Video game sales plunge 42% in April

Video game sales took a nose dive in April, plunging a stomach-churning 42% compared with a year earlier as companies cranked out fewer releases than in April 2011.

Retailers rang up just $292.1 million in game sales last month, down from $503.2 million a year earlier, according to the NPD Group, a market research firm.

With fewer new games to drive people into stores, sales of game consoles also took a hit, down 32% to $189.7 million.

"Simply stated, there were notably fewer" new game releases, said NPD analyst Anita Frazier. "I think it’s a simple as that, because when we see compelling content come into the market, the games are still selling as well as ever. We just saw a lot less of this in April as compared to last year.”

Sales of accessories such as extra controllers held steady at $148.6 million in April, while sales of used games, digital game downloads and online game subscriptions contributed an additional $370 million, kicking the industry's monthly total to $1 billion. NPD, which recently began tracking digital game sales, does not have a comparable figure for 2011.

Analysts speculate that the soft sales figures will lead companies to cut the price of games and consoles in order to encourage buyers.

"April industry sales remain soft, and declining ... volumes will likely necessitate price cuts," Colin Sebastian, an analyst with Robert W. Baird & Co., wrote in a note to investors.

Sebastian said there are bright spots on the horizon as game publishers prepare to unleash some of this year's most anticipated games -- among them Max Payne 3, from Take-Two Interactive Software Inc., and Diablo III, from Activision Blizzard Inc.

"We still expect overall product momentum to improve beginning in May with launches of Diablo III and Max Payne," he said.

For a list of the top 10 games sold in April, click the link below to continue reading.

EA to settle NFL lawsuit? [Updated]

UPDATE: This post had initially conjectured that the lawsuit Electronic Arts Inc. had set aside $27 million for a potential settlement was one involving former National Football League players who sued the company for allegedly using their likenesses in its Madden NFL video games without their permission. Among the plaintiffs of that lawsuit are Vince Ferragamo, former quarterback for the Los Angeles Rams (pictured above). That lawsuit is not part of the settlement, the Times has learned.

Electronic Arts Inc. on Monday disclosed that it had set aside $27 million for a "potential settlement of an ongoing" lawsuit. 

EA declined to identify the suit, stating that it had no final settlement to announce.

The most likely case involves a class-action lawsuit filed in 2008 alleging that EA had stifled its competitors when it signed licensing deals with the NFL and the National Collegiate Athletic Assn. for the exclusive rights to use the likenesses of the groups' football players.

The case filed in federal court by Geoffrey Pecover and Jeffrey Lawrence, two consumers who purchased EA's Madden NFL games, accused EA of freezing out other game companies from making a viable football game when it won the exclusive right to use NFL and NCAA players in its games. They argued that EA violated antitrust regulatons by raising the price of Madden games by 72% in 2005, the year after it signed the exclusive licenses. The case was granted class-action status in December 2010.

The Redwood City, Calif., game publisher denied the allegations in a statement filed in the U.S. District Court of Northern California, saying it did nothing to violate antitrust laws by pursuing exclusive licenses with the football organizations.

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-- Alex Pham

Photo: Vince Ferragamo, No. 15, former quarterback for the Los Angeles Rams, gets ready to throw during the 1980 Super Bowl game. Credit: Associated Press and Los Angeles Times.

The force isn't with EA as it announces fourth quarter earnings

A drop in the number of subscribers for Star Wars: The Old Republic triggered a 10% slide in shares of Electronic Arts Inc. Monday, overshadowing news of a better-than-expected fourth quarter for the Bay Area game publisher. 

EA, which in February said it had 1.7 million active subscribers to The Old Republic, on Monday reported that the figure fell to 1.3 million at the end of April. Though the term "active subscribers" doesn't translate exactly to paying subscribers, it is a good gauge for how many people have bought the title and are actively playing the online game.

The Old Republic, whose development and marketing budget tipped well over $150 million, is the most expensive title ever produced by EA, and is certainly among the costliest games of all time to make. EA had projected that the game would "approach break-even" on an operating basis at 1 million paying subscribers.

Shares in EA plummeted nearly 10%, or $1.49, to $13.64, immediately after the company released its fourth-quarter report. It had gained a penny to close at $15.13 prior to the announcement.

For its fourth fiscal quarter, EA posted $400 million in net income, or $1.20 a share, on $1.37 billion in revenue. A year earlier, it recorded $151 million in profit, or 45 cents a share, from $1.1 billion in sales.

