The lights are on
The summer is winding down, and the first big releases of of the fall are right around the corner. Things kick off on Sunday August 18, 2013, with Disney Infinity and the train doesn't stop until well after the new consoles arrive. Ah, the madness. That's the future, though. Let's talk about the recent past.
So much financial news, but what does it all mean?
It's rare that one week brings so much financial news, and rather than go through all the nitty gritty, I want to talk about some trends we're seeing.
Last quarter I pointed out the biggest difference between EA and Activision. Given that both have military shooters coming out this fall, I'm feeling good about a gun analogy.
EA is a shotgun. They try to touch everything they possibly can, but the further they spread out, the less impact each element of the business has. Sports, shooters, racing games, mobile, social, mid-core. The bottom fell out of social games, and EA took the axe to a number of its holdings and a huge number of employees.
It's recovering from that, but with a big pending lawsuit related to its NCAA games, not to mention the already partially successful claim by Madden's original creator, things could get very bad for the software giant very quickly.
Activision, on the other hand, is a sniper rifle. The company takes its time, picks its target and its moment, and then it pulls the trigger for huge damage. Think of what Activision has coming to retail this year. It shouldn't take you long: Skylanders: Swap Force and Call of Duty. The two are the biggest franchises in North America and Europe. Call of Duty is a perennial beast, and Skylanders is now a $1.5 billion dollar franchise. The company just leveraged about $4.6 billion in debt and investors thanked them (well, most of them did) with bumping the share value.
Vivendi isn't around to leech off Activision anymore, CEO Bobby Kotick ponied up huge money to assist with the liberation, and the company raised its financial outlook for the year, even while cautioning about the console transition. Activision's next new IP, Bungie's Destiny, is expected to be yet another $1 billion franchise. You can't find two more starkly opposed companies in the business right now.
On Retail and Digital
One thing is becoming very clear, digital isn't just important, it's becoming more important by the day. EA, Activision, Take-Two, Ubisoft, and others are all making a point of sharing how important digital has become to the bottom line. Microsoft's digital future might be on hold, but if you think vocal dissatisfaction is going to stop it, you might as well stand in front of a train and hope it bounces of you.
On Japan and The Americas
Activision and Take-Two, while having very different financial profiles right now, are both poised for enormous gains at the end of this year. EA, while wounded, is turning things around (and could very well continue if it gets its leadership issues worked out and makes it through its lawsuits relatively unscathed). Capcom and Square Enix are both in serious financial distress and making mis-step after mis-step.
This week, not only did Capcom post big losses, but it set off a firestorm amongst fans with its plans for the Breath of Fire series (it's going mobile/social). Square Enix, tripped over what should have been an enormous announcement with a next-generation Tomb Raider sequel. The news was buried at the bottom of a blog post from president Phil Rogers. The tone of the post was one of desperation, asking fans to trust in the company, assuring them that there is a plan in place. I get concerned when someone makes a big point of telling everyone, "don't worry about me. I'm fine."
Two companies bucked the trend (one fully, and one partially). Sega posted huge numbers, thanks in part to Relic's Company of Heroes 2, which sold 380,000 in the few days it was on the market during the quarter. Nintendo also posted gains thanks to the 3DS, but put up absolutely terrible Wii U numbers. Only 160,000 consoles were sold in the three-month period, and unless Pikmin, Donkey Kong, Wind Waker HD, and (much later this year) Mario 3D World can start moving consoles, the future is bleak. This fall is critical for the Wii U's success. Thankfully, Nintendo's coffers are full and the 3DS shows no sign of slowing down. The company isn't going anywhere, but something big needs to happen for the Wii U.
Microsoft and the 53 Mhz announcement
The biggest question I got yesterday was, "what's the big deal about a 53 MHz bump in the GPU speed?" The answer? Nothing much. The logical follow-up question then is, "Why is Microsoft making such a big deal about it?" Answer? Because we're talking about it.
While the explanation seems a bit reflexive, it makes sense. Microsoft's PR has been stumbling at most every step since the May 21 reveal of the Xbox One. Since then, the company has been slowly rebuilding its image and competitive edge with reversals, policy changes, and little announcements. Just this week, they dripped out news related to matchmaking, the reputation system, and the hardware. They know that gamers are hungry for every piece of information (and because of that, we'll share it).
That's not to say the information is bad or uninteresting (it isn't), it's just that sometimes companies will say something because people want to have something to talk about. The 53 MHz announcement has one added advantage. In that row on the PS4 vs Xbox One comparison, Microsoft now looks stronger (prior to this, the GPU speeds of both were 800 MHz). A developer I spoke with was quick to remind me that GPU speed isn't the only comparison point. The Xbox One has 12 compute units to the PS4's 18. Additionally, the Xbox One RAM is DDR3, while the PS4 sports faster DDR5.
How much different are they in power (in ways that gamers will see)? Probably not much. But yesterday, Microsoft had us all talking about 53 MHz (and by extension, the Xbox One) all. day. long.
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