Video game makers predict jingle bells at registers
Video game sales are expected to be strong this year and in 2009, despite the economic troubles that have hurt some of the retail stores that sell the games, industry executives said on Thursday.
Speaking at the BMO Capital Markets Interactive entertainment conference in New York, they said their optimism is fuelled by solid sales of advanced gaming consoles made by Nintendo, Sony and Microsoft.
As the Wii, PlayStation 3 and Xbox 360 are expected to be popular during the holiday shopping season, consumers are also likely to buy games to play on them.
“I think it’s going to hold up a lot better than other industries,” said Mindy Mount, chief financial officer of Microsoft’s entertainment and devices division. “We remain cautiously optimistic.”
The outlook for video games is rosy in contrast to many other industries.
On Wednesday, big box retailer Best Buy, the No. 1 U.S. electronics chain, slashed its profit forecast, just two days after Circuit City Stores filed for bankruptcy, falling victim to reduced consumer spending and tighter credit from suppliers.
Still, Yves Guillemot, chief executive of France’s Ubisoft Entertainment - maker of the hit “Splinter Cell” franchise - expects 2008 North American and European video game industry software sales to grow by more than the 20 percent rise forecast by BMO analyst Edward Williams.
Guillemot added that 2009 “will also be a great year,” saying business may fare better in stores with a different demographic than Best Buy, such as low-cost retailer Wal-Mart Stores and game-seller GameStop.
“What we see is Wal-Mart and GameStop - those guys keep the traffic, they sell lots of (game software),” Guillemot said. “In general, there’s a lot of competition (from other publishers), but we see that software is selling well, just due to the fact there are a lot of machine owners who need software.”
Nonetheless, the global financial meltdown and rising unemployment, which has prompted shoppers to curb spending, will hurt some game makers, particularly those lacking major hit franchises, analysts have said.
For example, THQ posted a dismal third quarter earnings report last week and cut jobs, cancelled some games and said it plans to retool.
Strauss Zelnick, executive chairman of Take-Two Interactive Software, maker of the blockbuster “Grand Theft Auto” series, said overall holiday shopping “doesn’t look very promising” for those who do not have huge hits on the shelves.
“I’m concerned that it’s going to be a pretty rough holiday season,” he said. “Everyone’s going to be shopping less. First you are going to see less foot traffic and then less inventory on the shelves.”
Peter Moore, president of Electronic Arts Inc’s EA Sports unit, which makes the popular title “Madden NFL,” also voiced “cautious optimism.”
“We are entering uncharted water from an economic standpoint,” he said. “We are holding our breath and hoping the consumer comes out to play.”