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Zombies Hitting Santa Claus Lists Fuel Game Maker Stocks

August 22, 2013

Zombies Hitting Santa Claus Lists Fuel Game Maker Stocks

Gary Barth, senior manager of fabrication arts and design, left, eats lunch behind a zombie bust at Sony Computer Entertainment America's headquarters in San Mateo, California, U.S., on Tuesday, Aug. 20, 2013. Photographer: Noah Berger/Bloomberg

Four months before the holidays, Frank Gibeau can’t tell you whether to expect a white Christmas. But for his company -- video-game producer Electronic Arts Inc. (EA:US) -- he’s predicting lots of green.

“It’s going to be a great Christmas because game consoles are going to be at the top of every kid’s list, not phones, not other electronics,” Gibeau, EA’s game-development chief, said while sheltering from the blips and blasts of games in the company’s lounge at the Gamescom trade fair in Cologne, Germany.

Two months after Microsoft Corp. (MSFT:US) and Sony Corp. (6758) took center stage at the Electronic Entertainment Expo in Los Angeles to unveil a new generation of machines, EA, Ubisoft Entertainment SA (UBI), Activision Blizzard Inc. (ATVI:US) and scores of other publishers have come to Gamescom to show off their holiday line-ups.

The prognosis is that Santa Claus will get lots of mail about zombies, assassins and car crashes, as game makers are seeing strong orders for titles designed for the new consoles. Gamescom, with some 275,000 attendees over five days through Sunday, will provide a sense of what players want.

“What’s great about Gamescom is that it’s a consumer show -- we can tell by the length of line-ups if a game is a hit or not,” Gibeau said.

‘Card Reshuffle’

EA, the second-largest U.S. video-game maker, said orders for its forthcoming “Battlefield 4,” a shooter game set in 2020, and its “FIFA 14” soccer title are very strong. Ubisoft is seeing good demand for its “Watch Dogs” game about hackers and a new episode of the adventure game “Assassin’s Creed” involving time travel and pirates, according to Chief Executive Officer Yves Guillemot.

“New consoles are an opportunity to reshuffle the cards,” Guillemot said yesterday at Gamescom. “With each generation we try to climb up a step and grab a few more points of market share.”

Within 15 minutes after doors at the Koelnmesse opened at 10 a.m., hundreds of gamers were in line -- some with beer and pizza in their hands -- to be first to try out Activision’s “Call of Duty: Ghosts.”

Anticipation of a surge in demand has lifted stocks of game publishers this year. EA, based in Redwood City, California, jumped 84 percent before today, and Santa Monica, California-based Activision rose 56 percent.

New Cycle

Today, EA climbed 4.2 percent to $27.78 in New York, the highest price in almost five years. Activision added 1.3 percent to $16.80. Ubisoft, with its headquarters in the Paris suburb of Montreuil-Sous-Bois, climbed 2.7 percent to close at 12.12 euros in the French capital, taking its advance to 53 percent this year.

GameStop Corp. (GME:US), the largest specialty retailer of video games, boosted its full-year profit forecast today, sending its stock 9 percent higher to close at $51.91.

“The beginning of a new cycle gives the traditional players of the gaming industry a chance to step back into the spotlight,” Richard Beaudoux, an analyst with Natixis Securities in Paris, said in a note. “No more getting their thunder stolen by new players in cloud gaming and mobile games.”

Sony says it has more than 1 million orders for its $399 PlayStation 4, which will be available in 32 countries by Christmas, starting with North America on Nov. 15. Microsoft says it’s preparing its $499 Xbox One for 13 markets before Christmas. Nintendo Co. (7974) has sold 3.6 million of its most recent console, the $300-$350 Wii U, since its debut last November. In April, the company forecast sales of 9 million in the year ending next March.

Seven Years

The game makers and console manufacturers are counting on each other. Game publishers expect to see their big franchises get a boost as new machines hit the market for the first time in seven years. And the console makers are betting that those titles will help lure players away from smartphones and tablets and convince them to buy new hardware.

EA’s “FIFA 14” will get a head start, with Microsoft announcing yesterday it will ship the game to everyone who pre-orders the Xbox One in Europe. Other new EA titles shown in Cologne include shooter game “Plants vs. Zombies Garden Warfare” and racing game “Need for Speed.” Microsoft is also teaming up with Activision to offer special content with the upcoming episode of its “Call of Duty” title.

Console Comeback

Sony this week called Ubisoft CEO Guillemot on stage at a conference to present the latest episode of “Assassin’s Creed,” which the console maker said it will distribute with exclusive extra content to lure gamers onto its platform.

“After a seven-year wait, we will finally see the release of next-generation consoles for Christmas,” Thomas Alzuyeta, an analyst for Kepler Cheuvreux in Paris, wrote in a note. “The industry had been praying for this.”

Alzuyeta predicted the new consoles will translate into an increasing audience and market, as past generations have. EA’s Gibeau forecast the video-game industry will grow by more than 60 percent to $100 billion in annual sales within four years.

“Stories were written to say the tablet killed the console, but lo and behold, the console is back,” Gibeau said. “The ramp-up will be much faster in this cycle because there’s a lot of pent-up demand after the last console cycle lasted so long.”

To contact the reporter on this story: Marie Mawad in Paris at mmawad1@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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Companies Mentioned

  • EA
    (Electronic Arts Inc)
    • $43.49 USD
    • 0.34
    • 0.79%
  • MSFT
    (Microsoft Corp)
    • $47.98 USD
    • -0.72
    • -1.5%
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