BIZ: With Activision Blizzard and EA possibly getting you guys – and I realize you probably won’t comment on the EA deal – what is your opinion on this wave of industry consolidation and how it’s affected the game industry ecosystem? It seems like the rate of consolidation has picked up…
Feder: When I came to Take-Two I said consolidation was inevitable; I still believe it’s inevitable. As the games industry grows up from a cottage industry to a more mature industry and ultimately to kind of mainstream media, it will require greater capital resources, better systems, and much more robust marketing development organizations. And it requires consolidation in terms of costs. All of that speaks to consolidation, but also margins and competitive advantage and the falling away of ‘mom and pops.’ There will always be room, but this is becoming what the studio system is like in Hollywood. There will be majors in this business and the majors are going to drive the higher margins. It’s going to be hard to compete against them. The guys that are not majors are going to have to be very clever about what they produce and how they market it.
For Electronic Arts (ERTS:46.16, -1.57, -3.3%) , the first fiscal quarter report scheduled for Tuesday afternoon will likely show a strong increase in sales offset by a deeper loss than the previous year as the game publisher continues to push a turnaround effort that is now extending into its second year.
For close rival Activision Blizzard (ATVID:35.02, -0.42, -1.2%) , the report on Thursday afternoon likely will be the opposite — strong earnings growth fueled mostly by its hit “Guitar Hero” franchise.
The market has treated the two stocks very differently. Over the past three months, Activision shares have gained about 30% while EA has slumped about 7% during that same period. THQ Inc., a smaller publisher that also reports this week, has lost about 20% since April.
“On the exclusivity front – whether it’s downloadable or not – one of the unrivalled strengths we have, and we’ve proven this time and time again, is the power of our internal worldwide studios. Our first-party product is obviously platform exclusive and is the best out there.” – Kaz Hirai, Sony Computer Entertainment President
I knew that RE5 gameplay was based on that of RE4 (which is a very good thing indeed), but it is still a little shocking to see the comparison side by side. I guess why change up a good thing?
“One thing that’s different is we typically figured out who the market leader was going to be before the start of the cycle and bet with our development resources on that platform… We made the wrong call there [by betting on the PlayStation 3 and Xbox 360], which made this transition harder than it would otherwise be. But now we’re catching up, and I think we’re fine. We’ve got some incredibly innovative Wii titles, [and] incredibly innovative DS titles coming. And so I think that issue’s sort of behind us… [What’s] unusual in this cycle is there’s a second and third place that is meaningful, against which we can build a profitable business. That’s a good and positive thing.” – John Riccitiello, Electronic Arts CEO
“For the record, we have no plans to make any big announcements or huge reveals at PAX this year. While we will have some Halo 3 multiplayer stuff for you to check out, this is not going to be the ‘big announcement’ many of our fans are clamouring for. Rest assured that when the time is right, we will be making announcements and talking about the stuff we’re currently working on. At the moment we do have three distinct projects underway within Bungie – some familiar, some not. Some on a closer horizon, some quite far off.” – Bungie blog post
Two of the three projects we know at least something about. One is Halo Wars, the other is the game that Microsoft pulled from the E3 conference. That leaves one new project that nobody knows about. Ohhh the suspense.
