2012

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tsanalysis
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2012

I wanted to look ahead a bit to 2012, specifically holiday 2012. The current gen consoles will be another year older in what has already been an extended cycle. It will be the first holiday for Wii U, but I don't think Wii U can be counted on to deliver strong numbers in its first holiday. And last but not least, the overall software release schedule would look to have very difficult comps against holiday 2011. Would you expect this to in general depress multiples on the video game stocks? Even those with expected stellar 2012 earnings such as Take-Two? How about the retailers such as Gamestop and Game Group? Assuming that the retailers and successful publishers experience share price appreciation on good holiday 2011 results, when do you think the market could begin pricing in lower holiday 2012 expectations? Early 2012, middle 2012, or late 2012?

darrens
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Wow, that's really hard to

Wow, that's really hard to say. I can't categorically disagree with you but on the other hand you're going to have a larger install base of consoles which will (still I think) not be seen as legacy system, lots of Wii owners could be trading up to a Wii U and the release schedule may well be as strong as this year, particularly if we get GTAV or something like that.

I think your scenario is as likely as mine.

As to the market, then if the last part of 2011 is as strong as I suspect then I think the market and analysts will be falling over themselves to predict that the video game industry has bounced back and will be looking forward to continued growth. Particularly if the sales tracking organisations start to include "digital" in their numbers.

I honestly think it is too far out to predict but if you put a gun to my head then I'd say that, if you are right and 2012 shapes up to be lukewarm, then this time next year may be the time to sell what will have become an over-valued sector.

tsanalysis
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Thanks, I agree it is too

Thanks, I agree it is too early to know but I wanted to start thinking about possible scenarios and trading strategies. Q1 of calendar 2012 seems like it should be solid with some notable new releases such as Bioshock Infinite and Mass Effect 3, along with the continued sell-through of the Q4 2011 blockbusters. April through August we don't know the full release schedule yet, but the year over year comps should not be that strenuous. September 2012 on we will start to lap the difficult year over year comps, so it would make sense that around that time (or a couple months in advance) is when the market would start to worry about year over year slowdowns, if indeed the holiday 2012 schedule turns out to be considerably weaker than holiday 2011's.

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tsanalysis
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The Spike TV VGAs were this

The Spike TV VGAs were this past weekend. The show has become a bit of a showcase for big reveals for upcoming games. I can't say that the reveals this year did anything to improve my expectations for 2012's line-up. There still could be lots of games that publishers are holding back on revealing though.

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tsanalysis
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My conviction is growing that

My conviction is growing that 2012 will be disappointing. On the hardware side I think PS Vita will flop. I think Wii U will disappoint. On the software side I expect most of the big first half releases to disappoint and I expect the holiday lineup to be weaker than this past holiday's. As I've said in various other threads, I think the major Q1 titles from the publicly listed publishers we follow most closely (so Kingdoms of Amalur, Syndicate, SSX, Grand Slam Tennis, FIFA Street from EA; Darkness II, Spec-Ops the Line from TTWO; Prototype 2 from ATVI, UFC Undisputed 3 from THQI) could all disappoint. I think even Max Payne 3 could disappoint, and Mass Effect 3 could just meet expectations but not be a breakout hit. I don't see much from other publishers either. Looking towards year end, I think Call of Duty may be flat to slightly down year over year, from EA it will be a MoH year which I think will be down significantly from BF3, there will be no Elder Scrolls game. Just overall, there were so many '3's this year (Gears of War 3, Uncharted 3, MW3, BF3, SR3), which I think are often the high point for a series in a console cycle, that I just don't see 2012 comping favorably.

Sure 2012 will see some big titles - Diablo III, Starcraft II HotS, Bioshock Infinite, Halo 4. But I don't think that will be enough. If GTA V releases in 2012 that might change my mind, but I am still expecting GTA V to be released in March 2013.

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tsanalysis
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New AAA releases in 2012 are

New AAA releases in 2012 are seeing disappointing sales so far. Things seem to be playing out pretty much as I expected. Kingdoms of Amalur managed to sell just so-so. The Darkness II, Grand Slam Tennis, UFC Undisputed 3, Syndicate have all flopped. SSX and FIFA Street will be next. I think Mass Effect 3 will sell around 1 million units (NPD) in March and drop off quickly from there, and will overall be considered a disappointment. Prototype 2 will flop. I think Max Payne 3 and Ghost Recon Future Soldier will sell worse than Mass Effect 3 and so again be considered disappointments. Then it will be another drought for a few months until the holiday releases start to arrive and underperform 2011's holiday slate. On the hardware side I think Vita has already flopped and Wii U will, too. I don't know what most analysts are expecting for overall industry sales (hardware and accessories and software) in 2012, but I am beginning to think that down 20% year-over-year, despite the launches of the PS Vita and Wii U, is not that unreasonable a starting point.

http://www.mcvuk.com/news/read/new-releases-ko-d-on-tough-uk-high-street...

