Consumer electronics sector expecting its first annual revenue drop since 2001

Samsung Electronics Booth at CES 2009. Credit: Alex Pham / Los Angeles Times.

It's bad all over. A day after the video game sector posted its worst year-over-year decline in nearly nine years, the consumer electronics industry today said it was expecting its first annual revenue drop since 2001.

Shipments to U.S. retailers and consumers are projected to fall 7.7% this year to $165 billion, according to a report released today by the Consumer Electronics Assn. Contributing to the drop is a rapid decline in the prices of all electronics. Americans are also saturated with gadgets such as digital cameras, music players, the report suggested, and perhaps even large-screen TVs, which have been a driver of industry growth for the last several years.

Although shoppers are expected to snap up more flat-screen TVs, leading to an increase in the total number of TVs shipped to stores, total revenue for the category is expected to decline. That's because prices are projected to plummet, and more consumers are likely to opt for smaller-size sets.

One bright spot: Blu-ray DVD players are expected to post a jump, both in unit sales and in revenue, the report said. Manufacturers will ship 6 million Blu-ray players, up 112% from 2008, while revenue is expected to top $1 billion, a 48% increase over last year.

Revenue from smart phones such as Apple's iPhone is also expected to increase to nearly $14 billion, up 3% despite heavy price discounts. CEA predicted smart phones will account for 1 in 4 total handsets sold this year as consumers use their phones for Internet access, navigation and media playback.

Sales of netbooks -- those lightweight, low-cost laptops -- are forecast to jump 85% this year to 8.5 million units. But don't let the smaller price tag lull you into thinking it's an insignificant category -- netbooks are set to hit $3.4 billion in revenue in 2009, CEA said.

In the it-could-be-worse department, the trade group said the industry's 7.7% revenue decline compared favorably with car sales (down 40% in since the fourth quarter of 2007) and sales of existing homes (down 34% from its peak in August 2005).

“The CE industry is not impervious to the economic downturn but remains resilient compared to other industries,” CEA President Gary Shapiro said in a statement.

Sales are expected to improve in 2010, but not by much. CEA said it projects an increase of less than 1%.

-- Alex Pham

Follow my random thoughts on games, gear and technology on Twitter @AlexPham.

Midway Games lays off nearly half of its staff while investor makes a 4,900% return

 

Screen shot from Mortal Kombat vs. DC Universe. Credit: Midway Games.

Midway Games has cut 46% of its 520 employees in the last few days, including about 100 developers in its San Diego office who have been working on a wrestling game under a license with TNA.

Some of the layoffs were detailed in a document filed yesterday with the Securities and Exchange Commission. In addition to the San Diego crew, the layoffs include 60 executive and administrative staff members in the company's Chicago headquarters and 75 developers in a U.K. studio. About 210 Midway developers got to keep their jobs as Warner Bros. employees.

The filing also disclosed the final price Warner paid for most of the bankrupt Chicago game publisher's assets: $49 million, or $16 million more than the originally announced price of $33 million. The difference comes from the final tally of the value of Midway's inventory of games and its accounts receivables on July 9, the day before the deal closed, according to Geoff Mogilner, a Midway spokesman.

In addition, the filing shows that Mark E. Thomas, the mysterious Massachusetts investor who in November paid former majority owner Sumner Redstone a mere $100,000 for an 87% stake in Midway, received $5 million for his trouble. That's a 4900% return, minus a few percentage points for legal and administrative fees. That's a tidy score in any economic climate.

Warner, meanwhile, has not said what it would do with its purchase, which includes a development team in Chicago that makes the Mortal Kombat franchise and a Seattle studio that is working on an adventure game called This is Vegas. Warner emerged as the sole bidder for Midway's assets last month, but it didn't take the whole company. Left out of the deal were two studios, one in England that has been shut down, and the other in San Diego. Unless Midway finds a buyer, the San Diego studio faces a similar fate to its U.K. counterpart's.

