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The Biggest Stories Of The Week (May 11, 2013)

Did you miss any of the big stories this week? Want to find out how the pieces fit together? You're in the right place. This week was filled with financial reports, the strange tale of Silicon Knights, and a diverse body of previews.

 

'Tis the season for financial reporting. Bear with me, because this is important stuff.

This week saw a number of publishers report on their finances for the period ending March 31, 2013. EA, Capcom, and Sony wrapped up their fiscal years with varying degrees of success, and Activision is off to a strong start at the end of its first quarter. The biggest story here is the stark difference between EA and Activision. EA set the stage well for its call on Tuesday, announcing a major deal with Disney to exclusively produce core market Star Wars games. The company also announced The Sims 4 and, almost as importantly, confirmed that it would be playable offline.

The call and the related financial statements raised some eyebrows, as EA finally confirmed it had laid off 10 percent of its staff worldwide. Investors received this news, along with word of the Star Wars deal, extremely favorably, and stock prices jumped 17 percent on Wednesday. Cutting through what seemed like an obfuscated presentation yielded a couple of items that we are watching with interest.

EA has changed the way it will be recognizing revenue related to its games, but will not be changing the timing of its expenses. Timing an accounting change of this nature during a year of significant transition to a new hardware generation is going to make comparison difficult between fiscal 2013 and fiscal 2014.

During the call, EA also indicated that Frostbite 3 is ready and will be running under the hood of multiple games. However, when questioned about savings from the significant layoffs, EA cited research and development and increased promotion of Battlefield 4. By using Frostbite 3 as the underpinning of games across studios, EA saves licensing costs and leverages a broader knowledge base. It is possible that all of those individuals now out of work were sacrificed in the name of making expenses appear level, but so far the narrative behind the numbers isn't terribly compelling. This isn't helped by two vice presidents selling significant quantities of stock (one completely divesting) as prices suddenly soared.

On the complete opposite side of the spectrum from EA's "be everything to everyone" experimental approach is Activision. Typically cautious, Activision has a history of betting big and safely. Call of Duty and Skylanders continue to dominate, and the publisher's bet on Bungie's Destiny is a good one. The company currently carries no discernible debt and is positioned well for the coming transition, even as Bobby Kotick and team caution on upcoming challenges. The confidence and straightforwardness of Activision's earnings call was a stark comparison to the shifting numbers and unclear responses to inquiries we heard from EA. 

Then there's Capcom, who simply appears lost. The company is pegging its hopes in the west on Lost Planet 3, a series that isn't likely to perform well at all. Capcom did not disclose any other upcoming titles for later in the year, seems to have decided against cross-generation development (and therefore will forego the existing base of current generation owners), expects costs to skyrocket when others are being far more optimistic, and completely failed to mention the Panta Rhei engine (shown first at the PlayStation 4 reveal) as a strategic strength.

Finally, Sony performed well overall, but sales of PlayStation 3 consoles are down, and the Vita is expected to plummet next year from seven million units sold annually to five million units. Those hoping that  the Vita would be a key point in Sony's PlayStation 4 strategy might be in for disappointment. This could have been the moment for the tragic tale of the Vita to turn around. 

For supplemental information, check out our coverage of EA's upcoming plans for its sports lineup and the newly-acquired Star Wars license (spoiler: no games coming in fiscal 2014). We also covered EA's decision regarding licensed gun images moving forward.

 

Too many questions surround precursor games Eternal Darkness spiritual successor Shadow of the Eternals

In case you missed it, late last week, a new developer by the name of Precursor Games teased a crowdfunded spiritual successor to one of the best GameCube titles, Eternal Darkness. Alarm bells starting going off, as that title's developer, Silicon Knights, has been embroiled in a messy legal dispute with Epic Games over licensing and illegal use of Unreal Engine 3.

Silicon Knights lost and CEO Denis Dyack vanished. He has recently emerged as the chief creative officer of Precursor Games, working on a title that he was in the process of making at Silicon Knights on hardware purchased by Precursor from Silicon Knights (along with art assets), alongside other people who used to be employed by Silicon Knights. Polygon put together a fantastic piece of reporting that goes into far more depth, and I encourage you to read it.

I shared my own thoughts, including some significant reservations about any crowdfunding project in which the fox guards the hen house. Kickstarter and Indiegogo work because there is some measure of protection. Make no mistake, there is no safety net here.

 

Quick Hits

Our June issue has been revealed (and is currently available for digital subscribers). Welcome to a month of coverage on the PlayStation 4, with Infamous: Second Son adorning the cover. 

Announcements and Release Dates

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