Sales of triple-A video games have reached an all-time low.

The UK games retail market is 25 per cent down compared with last year. And publishers are aghast by the performances of major sequels.

One prominent analyst told MCV that sales are “half of what they should be”. According to retail sources, this year’s major new games are selling between 10,000 to 48,000 during their first week on sale. By comparison, in the same period last year the big brands were shifting between 35,000 to 80,000 units.

One publisher who has seen its latest triple-A struggle told MCV: “We are trying to understand it, but everything is selling well below what it should. It is an absolute nightmare. I’m not making half the money back I’m spending on marketing.”

Another added: “Nobody is looking at Chart-Track’s numbers so far this year and thinking ‘cool’.”

Even the chart toppers are performing below expectations and failing to match their predecessors. UFC 3 by THQ is this week’s No.1, but it hasn’t equalled the figures of its forebears. In fact, the original UFC outsold this year’s title 3:1 during the same period.

“There are some stock shortages at retail, but I don’t think that’s what’s causing these figures,” added one UK boss of a Japanese publisher. “The big games of last year are available cheaply. But also consumers don’t want to spend money, and we as an industry are not giving them any reason to change their minds. I will be watching Mass Effect 3 and Syndicate very closely.”

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Silent Hill: Downpour,

Silent Hill: Downpour, Resident Evil: Racoon City, Ninja Gaiden 3 aren't exactly impressing either on Metacritic or Amazon best seller lists. The Japanese publishers have been on the decline for awhile, but still this would seem to represent new lows for these franchises.

Disappointment from these games can't bode well for March NPD. Sure Mass Effect 3 did well. But what else was there? I guess SSX did moderately well. But last March had Pokemon Black/White (2.4 million sold), Homefront (500k), along with Dragon Age II, Crysis II, Lego Star Wars III and Fight Night Champion.

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SEGA results, Best Buy

SEGA results, Best Buy (entertainment division) results... just more data points pointing to the disappointing 2012 so far. That's why it is hard for me to be excited about any publisher with a large packaged goods business right now and the only stock I am long is Gameloft. The US markets have been doing very well overall also. I worry the video game publishers could suffer another leg down in share prices if the overall markets correct which it seems like it is due for.

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ClaasPotthoff
Don't bash Sega

Once again Sammy is the undisputed Pachislot market leader (169000 Hokuto No Ken machine installations). Monster Hunter (Rodeo, 65% Sammy and 35% Fields subsidiary) could be another mega hit.
And they are building a new factory in Saitama for Slot and Pachinko machines as well as a new distribution center.

So maybe Sega Sammy is just becoming more and more a pure gambling business over time. Having US$ 2.5 bn or so in cash and marketable securities means they can withstand a much harsher environment.

tsanalysis
tsanalysis's picture
As you know, I have been wary

As you know, I have been wary of Max Payne 3 and Ghost Recon for awhile but I was not expecting UK sales to be down year over year as much as they have been the last two weeks. I mean, 40% declines for weeks seeing the launches of Max Payne 3 and Ghost Recon Future Soldier and at least partial retail sales from Diablo III. Really? Is it time to declare this generation dead? I mean, really really dead to the point where even Borderlands 2, Assassin's Creed 3, Halo 4, Call of Duty Black Ops 2, FIFA 13, Bioshock Infinite and GTA V are going to suffer disappointing sales?

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darrens
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Here's the thread in case I

Here's the thread in case I read it wrong

http://www.neogaf.com/forum/showthread.php?t=475890&highlight=pal+chart

It will be very interesting to see NPD data because there is definitely a UK specific factor at play here (the collapse of GAME) but I don't know how big a factor that really is. NPD (next Thursday) will help to see whether the UK is skewed negatively or if.....it's time to declare this generation dead!

db1965
2012 / E3

Hi Chaps

I don't normally post but as I'm no longer in the business as such but am an interested observer I feel like I am able to now.

