Activision expects a repeat of game plan
To predict what will happen in the video game business this holiday season, just look at last year.
Activision Blizzard Inc. said Wednesday that it expected consumers to behave the same way they did a year ago -- by flocking to top titles and shunning marginal or lesser-known games.
“Retailers will chase winners, and top titles will benefit disproportionately,” Michael Griffith, Activision’s president of publishing, told analysts during a conference call Wednesday to discuss the Santa Monica game publisher’s second-quarter earnings.
Translation: If a game isn’t going to make the top 10, it’s likely to languish, said Colin Sebastian, an analyst at Lazard Capital Markets.
“In this economic environment, second-tier games are going to suffer the most,” Sebastian said. “Consumers are setting the bar pretty high in terms of what they’re willing to buy. So you’re seeing a lot of publishers delaying titles to ensure that they have the right level of quality.”
That’s one reason Activision said it would postpone its launch until next year of two key titles, StarCraft II: Wings of Liberty and Singularity. Both were initially due out this year.
“We must get the games right before we release them,” said Mike Morhaime, president of Irvine-based Blizzard Entertainment, the unit developing StarCraft II. “We only get one chance to make a first impression.”
The delay, along with the recession, is expected to cost Activision roughly $250 million in revenue this year, the company said. As a result, it said, sales would be $4.05 billion, down from $4.3 billion. But per-share profit is expected to remain the same at 63 cents, thanks in part to a lower-than-expected tax rate, said Michael Pachter, an analyst at Wedbush Morgan Securities.
For the second quarter that ended June 30, Activision recorded $1 billion in sales, on par with last year. Net income of $195 million, or 15 cents a share, was up from $28 million, or 5 cents, a year earlier.
Activision’s shares, which lost 28 cents to close at $11.55, gave up an additional 20 cents in after-hours trading following the earnings report.
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