-- Alex Pham

Follow my random thoughts on games, gear and technology on Twitter @AlexPham.

Game sales drop 31% in June as recession takes a swipe

EA's Fight Night Round 4 took the No. 6 and 7 spots in top games sold in June. Credit: Electronic Arts.

Kerpow! Sales of video games, consoles and hardware peripherals in the U.S. took a 31% sucker punch in June to $1.2 billion, down from $1.7 billion in June 2008, according to market research firm NPD Group. It was the industry's fourth consecutive monthly sales decline.

The recession, combined with a lackluster release schedule, led to last month's 38% drop in sales of consoles such as Sony's PlayStation 3, Microsoft's Xbox 360 and Nintendo's Wii and DS. Hardware sales fell to $383.6 million, from $617.3 million in the year-ago month.

Games took a slightly smaller, but still painful tumble, falling 29% to $625.8 million last month, down from $875.8 million in June 2008, NPD said.

For the first half of the year, the industry's overall sales in the U.S. were down 12% to $7.3 billion.

Industry analysts had entered 2009 confident that the recession would leave games unscathed because of its perceived value in offering dozens of hours of entertainment per title and because of people's tendency to stay home during hard times instead of spending money on big vacations. Now, those who have projected growth for the industry may be revising their forecasts.

Some industry watchers still have hope that the industry could pull out of its current tailspin.

"You have weak hardware sales and you have weak software, so it’s prudent to be concerned about the rest of the year," said Colin Sebastian, an analyst with Lazard Capital Markets. "But there’s still a chance for the industry to show growth for the entire year."

Click "read more" to get the list of top 10 titles in June, along with a tally of the number of consoles sold.

Google revenue, profit grew in second quarter; market yawns

Google CEO Eric Schmidt. Credit: Google.

Google this afternoon said its revenue rose 3% in the second quarter in spite of the global economic downturn. Profits also grew 18% to $1.48 billion from last year's $1.25 billion.

The Mountain View, Calif., search giant's revenue of $5.52 billion in the quarter ended June 30 was up from $5.37 billion in the same period last year. Google Chief Executive Eric Schmidt, in a statement, said the results were positive in light of the challenging economic climate:

Google had a very good quarter, especially given the continued macro-economic downturn. While most of the world's largest economies shrank, Google's year-over-year revenues were up 3%. These results highlight the enduring strength of our business model and our responsible efforts to manage expenses in a way that puts us in a good position for the economic upturn, when it occurs.

But investors were unimpressed. Its shares, which closed up $4.43 at $442.60, shed more than $12, or close to 3%, in after-hours trading following the company's earnings release.

Though Google's performance beat analyst predictions, expectations were heightened after Intel earlier this week posted strong results and signaled that a possible recovery may be on the way.

-- Alex Pham

Xbox 360 is only console to grow sales this year, Microsoft says

Xbox 360 controller. Credit: Microsoft.

Microsoft said sales of its Xbox 360 game console grew 20% in the first half of 2009, citing figures from NPD Group. The Redmond, Wash., technology company crowed that the data show it was the only major console to increase hardware sales this year (implying that sales of Nintendo's Wii and Sony's PlayStation 3 were down from last year).

Microsoft credits its growth to the $199 price tag for the basic version of the Xbox 360. The Wii is $249 and the PS3 sells for $399.

Games for the Xbox 360 snagged four of the top 10 best-selling titles for June, according to Microsoft. Those include Prototype from Activision, Fight Night 4 from Electronic Arts, UFC 2009 Undisputed from THQ, and Red Faction Guerrilla, also from THQ.

In a release entitled "Xbox 360: The Industry's Sole Bright Spot in 2009" and e-mailed to journalists, Microsoft said 85% of its 20 million active Xbox Live users have downloaded digital content onto the console in the last 12 months.

How does that compare with its rivals? We'll see when NPD releases its U.S. sales figures later this afternoon.

-- Alex Pham

Follow my random thoughts on games, gear and technology on Twitter @AlexPham.