It also seems to have been a really lacklustre E3 this year - I know it's primarily a trade show but it has to be one of the least exciting ones for years. The Wii-U seems to have excited no one in particular and aside from Ubisoft who came out of it fairly well it's all looking very lacklustre. I would guess the NPD data is also going to show pretty bad news too.

It does make you wonder about the fate of the remaining few large European studios and how they can make financial sense at present with long development cycles and big teams hitting weak sales figures.

darrens
darrens's picture
Hi db

Hi db

I'm actually away this week so haven't been able to go through all the E3 stuff as much as I'd like to but I'm slightly unclear why everybody is so disappointed with E3. I'm not saying it was super-exciting but wasn't it pretty much in line with how E3 has become? You seldom get any major, major announcements any more and it seems more like a showcase for the things that we already know about (or suspect).

So, while I agree that E3 was a bit dull, I just think that's how it always is.

However, having said that, it really just confirmed what we already know - there's nothing on the horizon that is going to give the video game industry a shot in the arm. Wii U looked okay but without (or until) any killer apps it's unlikely to repeat the success of the Wii. The gamepad controller is still just an interesting concept until somebody makes a "must have" game for it then it's just an interesting piece of technoloy.

NPD for May is likely to be bad but it will be interesting to see whether the UK picture (which shows that Max Payne 3 and Ghost Recon didn't make any difference to the huge year on year decline) is repeated in the US.

As you say, it could be that we are entering a very dark place.

Very nice to hear from you - are you going to break cover or remain db1965?

db1965
I thought this article was interesting in terms of E3

http://www.gamasutra.com/view/news/172088/From_the_Editor_E3_2012__The_E...

I went to a talk by Peter Molyneux a few years back when he suggested that the number of consumers for hardcore games has never really changed significantly since Dungeon Keeper etc (this was a Kinnect launch thing) which is why Microsoft etc were so desperate to chase the mass market consumer that was on the Wii at the time (and now they are more likely to be on free to play aps etc).

Now the tech of AAA games has become so similar you are losing some of the factors that made a game feel special because of its technical features (when things like 'physics' used to be a USP) and instead it's more about the story & the action - but in consequence many of the big games are becoming so similar with graphic violence (which was always there but previously we could claim it was cartoon-ey) and dreadful quick-time events (QTE).

As the article suggests (and I agree with) this means so many mores games are becoming clones of each other as very similar dumb action movies aimed at 14 to 16 year old boys.

Obviously some of these do sell (Gears of War, COD etc) but it seems to be becoming a smaller pool of titles doing decent numbers.

Also if the economics of AAA aren’t working now for publishers how can they possibly improve with next gen expectations – even if the team sizes (in developers) don’t grow immensely the cost of creating the assets for the game is inevitably going to spiral too?

darrens
darrens's picture
With the video game industry

With the video game industry apparently in free-fall then it's only natural to try and diagnose the problem. My personal view is that the exciting new stuff of recent years which drives growth has been in areas which, to put it bluntly, don't make any money. Or, at least, not much. Almost everything since the wii has been stuff that doesn't monetize (sorry, awful expression) as well as triple A blockbusters do.

I know there's a lot of research but very little hard data and some thiink that social/mobile/f2p and so on are big revenue drivers but personally I don't agree. Fundamentally it's very easy now to spend a lot of time gaming for very little money and I think that's a big factor in the decline in the traditional video game industry.

The other big issue is that since the wii there's been no new gameplay ideas that have really driven the industry. I think that came through in spades at E3 and in q4 of last year. That should have been the shock to the system that saw huge amounts of innovation at E3 but either it came too quickly or the industry has its head in the sand about what the general public think about "big franchise n". The gaming public is quite clearly a bit bored of the current franchises and also the current gameplay ideas. It's obvious from the sales data. That's a huge problem for the big publishers and not one that many seem to really be addressing.

Ditto the platform holders. Perhaps the next gen will have some exciting new gameplay ideas but the wii u hasn't exactly broken any moulds.

So, I think e3 was simply a factor of publishers running for cover and just reverting to what they thought was safe. It was safe, but it wasn't the answer.

darrens
darrens's picture
Interesting chart showing the

Interesting chart showing the varying fortunes this year of UK and Japan.  Japan in 2012 has actually had a bit of a rebound whereas the UK has dropped off a bit of a cliff which ended up with 2012 (so far) only about half of 2008. 

