November game sales send mixed signals

Analysts agree to disagree about the greater significance of holiday software revenues. Some publishers' shares see moderate gains.

Was November a good month for the game industry? Depends who you talk to. Less than a week after word from upbeat analysts and CEOs lifted publishers' shares, several new reports have muddied the waters.

In a report yesterday, U.S. Bancorp Piper Jaffray analyst Tony Gikas gave a bleak assessment of the 2003 holiday season's kickoff. "Many retailers indicated that soft sales are the result of few 'hot' new titles, slow hardware sales, high software price points, and increased competition," said Gikas. Gikas also revised his estimates for total 2003 games sales from 18 percent growth to 12.5 percent growth. "We believe industry sales of video game software during 2003 will fall well short of original analyst, publisher, and retailer estimates," he said.

Also, according to Reuters, a survey of 20 Wal-Marts and 20 EBgames outlets by J.P. Morgan, which had upgraded Electronic Arts' stock only days before, found that 50 percent had excess inventory.

However, NPD numbers from November showed that the Christmas shopping season's start has been nice to some publishers, but naughty to others. Strong sales of True Crime: The Streets of L.A. (630,000 copies) and Tony Hawk's Underground (554,000) let Activision skate its way to a 46 increase in sales over November 2002. The news sent Activision's stock shooting up, despite a newly imposed "neutral" rating from Merrill Lynch. The company's share price ended the day at $16.48, up $1.44--nearly 10 percent.

EA saw a similar gain, rising $1.22 (2.82%) to $44.20. Franchise installments Lord of the Rings: Return of the King (435,000), Need for Speed: Underground (527,000), and Medal of Honor: Rising Sun (580,000) boosted EA's November sales 29 percent, earning it a "buy" rating from Merrill Lynch.

November's big loser was Take Two Interactive, whose sales plummeted 47 percent. Hopes that Manhunt would help fill in for the absence of a Grand Theft Auto game proved woefully unfounded, as the controversial game only shipped 75,000 units, a fraction of the 502,000 GTA Double Packs sold. But neither the revenue dip nor the still-raging protests by Haitian-American groups, who picketed Take Two's offices Sunday, could dent the company's share price. As the markets closed, the Take Two stock price rose $0.20 to $29.20, and received a new "buy" rating from Merrill Lynch.

However, virtually everyone agrees that, overall, holiday game sales didn't get off to a stellar start. According to the NPD numbers, November sales were up only seven percent over last year.

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