Games Stocks Slip
It'll still be the biggest holiday season in the industry's history, but it's a bumpy road getting there.
Published: December 16, 2002
It's no secret that the games industry has managed to largely weather the tech industry slump. Games companies weren't immune to the economic downturn, but they didn't suffer as much as some of the more niche tech sectors. But, analysts have been saying for months now that the industry was headed for a slip, and it looks like last Friday finally let things loose.
Stocks across the industry dipped a bit under the weight of a downgrade for the entire sector from Goldman-Sachs to "underperform/cautious," causing stocks in everything from retailers to publishers to slide. As of Friday, Midway was down 25%, Activision dropped 20%, Take-Two (parent company of Rockstar Games) was down over 19%, THQ and Acclaim both slipped 16%, EA drooped 14%, and 3DO dropped another 13%. Retailers EB and GameStop dropped almost 6% and nearly 13%, respectively. With the exception of 3DO, at the time of this story, all stocks have since made slight gains back into the positive in the wake of market-wide gains.
The feeling by Goldman was echoed in a number of analyst and brokerages, who lowered expectations on a number of publishers like EA, Activision, Take-Two, Acclaim Midway, and THQ – some of them lowered multiple times by multiple firms. It's unlikely that The Street will be eager to upgrade the stocks any time soon after all the buzz about the industry "losing steam."
The Goldman downgrade came after pouring over reports from PSX2.com partner NPD Group, which showed that sales were only up 7% over last year for November, contrasted by the 74% growth for the month of October. What Goldman likely didn't understand was that Grand Theft Auto: Vice City was released in October, and before it even hit shelves, had over 4 million copies pre-sold. Obviously October would be up quite a bit by comparison to the relatively low-profile launch of Grand Theft Auto 3.
Holiday sales will no doubt be through the roof with all three systems showing strong Game of the Year offerings. Expect a counter story from the industry to reaffirm shopper confidence shortly.
