, it's been a while since I wrote anything and I guess some pent up stuff started flow .] Another Q4 is behind us and the publishers are locked down in the deep, dark, musty bowels of their fortress like edifices surveying the seasonal lucre. The piles are not quite as high as year’s past and when they reemerge into the sunlight from their Morlock existence in the counting and analysis rooms, they will not be happy. Contrary to the mainstream media reports, sales for most publishers were less than stellar. Gamasutra’s story highlighting what they characterized as low numbers for Mirror's Edge and Dead Space (for the sake of argument let's not mention they did not apply the NPD multiplier to determine real US sales, nor did they add in PC sales or sales in foreign territories which are not reflected in NPD) reflects the norm rather than the exception. The point
Read more