Google to newspapers: Put up or shut up

Newspapers in a Vienna coffeehouse. Credit: Alex Barth via Flickr.

Is Google stealing our content? That, anyway, seemed to be the suggestion when a European publishing group announced last week that it had garnered a number of supporters for its Hamburg Declaration, which calls for "urgent improvements in the protection of intellectual property on the Internet."

This week, Google had a reply, which basically boils down to: Put up or shut up.

In a post written by Josh Cohen, senior business product manager, on the company's public policy blog Wednesday afternoon, Google said publishers can easily tell search engines to take a hike. All it takes is a two-line piece of code, which he helpfully included in his post. Tuck that on your website, and no search engine will crawl it; the stories won't show up when people look for content using search engines.

It's unlikely that newspapers will call Google's bluff. Here's why: Google's search engine and its Google News site sends 1 billion visits to newspaper websites each month. Those visitors drive up the traffic numbers that website ad rates are partially based on. More readers = higher ad rates, which is why few publishers will say no to Google's traffic referrals.

Granted, most of those readers don't pay for the stories they read. And that leads to statements like this one from the Hamburg protocol, which was signed by James Murdoch of News Corp., Robert Thomson of the Wall Street Journal and Ian Smith of Reed Elsevier, among others:

Numerous providers are using the work of authors, publishers and broadcasters without paying for it. Over the long term, this threatens the production of high-quality content and the existence of independent journalism.

Sam Zell, whose Tribune Co. owns the Los Angeles Times, has said much the same thing, if only in more colorful terms. "If all of the newspapers in America did not allow Google to steal their content, how profitable would Google be?" he told a group of incredulous Stanford University students in 2007.

Google's retort to publishers is that it is open to work with them on whatever business model they deem fit. Want only paid subscribers to read? Fine, it can steer clear of the site, or follow a model like that of the Wall Street Journal, which lets readers referred from search engines see the article for free but makes them subscribe if they want to read any other articles on the site. Want the articles to expire after a few days and go into an archive where readers would have to pay to see? There's a line of code for that too.

Right now, the vast majority of newspaper sites serve up free, ad-supported content. And Google said it's happy to send traffic to those sites. Unless, of course, they don't want all those readers.

-- Alex Pham

Follow my random thoughts on games, gear and technology on Twitter @AlexPham.

Intel earnings point to possible recovery

Image of a silicon semiconductor. Credit: huangjiahui via Flickr.

Bottoms up!

Intel this afternoon gave investors a reason to hoist a beer mug or two, posting $8 billion in second-quarter revenue powered by sales of its Atom processor, used in fast-selling netbook computers, lightweight laptops that sell for as little as $200.

Intel Chief Executive Paul Otellini said the results "reflect improving conditions in the PC market segment with our strongest first- to second-quarter growth since 1988 and a clear expectation for a seasonally stronger second half." 

Translation: Computer makers are expecting a surge of back-to-school shoppers and better holiday sales than in 2008, when consumers reined in nearly all discretionary spending.

The Santa Clara, Calif., chip maker, however, posted a $398-million quarterly net loss, or 7 cents a share, primarily because it paid a record $1.45-billion fine imposed by the European Commission on charges that the company restricted competition in the semiconductor market. It had a $1.6-billion net profit in the second quarter last year. Its $8 billion in revenue represented a 12% improvement over $7.1 billion in sales posted for the first quarter of this year but an erosion from $9.5 billion a year earlier.

Even so, Wall Street loved what it heard, pushing Intel's stock up $1.20, more than 7%, to $18.03 in after-hours trading following the earnings release. The stock earlier in the day had closed up 34 cents to $16.83.

Intel's results kick off the earnings season for the tech sector, with Google coming up Thursday and Apple and Yahoo next Tuesday, followed by EBay, Microsoft and Broadcom later in the week.