The UK has certainly been affected by GAME's collapse and it will be interesting to see numbers for the US to see if it mirrors the UK or Japan.

http://i.minus.com/iMUz0t6fgh24b.png

darrens
darrens's picture
As we say goodbye to 2012 I

As we say goodbye to 2012 I thought I would sahres this chart from one of Nintendo's presentations (they are excellent sources of video game industry data) which I wanted to keep somewhere since it does a pretty good job of showing the different tastes of different territories when it comes to consoles.

http://www.nintendo.co.jp/ir/en/library/events/121025/img/15l.jpg

darrens
darrens's picture
Here's 2012, a picture tells

2012, a picture is worth a thousand words...

darrens
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We now have a top 20 for the

We now have a top 20 for the UK for 2012 with the Holiday releases (Hitman Absolution and Far Cry 3) doing surprisingly well compared to the earlier offerings like Mass Effect 3, Borderlands 2 and Max Payne 3.

Here it is:

1. Call of Duty: Black Ops II - Activision
2. FIFA 13 - Electronic Arts
3. Assassin's Creed III - Ubisoft
4. Halo 4 - Microsoft
5. Hitman Absolution - Square Enix
6. Just Dance 4 - Ubisoft
7. Far Cry 3 - Ubisoft
8. FIFA 12 - Electronic Arts
9. The Elder Scrolls V: Skyrim - Bethesda
10. Borderlands 2 - 2K Games
11. Mass Effect 3 - Electronic Arts
12. LEGO Batman 2: DC Super Heroes - Warner Bros
13. Need for Speed: Most Wanted - Electronic Arts
14. FIFA Street - Electronic Arts
15. Mario & Sonic: London 2012 Olympic Games
16. Skylanders Giants - Activision
17. Battlefield 3 - Electronic Arts
18. Call of Duty: Modern Warfare 3 - Activision
19. Max Payne 3 - Rockstar
20. Sleeping Dogs - Square Enix

Contrasting with 2011 top ten:

1. Call of Duty: Modern Warfare 3
2. Fifa 12
3. Battlefield 3
4. Zumba Fitness
5. The Elder Scrolls V: Skyrim
6. Just Dance 3
7. Assassin's Creed: Revelations
8. LA Noire
9. Saints Row: The Third
10. Batman: Arkham City

tsanalysis
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NPD top 10 for all of 2012:

NPD top 10 for all of 2012:

1. Call of Duty: Black Ops II
2. Madden NFL 13
3. Halo 4
4. Assassin's Creed III
5. Just Dance 4
6. NBA 2K13
7. Borderlands 2
8. Call of Duty: Modern Warfare 3
9. Lego Batman 2
10. FIFA Soccer 13

I think last year Amazon released an official list of their top selling video games for the year, but here is Amazon's real-time 2012 best seller list. Amazon lists each sku separately though so it is not directly comparable to the NPD list. I kind of took the average rankings of all available skus into account to arrive at what I thought was a realistic top 10 ranking across skus so it could be compared to the NPD list:

1. Call of Duty: Black Ops II
2. Halo 4
3. Assassin's Creed III
4. Just Dance 4
5. Madden 13
6. Borderlands 2
7. Diablo III
8. Just Dance 3
9. Mass Effect 3
10. FIFA 13

Not too bad. The major differences were NBA2K13, CoD MW3 and Lego Batman 2 on the NPD list whereas Amazon had Diablo III, Just Dance 3, and Mass Effect 3 instead. And Amazon's official list, if they release one, may show differently.

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Metacritic released its

Metacritic released its annual top publisher list.

http://www.metacritic.com/feature/game-publisher-rankings-for-2012-releases

EA was crowned the top major publisher with a 75.2 metascore average. TTWO was the top mid-size publisher, and top publisher overall, with an 83.1 metascore average (Telltale games had an 83.9 metascore average, but TTWO had 3 "great" titles compared to Telltale's 1, which increased TTWO's overall weighting).

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darrens
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Interesting analysis from

Interesting analysis from metacritic but I don't think splitting it into two separately ranked groups based on number of titles is valid. In particular, Take Two is only in the mid-size publisher category because the purposely decided to release fewer higher quality titles as a key part of their strategy. Their strategy has paid off brilliantly and I feel metacritic have snatched away their achievement by the spurious categorisation. I also have some reservations about Telltale games being in the mix given that their line-up is the episodic Walking Dead and that's just about it.

It doesn't really matter but if metacritic want to try and give out some useful analysis then they need to be a bit more rigorous in their approach.

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