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Videogame industry prays for resilient 2009
Thu Jun 4, 2009 9:57pm EDT
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By Franklin Paul and Edwin Chan
LOS ANGELES (Reuters) - Game publishers, in a rare moment of solidarity, joined forces on Wednesday to convey optimism for the future of their $30 billion industry despite spiraling consumer spending and a global economic downturn.
Electronic Arts, Activision and THQ Inc -- with Activision the sole profit-maker in its last reported quarter -- hope to focus on developing mainly blockbuster titles while finding ways to eliminate costs.
A year-long recession has slowed sales growth. Research house NPD estimates spending on U.S. videogames dived 17 percent in April. With top titles often costing as much to produce as a Hollywood film, publishers have had to make tough choices.
After a wave of belt-tightening in the past year, including widespread job cuts, studio closings and title cancellations, many now adopt a strategy of diverting resources to only their most bankable franchises.
"Our actual net development budget has been significantly reduced this year to $120 million ... but its focus is on a few of these quality titles," THQ CEO Brian Farrell told Reuters.
Executives see glimmers of hope in new audiences and more casual users, expanding beyond the industry's traditionally heavily male demographic to women and older people.
Electronic Arts CEO John Riccitiello sees 1 billion game players from just a few hundred million now.
Crucial to that vast expansion will be games that appeal not just to the hard-core, but also to families and casual gamers, as exemplified by the enormous take-up of Nintendo's Wii and its best-selling Wii Fit fitness title.
HOPE SPRINGS ETERNAL
Videogames -- even those that cost more than $50 -- are likely to score significant sales in coming months as recession-weary consumers go for cheap entertainment instead of taking vacations or buying big ticket items, Take Two Interactive Chairman Strauss Zelnick argued.
Hudson Square Research analyst Daniel Ernst pegged videogame sales for the fiscal year ended March at $29 billion, up 13 percent and surpassing the $27 billion movie business.
Partly because of brightening expectations, as well as painful cost-cutting, THQ -- backer of games like "Saints Row" -- is now more confident of attaining its goal of achieving profitability again in fiscal 2010. Its shares climbed 8 percent on Wednesday versus a 0.6 percent fall on the Nasdaq.
And publishers may get a welcome boost when -- as many analysts predict they will this year -- console makers like Sony and Microsoft cut prices.
"We love those price wars," Farrell said. "I wouldn't rule out that if Sony cuts, Microsoft and Nintendo may respond. When those guys have their hardware wars, we supply the ammunition."
FLASH IN THE PAN Continued...
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