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Photo: Screen shot of Star Wars: The Old Republic. Credit: Bioware and Electronic Arts Inc.

Judge denies EA plea to dismiss NFL players' lawsuit

A federal judge Friday denied a motion from Electronic Arts Inc. to dismiss a lawsuit filed by former National Football League players alleging that the video game company misappropriated their likenesses in its Madden NFL titles.

The ruling, by Judge Richard Seeborg of the U.S. District Court for the Northern District of California, means that the case will proceed with its quest to obtain class-action status in representing more than 6,000 former NFL players. 

The named plaintiffs include Tony Davis, former running back for the Tampa Bay Buccaneers; Vince Ferragamo, former quarterback for the Los Angeles Rams (pictured above); and Billy Joe DuPree, former tight end for the Dallas Cowboys.

Davis and others allege that EA, based in Redwood City, Calif., used their likenesses in Madden games without compensating them. EA in the past has argued that it has the right to do so under the 1st Amendment.

An EA spokesman said the company "respectfully disagrees" with the ruling and is "confident we will prevail." 

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Photo:  Vince Ferragamo, No. 15, former quarterback for the Los Angeles Rams, gets ready to throw during the 1980 Super Bowl game. Credit: Associated Press and Los Angeles Times

January video game sales tank on lower releases

Sales of U.S. video games and consoles plunged 34% in January to $750.6 million, compared with $1.14 billion a year earlier, according to market research firm NPD Group Inc.

Revenue from consoles such as the Xbox 360, the PlayStation 3 and the Wii fell 38% to just under $200 million last month, down from $324 million in January 2010, NPD said in a report released Thursday. Console accessories, such as game controllers, slipped 18% to $195 million from $237 million.

Sales of games played on both personal computers and consoles ebbed 37% to $380 million, down from $603 million last year.

A dearth of new game releases last month made for the poor comparison with January 2011, when a flurry of new, high-profile games such as Dead Space 2 and DC Universe Online pumped up sales. All of the titles in the top 10 list for January 2012, for example, debuted last year.

Hard-core shooter titles remained popular, with Call of Duty: Modern Warfare 3, Battlefield 3 and Saints Row: The Third taking top slots. Dancing and fitness games also continued to sizzle, with Just Dance 3 and Zumba Fitness 2 selling well.

Top-selling video games in January 2012

(publisher)
1. Call of Duty: Modern Warfare 3 (Activision Blizzard)
2. Just Dance 3 (Ubisoft)
3. Elder Scrolls V: Skyrim (Bethesda Softworks)
4. NBA 2K12 (Take-Two Interactive Software)
5. Battlefield 3 (Electronic Arts)
6. Madden NFL 12 (Electronic Arts)
7. Mario Kart 7 (Nintendo)
8. Skylanders: Spyro’s Adventure (Activision Blizzard)
9. Zumba Fitness 2: Party Yourself Into Shape (Majesco)
10. Saints Row: The Third (THQ)
Source: NPD Group

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Call of Duty, Skylanders boost Activision earnings, stock

Bolstered by the continued dominance of the Call of Duty military shooter franchise and a new hit in its Skylander video game and toy line, Activision Blizzard Inc. swung to a profit in its fourth quarter, beating Wall Street's expectations and pumping up its stock price Thursday by 1%.

The Santa Monica game publisher also reported that subscribers to its World of Warcraft online game fell to 10.2 million as of Dec. 31, down from 10.3 million customers three months earlier. The fantasy role-playing game, which is in its seventh year, had been steadily losing players since it peaked in October 2010 with 12 million customers.

Some analysts had feared that the online game — the company's most profitable property — would suffer worse declines because of competition from the mid-December release of rival online game Star Wars: The Old Republic, published by Electronic Arts Inc.

But aggressive marketing and discounting, along with an injection in November of fresh game content, helped stem customer defections. However, that came at the cost of reducing the game's average revenue per customer, executives said during a Thursday earnings call with analysts.

Activision's financials were also helped by its blockbuster Call of Duty franchise. The latest game in the series, released in November, raked in $1 billion in retail sales within 16 days of hitting store shelves. Moreover, 1.5 million players have ponied up $49.99 a year for access to additional downloadable online content for the Call of Duty games.

“They're in a pretty nice competitive position, despite World of Warcraft subscriptions falling,” said P.J. McNealy, president of Digital World Research. “They have the biggest console game cranking in Call of Duty.”

