Electronic Arts, Activision, THA and Take Two have all been hit with lower stock prices on the heels of the latest earnings announcements and shipment forecasts. THQ dropped 4.0 percent to $30.48, Take Two has dropped 2.3 percent to $16.85, Electronic Arts dropped 1.7 percent to $48.04 and Activision dropped 2.3 percent to $16.71 .
The market analysts all predict a hard first quarter. Microsoft recently cut it’s shipment forecast to 12 million which is down from up to 15 million. Many believe that Microsoft is trying to reduce reseller and warehouse stocks before they release a new model later this year. Microsoft also faces competition this year from Sony and Nintendo which will have an effect on demand for the Xbox 360.
Sony also had a disappointing earnings report. Analysts are predicting that the game division probably lost 50.9 billion yen last quarter compared to a profit of 67.8 billion yen the last quarter of 2005. This is largely due to the botched Playstation 3 launch and the hundreds of dollars they loose on each machine. It will most likely take Sony another quarter to get production up to speed after they’ve completed the European launch early this quarter.
Fewer machines, of course, mean fewer people to sell expensive new generation games too. Gamers lucky enough to get an Xbox 360 at launch were exposed to a game drought through the first quarter of 2006. It will be no surprised to see the Playstation 3 gamers go through something similar. We’ve already seen key launch game titles be delayed for the Playstation 3 after shipping quantities were known just like we saw with Xbox 360’s launch. You can’t make a profit selling a game that cost you 15-20 million to make if your audience is only 500,000 strong.
With more pressure on software developers, they’re less willing to take risks. The smaller software shops will find it even harder to compete and the larger houses will rely on tried and true franchises (sequels) to turn their profits. Lets hope the second quarter things heat up. As gamers I think we’re all tired of seeing all the monster games come out in November.
