I am going to do some serious backpedaling, because BioShock Infinite from Take-Two Interactive (NASDAQ: TTWO) is game of the year material. I was wrong to question whether it would be a good game. This is based on reviews and what I have heard from people I trust. I have not had the time to sit down with the game yet. I am a player that needs to get to the end in a matter of days. Pacing myself is not a skill.
BioShock Infinite’s amazing opening act for superstar GTA V
The game has received massive acclaim, and it is at such a pitch that I do not think this will be one of those critically well received but commercially poor games. However, it will not be Black Ops 2. It is a big win for Take-Two, which will reap the rewards of its fantastic game, and that should carry it into Grand Theft Auto V this fall.
I am concerned that despite the success of BioShock Infinite, profit from the series might be low after development costs and marketing costs are considered. Top flight games are expensive, and GTA V has a huge development budget, not including marketing.
Take-Two has negative EPS ttm, and its debt-to-equity is approaching 0.58. Compared to industry leader Activision Blizzard (NASDAQ: ATVI) with its complete lack of debt, it is troubling. Video game development has huge upfront costs that can be disastrous if a game flops. Take-Two is also going to be making Red Dead Redemption 2, which will not be cheap. For now, the focus is on GTA V, but game development can take a while and companies can incur costs years before the product is released.
BioShock has topped sales charts, though there is not much information regarding the number of units sold. I think it is fair to assume that it will not be posting numbers like Black Ops 2 or Heart of the Swarm. It is still early, but it might not even beat Tomb Raider for first month sales. I do expect BioShock Infinite to have some staying power in the next few months. Considering the massive critical praise, I think word of mouth will eventually lead some non-core gamers to pick up a copy.
As a side note, Tomb Raider, with 3.6 million units sold in month one, is a disappointment for publisher SquareEnix, which expected 5 million copies selling in the first month. The expectation is fairly ridiculous, but all companies are looking to smash records with every game. It would be awful for Tomb Raider to be abandoned because it “only” sold 3.6 million in its first month, which is a fantastic launch.
Speaking of fantastic sales
Heart of the Swarm sold 1.1 million copies in the first two days of availability. There does not seem to be more information after that. It would be sad if after one month it sold only 1.5 million copies. That would mean its fans are ravenous and impatient, but there are not a ton of them.
Heart of the Swarm is just an expansion, and it sells for less than Wings of Liberty. There is still one more game in the series. All-in-all, I think it is a fantastic result and should mesh nicely with any stragglers who buy Black Ops 2. Games are hot in their first few weeks, but they can still sell over the course of months.
This is the only major release for Activision Blizzard for a while if you ignore things like Skylanders additions. Blizzard is releasing a free-to-play WarCraft card-based strategy game. It would be like Magic: The Gathering, but for WarCraft with all the booster packs and other purchases. It is called Hearthstone Heroes of WarCraft. Having sunk plenty of money into physical and digital trading card games over the last 2 decades, I can see the potential for this to become a regular revenue stream for Activision Blizzard.
Facing some headwinds
Electronic Arts (NASDAQ: EA) rounds out the group, but I think the most notable release is Dead Space 3. A lot of game reviews sing its praises, though some sites gave the game lower reviews compared to others in the series. From what I hear from friends who are gamers is that it is more of an action game, which takes away from what originally made the series so popular.
There are no sales numbers for Dead Space 3 yet. I think sales will be really good if slightly underwhelming when you look at the stature of the franchise.
Electronic Arts also had a disastrous launch of the new SimCity game. The game requires a connection to servers for single player. Apparently, it was a creative decision and not a DRM issue, but it makes me wonder why online-only was forced from a creative stand point. It should be an additional feature.
For what little play time some people got while the servers were working, the game is fun when you can play it, and making it a MMO experience seems pointless. Battlefield 4 will probably be the next big success for Electronic Arts, but that will not happen until fall 2013. Financial data from the last few quarters does not matter to me, as I think the present products that would drive sales are underwhelming, especially with SimCity.
Conclusion
Take-Two has some amazing catalysts and is probably going to report solid sales for BioShock, and with GTA V looming, the company seems to have a lot of positive momentum. However, there are lingering balance sheet concerns and posting losses in between major releases.
Activision Blizzard is moving along in the wake of a great release for Heart of the Swarm, but other than Heartstone, I do not see anything major title until fall when a new Call of Duty is expected to release.
I do not see a lot of excitement surrounding the release of Dead Space 3. It was notable enough to worth mentioning the week of release, but following that, it seemed to slide off the gaming headlines. Coupled with the disaster that became SimCity, I would avoid Electronic Arts.
Additional Riffing:
Also not too much more to say here. The thing about video games being high on the upfront costs but uncertain on the return is an important one. I will say that ATVI needs to build a new hardcore IP not Skylanders.
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