EEDAR Analyst Jesse Divnich Calls Out Reactionary Investors Over THQ Stock Dump

by Matt Bertz on Mar 24, 2011 at 11:10 AM

After THQ reported today that it has sold more than one million copies of Homefront to consumers and shipped over 2.4 million units worldwide, EEDAR vice president of capital research Jesse Divnich issued a cautionary message to the investors who hastily ditched their THQ stocks two weeks ago.

For those of you who haven't been following the drama, here's a quick recap. On the same day THQ publicly admitted that it needed to move two million copies of Homefront to break even, traders reacted negatively when the game only mustered a 71 Metacritic rating after majority of the reviews went live (you can read ours here). As a result, THQ's stock dropped 20 percent in one day.

Now that THQ is reporting the game's strong early sales numbers, Divnich took the opportunity to scold shareholders and analysts for being too reliant on using a single metric to guide their investment decisions.

"It is easy to become too reliant on a single metric, which may erroneously drive forecasts and/or investment decisions," he said. "The reality is that numerous factors exist that can impact the overall sales performance for a title.

"Review scores are simply a weight, not an absolute. The impact of review scores on video game title sales are determined by the potential size of the market, direct and retail promotional spend, competition at launch, overall level of interest in the title before release and more. This helps to explain why titles such as Demon’s Souls can achieve 90+ reviews, but produce lower revenues, and why a game such as Medal of Honor from Electronic Arts can get an aggregated review score in the 70’s and surpass nearly 5 million units in sales worldwide."

Divnich also said that one of the flaws of the review score system in general is that it doesn't account for quality gaps between single-player and multiplayer modes in shooters.

"If anything Homefront is an example of a potential flaw in the video game review system and its ability to clearly represent in a single score the differences that can exist between online and offline gaming aspects within a single title," he said. "Fortunately, reviewers did an excellent job messaging within their reviews the disparate level of quality, something discerning consumers likely took into consideration and something investors clearly did not. Again, focused too narrowly on just 'the score.'"

In closing, Divnich said he expects Homefront to surpass three million units worldwide.