Game Makers Push Beyond Christmas
February, 10 2010
Yukari Iwatani Kane—Wall Street Journal
Videogame publishers are set to release more than a dozen major titles in coming months as the companies attempt to spark demand outside the crowded holiday season and reverse an industry-wide sales slump.
The big launches, twice as many as the first half of last year, come as publishers are spending more to develop potential blockbusters and jockeying with rivals for release dates, much like Hollywood studios. These high-profile games are increasingly important to game makers as they take years to create and can cost $20 million or more to produce, analysts say.
"There's no question that everyone tries to manage their release of a AAA title to not compete with someone else's AAA title," said Strauss Zelnick, chairman of Take-Two Interactive Software Inc., referring to the class of games that are considered top quality and have high development costs to match.
One such title, Take-Two's first-person shooter game "BioShock 2," was released Tuesday. Take-Two declined to say how much it cost to make the game, but analysts put the figure at $15 million to $20 million. The game was originally scheduled to debut late last year but Mr. Zelnick said he's satisfied with a February launch.
"Because the cost of making games has more than doubled this cycle, the risk of failure is much greater, and the publishers are constantly looking for the right 'window' in which to release their games," said Michael Pachter, an analyst with Wedbush Morgan, adding that it's become "quite similar to the year-round big releases we see from movie studios."
Next month, Electronic Arts Inc. begins selling "Battlefield: Bad Company 2," while Square Enix Holdings Co. is unveiling its "Final Fantasy XIII" role-playing game and Sony Corp. starts shipping its "God of War III" action-adventure game.
"This is unprecedented what's taking place in the next two quarters," said Tony Bartel, merchandising and marketing chief of videogame retailer GameStop Corp.
The sheer number of big titles so early this year reflects the changes that are occurring in the game business. Most games were historically launched in the last four months of the year so consumers could purchase them as gifts for the kids. But now that many of these players have grown up, publishers are realizing they have an audience who will buy games year round.
Taking advantage of that audience, which typically doesn't have enough time or money to buy too many games at once, is critical this year. That's because U.S. videogame sales fell 11% to $10.5 billion in 2009, according to market research firm NPD Group. With this year's more-staggered release schedule for games, Jesse Divnich, an analyst for market research firm Electronic Entertainment and Design Research, estimates U.S. software sales will rise 6% in 2010.
The pressure on game makers was evident in EA's latest earnings report. The company Monday posted a 25% drop in holiday-quarter sales and lowered its profit and revenue forecasts despite several coming major releases, citing in part changing consumer habits, as people shift to digital games and buy fewer games on discs.
"We've got a strong slate of games and there are reasons to be optimistic," EA's Chief Executive John Riccitiello said Monday. "But the better assumption is to be more conservative."
Many of the games that are debuting, such as "BioShock 2" and "Battlefield," are first-person shooter and action-adventure games that are intended to appeal to older players willing to pay $60 for titles. Another factor that may help: price cuts on game consoles like Sony Corp.'s PlayStation 3 and Microsoft Corp.'s Xbox 360 that have made the machines more affordable.
BioShock 2? Final Fantasy XIII? What games are you looking forward to? Talk with fellow gaming enthusiasts in Growing Up Gamer
Staggering the release of games has worked before. When Take-Two launched its "Grand Theft Auto 4" action-adventure game in April 2008, the timing raised concerns it was a "less opportune moment" to sell, Mr. Zelnick said. In an industry where a game that sells a million copies has traditionally been considered a best seller, "Grand Theft Auto 4" sold more than 8.5 million copies in its first month.
Already EA can lay claims to having the first blockbuster of 2010. Its "Mass Effect 2" sold more than two million units in the first week of its release, despite hitting stores one month after Christmas.
Around the same time, Nintendo Co. launched its "Super Smash Bros. Brawl" fighting game and "Mario Kart Wii" driving game, with similarly successful results.
Some of the games that are debuting in the next few months were pushed back from last year because of development delays, but analysts say publishers like EA, Sony and Square Enix also deliberately scheduled their game releases to avoid the crowded holiday selling season.
Many retailers are now showcasing fewer games and over the holiday season, Activision Blizzard Inc.'s "Call of Duty: Modern Warfare 2" shooter game overshadowed all other games after its November release. Activision is slated to report quarterly results Wednesday.
Sony recently chose to launch a new title called "Heavy Rain," a film-noir-like thriller game that some analysts believe could be a challenging sell, late this month. Peter Dille, a Sony senior vice president of marketing, said, "If you get outside the holidays, it's a really good window to attract a voracious audience." Sony declined to comment on the cost of making "Heavy Rain."