Longer term, Activision's online game platform, dubbed Battle.net, will allow the company to sell its titles directly to players online, McNealy said. “They have a tremendous opportunity to leverage the 50 million Battle.net users with new games down the road, which is a unique advantage,” he said.

The company, known for its uncanny ability to surf from one hit franchise to another, also rode high on a wave of popularity for its new Skylanders property — a video game introduced last year aimed at kids that ties into physical toys sold at major retailers such as Toys R Us. Skylanders action figures and games generated $200 million in sales last quarter for Activision.

For the quarter ended Dec. 31, Activision posted net income of $99 million, or 8 cents a share, on $1.41 billion in sales. It had reported a loss of $233 million, or 20 cents, a year earlier on slightly higher revenue of $1.43 billion.

Its shares gained 11 cents to close at $12.66 in regular trading prior to the earnings release, but popped an additional 9 cents to $12.75 after the quarterly financial announcement.

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-- Alex Pham

Photo: World of Warcraft players at a BlizzCon convention in Anaheim. Credit: Ricardo DeAratanha / Los Angeles Times.

THQ to lay off 240 workers, dock CEO pay

THQ Inc. will lay off 240 workers, or more than 17% of its workforce, in the coming months as part of a previously announced restructuring plan to remain viable by radically scaling back the Agoura Hills game publisher's operations.

The company also temporarily halved the base annual salary of its chief executive, Brian Farrell, to $359,250, for one year starting Feb. 13. Additionally, it reduced Farrell's potential termination pay from three times the amount of his highest annual bonus to one, should he resign or be fired without cause, according to documents THQ filed Wednesday with the Securities and Exchange Commission.

The beleaguered game company, once one of the industry's top three players, fell prey to a string of poorly performing releases in recent years as well as a shift among consumers away from the types of console-based children's games on which THQ excelled to free or inexpensive games played on Apple Inc.'s iPhones and iPads.

Consequently, THQ in December announced it would exit the kids console games market and focus instead on hard-core games, such as Saints Row: The Third and its fighting games, based on its licenses with the Ultimate Fighting Championship and WWE Inc.

As a result of the layoffs, THQ said it expects to take an $11-million charge for severance costs, much of it in the quarter ending March 31. The company expects to report its December quarter financial results Thursday afternoon after the stock market closes.

THQ's shares, which fell below $1 on Dec. 8, gained 5 cents to 72 cents a share Wednesday. The company on Tuesday disclosed that it had received a delisting notice from the SEC because its stock has traded below the $1 minimum listing price for 30 consecutive days. THQ has until July 23 to pull its shares above the $1 threshold, according to SEC rules.

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Photo: THQ Chief Executive Brian Farrell. Credit: Anne Cusack / Los Angeles Times.

 

Star Wars: The Old Republic snags 1.7 million subscribers

Star Wars: The Old Republic, an ambitious and costly online game, has sold 2 million copies since the title launched in mid-December and amassed 1.7 million "active subscribers," according to the game's publisher, Electronic Arts Inc.

The subscriber figure includes players who are still within their 30-day free trial period and haven't yet started to pay the $15-a-month subscription fee but have entered their credit card information and authorized EA to begin charging them when their trial period ends. 

The early performance suggests that the game, which cost an estimated $200 million to make and took more than five years to develop, is at least off to a healthy start, said Michael Pachter, an analyst with Wedbush Securities.

"The numbers are very good," said Pachter, who estimates that at least 1.2 million of the active subscribers have already started to pay the monthly fees.

EA has said that the game approaches break-even with just 500,000 paying subscribers, but only to cover its ongoing costs to operate the game, not nearly enough to earn back what the company invested to create the game.

The title will begin to be meaningfully profitable above 1 million subscribers EA said. At 2 million paying customers, analyst Doug Creutz at Cowen & Co. predicted, EA could make $156 million a year in operating profit.

It will be at least several months, however, before investors will know for sure whether EA's big bet on Star Wars will pay off. That's because a portion of the "active subscribers" haven't yet hit the point where they must pay to continue playing the game online.

In addition, EA is relying on Star Wars: The Old Republic to captivate players for years to come, not just a few months. Its biggest rival, Activision Blizzard Inc.'s World of Warcraft, has operated for more than seven years, peaking in October 2010 with 12 million active subscribers.

However, even Warcraft - -the dominant subscription-based online game -- is beginning to wane in popularity, with the number of subscribers dipping to 10.3 million last October. That creates an opportunity for The Old Republic to scoop up players who are tired of Warcraft, as well as pick up players who are drawn to the Star Wars universe.