-- Alex Pham

Five ways to find engaging people to follow on Twitter

In an earlier post, we discussed how to amass followers on Twitter. Now let's talk about finding people you can follow. Actually, it's about finding people you'd want to follow (because we're pretty certain that you don't want to know what everyone is having for breakfast).

Twitter is about eavesdropping on random conversations and figuring out which parties to join. Not into celebrity blather? Don't follow @BritneySpears. Love cycling? Check out @LanceArmstrong. There are literally millions of conversations happening on Twitter. You don't need to be listening to every single one of them.

Once again, we tapped Andrew Nystrom, the Times' social media guru who Twitters @latimesnystrom. His advice follows.

1. Start with your friends. Twitter lets you import contacts from your Gmail, Yahoo or AOL e-mail accounts. It will show you which of your contacts have Twitter accounts.

2. Be picky. Resist the temptation to "select all" of your contacts to follow. Because this is the default option when you import your contacts, you need to uncheck the box to select all. Start with dozen or so people to begin with. This helps keep the signal-to-noise ratio low. The idea is to funnel as much useful, relevant information to your page. Start with a dozen people. Andrew has a good Twit Test: If you can't wait to open a personal e-mail from this person, follow him.

3. Pick a topic. If you're passionate about a particular topic, say video games, try sites such as WeFollow, which is a directory of Twitter accounts organized by topic and ranked by popularity. 

iTunes App Store turns 1; cast ballots here for your favorite apps

iPhone screenshot from marcopako via Flickr.

Apple this morning said its iTunes store has served up more than 1.5 billion apps, those snack-sized pieces of software for the iPhone or iPod Touches that do all sorts of random things.

Since launching the App Store exactly a year ago, more than 100,000 developers have been busy cranking out a mind-bending 65,000 apps on the site. Some are useful (GPS apps that help the navigationally challenged, for example). Others are amusing (witness the explosion of games, a select list of which appears here from What They Play). Some unleash our inner artist. A handful are offensive, including the controversial Baby Shaker app. And some are just inane. Remember the $1,000 app that did absolutely nothing?

To celebrate this cornucopia of apps, we'd like to invite you to nominate your faves. Cast your votes in the comment box below, and at the end of the week, we'll publish the list of winners. Here are the categories:

• Most useful app
• Most useless app
• Best game
• Wackiest app
• Worst crApp ever
• Best news app
• Best time waster
• Best free app
• Best paid app
• App most likely to impress your friends at a party

-- Alex Pham and Michelle Maltais

Bioshock 2 delayed; Take-Two's stock takes a hit [UPDATED]

Just after Take-Two Interactive Software this afternoon said it would delay the release of BioShock 2 until 2010, investors punished the New York publisher's stock, pushing it down more than 12% in after-hours trading.

Take-Two shares plunged $1.12 to $7.86 after gaining 14 cents following its BioShock 2 bomb announcement.

BioShock is a marquee franchise for Take-Two, which also publishes Grand Theft Auto and 2K Sports games.

The move is bad news for the company's current fiscal year, which ends October 31, but great news for its 2010 fiscal year, said Jesse Divnich, director of analyst services at Electronic Entertainment Design & Research in Carlsbad, Calif.

"I expect them to dominate fiscal 2010," Divnich said. "BioShock 2, Max Payne 3, Red Dead Redemption, Mafia II, additional Grand Theft Auto Downloadable Content (DLC), and the possible launch of Agent should make fiscal 2010 the year of Take-Two. As far as I am concerned, Take-Two is just moving numbers from one financial year to another."

Take-Two also said its sales of older releases, so-called catalog titles, as well as retail orders of new releases, have been soft. With the economy eating into game sales and the delay of BioShock 2, the company forecast lower-than-expected earnings for the remainder of this fiscal year.

UPDATED: An earlier version of the post said it was unclear whether BioShock 2 could still hit store shelves this holiday, which falls into the company's 2010 fiscal year. After the release of the announcement, company executives said they expected the title to ship between January 2010 and June 2010. No BioShock 2 stocking stuffers this year.

-- Alex Pham and Ben Fritz