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Analysts clash over AAA console game viability
Analysts clash over AAA console game viability
August 1, 2012 | By Mike Rose

August 1, 2012 | By Mike Rose
More: Console/PC, Business/Marketing

The latest financial reports from publishers Electronic Arts and Take-Two have divided analysts, with some suggesting strong performances are ahead, while others aren't so convinced.

EA fell short of its revenue estimates for its fiscal first quarter, while two of Take-Two's biggest releases last quarter, Max Payne 3 and Spec Ops: The Line, both sold fewer copies than the company anticipated.

Cowen and Company's Doug Creutz believes that concerns over the demand for EA's upcoming retail titles "may be overdone" -- in particular, he cites sales of NCAA Football 13, which "is selling comparably to last year's title."

"We continue to believe that high-quality, well-marketed triple-A titles can still deliver unit sales in line with historical levels," he adds.

Baird Equity Research's Colin Sebastian isn't so optimistic for the company's triple-A offerings, noting that "the challenged console market continues to weigh on growth near term, burdened by the late-stage console cycle." However, he says that EA's digital strategy is encouraging, and that the company has potential digital catalysts coming later this year.

As for Take-Two, Cowen's Creutz is incredibly optimistic for the publisher's fiscal year, describing the upcoming release of Borderlands 2 and the imminent Grand Theft Auto V release date announcement as "powerful."

He notes in particular that pre-orders for Borderlands 2 are ahead of the company's highly successful 2010 release Red Dead Redemption, which sold-in 6.9 million units during its first quarter. Hence, Creutz has raised his first year Borderlands 2 sell-through estimate from 4 million to 5 million.

Baird's Sebastian, on the other hand, is wary that Take-Two is suffering from the tough console retail market, and that "the company's digital revenue streams are not yet significant enough to counteract these trends."

He suggests that the company's digital sales are not yet at scale, although he admitted that he is "encouraged by Take Two's initiatives on newer platforms." As a result, Sebastian has lowered his estimates for Take-Two's second quarter earnings.

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John Flush
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Late in the console cycle more people have a big backlog. Why by new at $60 if I can by new at $20-30 for a title I didn't have time for yet... then wait for the new $60 to lower out, rinse repeat. The problem is the larger the library the less you can get for it - you know supply / demand, economics 101... The only way it gets bucked is if something amazing that people can't pass up on before the community dies, thus why Borderlands 2 looks very good on the radar.

Matthew Mouras
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Agreed. Consumers are very smart about their game purchases.

I'd like to see more AAA studios release a game in multiple parts like Telltale does. $20 gets you a chapter of tight and focused play that is part of a larger campaign, then release another chapter for $20 two months later... rinse and repeat until the game is complete. With something like Borderlands, it would keep the interest level up and keep players engaged in the multiplayer over a longer period of time.

Why isn't this done? I'm pretty sick of the current trend: An initial $60 release with over priced supplemental DLC that may or may not be an interesting part of the overall package. Follow that with a "Game of the Year" edition 6 moths to a year later. The "season passes" are an even worse trend. There was some real backlash over the perceived value of Epic's season pass for Gears 3.

Gamers are used to these ploys in this generation by now. Why jump on a new release when you can wait a few months, get the "complete" package, and save a large amount of money? You nailed it - the only reason is the perceived value of the early adopter multiplayer community. There has to be a better way.

Mike Motschy
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I agree that the $60 price is pretty steep, but I used to pay for it, and the only reason I can think of why I don't buy at that price anymore is because of DLC. I know I will most likely not spend money on DLC although some of my friends will, which causes the experience to break paths if it's a multiplayer game. Knowing this I feel I just don't even purchase the game. I am also gaming a lot more on the PC which provides a free community for updates.

As Matthew Mouras mentioned a multiple part game like Telltale would probably not work well for myself. I like buying something once, and come back a few months later and still be able to play the complete package with my friends that haven't stopped playing it.

Matthew Mouras
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Yeah I'm with you there, Mike. I often wait and pick up the GotY version of a big title, but by then all my friends have moved on.