In the short term, strong sales of The Old Republic, which retails for about $60 a copy, helped boost EA's December quarter results. The Redwood City, Calif., company posted $1.1 billion in revenue its third quarter ended Dec. 31, roughly flat with a year ago. Net loss narrowed to $205 million, or 62 cents a share, down from a $322-million loss, or 97 cents a share, a year ago.

The flat revenue and losses disguise EA's actual sales because the company has chosen to delay the revenue of games that can be played online over a six-month period. As a result, much of EA's profits from the holiday quarter typically won't hit the company's bottom line until the March and June quarters.

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Screenshot of Star Wars: The Old Republic courtesy of BioWare / Electronic Arts.

 

 

 

Viacom is ordered to pay $383 million more to Rock Band makers

Viacom Inc. has been ordered to pay an additional $383 million to the makers of Rock Band, the latest development in a long and costly saga surrounding the media giant's failed attempt to enter the video game business.

In a regulatory filing, Viacom, the owner of MTV Networks and Paramount Pictures, said a private arbitrator ordered it to pay Harmonix's former shareholders the money on top of a $150-million bonus payment that it previously made. The shareholders had been seeking a total of $700 million, or $167 million more than the accountants involved in the arbitration determined to be appropriate.

The dispute centers on bonus payments owed to Harmonix's former owners under the terms of the 2006 acquisition of the Boston studio by Viacom, which paid $175 million upfront. The media conglomerate then paid a $150-million bonus for sales of Rock Band in 2007 but made no payment in 2008 and then sought a refund of nearly all the money it previously paid.

Though Rock band, sequels Rock Band 2 and 3, and spin-off The Beatles: Rock Band sold more than 10 million units, Viacom consistently lost money because of the high cost of creating plastic instrument controllers. In late 2010, it sold Harmonix to a New York private investment firm for just $50 and received a tax benefit of about $50 million on the loss.

Around the same time, however, the original shareholders of Harmonix filed a lawsuit alleging that they should not only be allowed to keep the original $150 million bonus but were also owed an additional $550 million.The suit triggered the arbitration for which the current decision was issued Dec. 19.

Viacom is not accepting the decision as a done deal, however. The company said it has filed a suit in the Delaware Court of Chancery seeking to vacate the resolution accountants' decision because certain arguments and evidence were "improperly excluded."

Walter Winshall, an early investor in Harmonix who has been leading the legal fight against Viacom, declined to immediately comment on the development.

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Photo: A scene from The Beatles: Rock Band. Credit: MTV Games

Viewers watching more streaming video on game consoles

Video game consoles aren't just for gaming anymore.

Increasingly, people are using their Xbox 360, PlayStation 3 and Wii devices to stream movies and TV shows, according to a survey released Wednesday by the Nielsen Co.

Because all three consoles readily connect to the Internet, viewers can use them to access video-on-demand services like Netflix, Hulu Plus, YouTube, Major League Baseball Network and ESPN to watch on their TV screens rather than on small computer monitors.

And that seems to be just what consumers are doing. Streaming video accounted for 14% of the average time spent using Microsoft Corp.'s Xbox 360 in October, up from 10% a year earlier, according to a Nielsen survey of 3,000 people.

For Sony Corp.'s PS3, the share of streaming video was 15% this year, up from 9% last year. The shift was even more dramatic for Nintendo Co.'s Wii, which jumped to 33% from 20%.

Xbox and PlayStation users also spent an additional 5% of their time watching movies and television shows they paid to download, an option not available on the Wii.

That's good news for studios looking to make more money through digital distribution. Game consoles, along with the Apple TV, are the most popular ways to reach people who want to watch video on their high-definition televisions.

It's more troubling for television networks seeking to boost their ratings and ad revenue, however. The new data emphasize that consoles aren't stealing viewers' attention just with video games but also with content that serves as a direct substitute for traditional TV watching.

Game consoles have proved particularly effective for Netflix. An earlier Nielsen survey found that half of the users who utilize its streaming offerings do so on the PlayStation, Xbox or Wii.

Two of the consoles are also popular as DVD players. People spend 15% of their time on PS3s watching DVDs or Blu-ray discs. Sony's device is the only console that plays Blu-ray discs and is the best-selling Blu-ray player on the market. Xbox 360 users spend 9% of their time watching DVDs. The Wii does not play movies on discs.

Below is a Nielsen chart summarizing the survey results.

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Photo: The Netflix interface on Xbox 360. Credit: Netflix Inc.