GA, NTES, Online Games (China), PWRD, SNDA - June 23rd, 2009 — 4:58am
Online Games (China), PWRD - June 19th, 2009 — 11:09am
Online Games (China), SNDA - June 8th, 2009 — 3:17pm
THQ (THQI, Sector Perform) hosted its E3 analyst event on Tuesday afternoon
Conclusion:
Positive. THQ announced it has shipped 2M units of UFC so far, which is better than our quarterly estimate of 1.9M. We’ll need to revise our forecast modestly higher as we approach the end of the quarter and we can better assess the success of its two other big Q2 releases: Red Faction and Up
Our Q2 sales estimate is above the Street already, so we believe the Street is also low. We are approximately $0.05 below the Street on EPS, which is a bigger question and we are not yet convinced that they will beat the Street forecast given the expenses associated with the launches of these three games.
The remainder of THQ’s announcements were not as impactful. It highlighted its slate for this year, which had been shown to the press in some detail already. While it expressed satisfaction with Red Faction and Up it did not give any quantification.
A note on EA’s new game MMA:
We had a chance to ask EA in our small group meeting about its plans with MMA, the new competitor to THQ’s UFC game. A few key points:
Has been looking at MMA since Peter Moore, the head of EA Sports got to EA in 2007 and a team came quickly together at EA Tiburon. Obviously given the release date, development is well underway
They will have rights to fighters on an individual fighter basis. Some will be exclusive to UFC (the one’s that Dana White has rights for) but many will be negotiated on a fighter by fighter and manager by manager basis
EA doesn’t expect to compete on day one with quality that equals the second UFC, but instead intends to build the franchise over time
It envisions releasing the game every two years, with the release of Fight Night in the other years. This lends to our theory that EA moved up Fight Night to try to put more competitive pressure on this years UFC.
Electronic Arts says it has long-term interest in this space and it will be around for a while. We continue to believe that it will be difficult for them to compete with THQ, but that EA will aggressively pursue the UFC license and either take it or make it more expensive for THQ somewhat limiting the profitability opportunity for THQ. The opportunity is still large, but not as epic as it could have been.
Details:
Sony introduces its take on the Wii-mote but may be too late to the game. Sony unveiled a new hybrid controller scheme that combines camera motion sensing with wand controllers that appear to be slightly more advanced Motion Plus Wiimotes. This is the technology that was demo’d for developers at GDC in March and we wrote about then and in our preview. It is expected to launch next Spring.
SNE - June 3rd, 2009 — 9:30am
Electronic Arts held its E3 press conference on Monday. EA’s press conference had a few minor announcements that are of note.
Conclusion:
Modest positive for ERTS. EA announced solid sales of EA Sports Active and announced a few new titles that should have a modest positive benefit to upcoming quarters although neither of these things move our estimates in the near-term
Negative for THQI. Electronic Arts announced it is creating a mixed martial arts (MMA) game, which will compete with THQ’s recently-launched UFC game. It will likely impact THQ’s game in F2011 and make it more expensive to retain the license in F2011. The UFC game is the most exciting thing THQ has going right now.
Microsoft presented its Keynote today at E3
Conclusion:
Modest Positive for ATVI, ERTS, THQI, TTWO, UBI. We believe Microsoft’s new technology code-named Natal (see details below) is a potential important addition to the 360 platform that will at least enhance it as a multimedia and casual game device. The further expansion of the casual games business is positive for the third-party publishers, especially because they should be better leveraged to the expansion because Microsoft isn’t as competitive with casual gamers. To the extent that Natal eventually enhances hard-core games it could offer another reason for consumers to choose video games over other forms of entertainment.
Event:
Activision Blizzard (ATVI, Outperform) held an analyst event on the first day of E3 (actually a day before the first day)
Conclusion:
Modest positive. Much of the discussion in the four hour event was on familiar trends that were not new to most investors. We do not believe anything extremely actionable came of the event. However there were a few interesting things to ponder for longer-term investors: