Chinese Online Game Companies Sinking

Online game companies in China are yesterday’s news. Recent financials from Chinese online game companies show that the frenzy is over and seemingly endless growth has receded. The9 dropped 12 percents in Friday’s trading. Despite their massive marketing efforts and stellar game selection, they only managed moderate growth. They are the best on the market and if they produce just ok results, then what is the point of going into Chinese online game market anyway?

Cinemaware acquired by eGames

This is yet another life for Cinemaware, a game company that did well during 80’s and closed down 1991. Lars Fuhrken-Batista bought Cinemaware assets and restarted the company in 2000, now he is selling present Cinemaware assets to eGames. Seems like the business logic runs to the direction in which eGames turns classic Cinemaware game assets into casual games. From Gamasutra.

Electronic Arts settles overtime dispute

Electronic Arts buried the hatchet and agreed to pay 15,6 million dollars in overtime dispute with workers. Furthermore company agreed to change terms for entry-level artists so that they are also eligible for overtime pay.

I think that EA once again made best of poor situation and now they have black on white, in case there are further complaints form workers. It means peaceful working conditions as game companies are heading into new generation game production. Article at Orlando Sentinel.

Carmageddon development halted?

SCI/Eidos is rumored to have halted the development of mega hit Carmageddon. Read more about the news over here.

COMMENTARY
I think that this puts the merger into rather dubious light, because major part of the logic was in the arrangement that Eidos gets some desperately needed extra funding to complete the development cycle of their hits like Lara Croft and Carmageddon. Now big part of that business logic has been amputated. Well, some downsizing will do the trick, just hope that they don’t downsize back to zero.

Vivendi comeback

Vivendi is finally benefiting from the digital entertainment strategy that it chose under the command of Mr. Messier. Blizzard happens to be one of the best performing parts of Vivendi. Company is also making strides in the field of mobile music sharing. As a personal comment, they finally seem to get back into the ring after hanging in the ropes for quite a few years.

Ubisoft has a price?

Ubisoft can't seem to be able to shed the image of being a game stock. Game stock in a sense that they are a catalyst in coming game industry reorganization. Electronic Arts has been mentioned more than once, because they own that strategic 20% of Ubisoft.

Ubisoft itself hints that they would prefer some big media company as their partner in acquisition...

The latest development in this industry drama are the innuendos of Chinese game companies having their eyes on Ubisoft. It doesn't take but an ounce of imagination to put that just-acquired IPO capital into use.

Don't you think it's just so ironic that American capital could still be used to buy Ubisoft off the market?

Eidos management thrown out

It didn’t go exactly as the title says but it wasn’t far from it. Eidos shareholders sealed the fate of top management by voting in favor for the SCi offer. Board members made their own conclusions of the situation. It was out with the old in with the new. Now three persons from SCi govern Eidos. Another chapter has been written in British video game industry.

Ubisoft considers media concerns

This twist has been widely distributed, La Tribune, Market Watch, GamesIndustry.biz, Ferrago etc. Yves Guillemot commented that it could be interesting to team up (merge or something like that) with sizeable media company (Walt Disney or Time Warner) or with an equal game company.

To me it is quite strange how he wants to team up with big media company. Ubisoft would not be in balanced relationship in such a deal. Media giant would just absorb them and turn this little puppet into content transformer - let's make every popular series and movie into a video game...

I would be looking into arena of innovative and technologically advanced companies like Pixar, DreamWorks or maybe some special effects companies. This match would create (well, sure it is only my opinion) very interesting talent pool that could be sold for even higher bundle of money or that could function as an innovative industry leader. In this respect, a merger with a smaller video game company could be the most logical solution as there are no special needs to integrate operations and find special synergies.

Eidos deal locking on

Shareholders of Eidos approved the offer of SCi to purchase the company. Now it seems like there is very little room for any competing offers. Eidos is a goner and SCi is the taker. Great move guys. I hope Brits manage to keep this industry alive as so many others have gone under or been sold.

Game industry stocks fumbling

Electronic Arts, Activision, and THQ have shaken investors expectations for the future. This shows in the stock price of above-mentioned companies. It is especially the short-term expectations, which are rather depressing.

If the giants of the field are shaking, smaller competitors catch the cold in no time. No matter what is the situation of an individual game company, the valuation of these companies is going to fall. Luckily, many companies in the game industry are not public and therefore outside of these short term price fluctuations.

There are three companies that come in mind especially: Infogrames, Vivendi and Eidos. Because of their financial situation, these game companies will have trouble every time when somebody in the game industry sneezes. For example, as SCi’s price has been dwindling, the rumours for new offers on Eidos start to circulate.

Game companies that are working in the area of mobile games are whole different matter. Market size is growing at staggering speed. Development costs, although rising, are quite low. Game development cycle is short so companies are better able to manage revenue flow. Furthermore, just one mobile hit can bring lot of cash for the company.

Electronic Arts is in trouble

Lately we have been reading about the difficulties that Electronic Arts faces. Company seems to have taken the wrong off-ramp and is now stuck in competition and lack of demand for their games. Earnings have plummeted and there does not seem to be much to rave about in their present product slate. Shift to next generation video game consoles will just devour money and the company has also pushed very hard to invest into franchises. Bringing their game titles up to speed with content and technological development.

The problem for Electronic Arts is temporary. In relation to revenue its stock is expensive and near-future development looks dim so expect further decline in the price of the stock. Competitors like Activision and Take Two Interactive are cheaper and smaller. These smaller competitors now have good chances to score big growth with couple of successful games. Expect investors to make some changes in their video game company portfolios. Short-term prospects are appalling for EA, but it will get better just wait and see.

video game ads are coming again

Troy Wolverton wrote for TheStreet.com about advertising in video games industry and inside the games. He concluded that in-game advertising could bring extra one billion USD for the industry that now makes ten billion USD turnover per year.

He goes on and writes about the difficulties the industry is facing with the introduction of next generation game consoles. With next generation comes extensive network connectivity and there is some market speculation that business model will break out from the box. How fitting, because for the moment that model is solely based on retail box sales.

Anyone can see that this is quite a chuck of extra income for the industry. Given the challenges and possibilities of the future, it is quite likely that this new possible source of income will be embraced. As usual, it is likely that money talks or maybe even shouts and ads populate our beloved games.

Elevation Partners is giving up Eidos

Now it is official. Elevation Partners has step down from the race and Eidos is going for SCi. At the moment there are no other possible candidates for the take over race, so apparently it is now quite safe to say that we will have a new SCiEidos on the video game industry map.

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Eidos going once, going twice...

Guardian and Financial Times informed us that Eidos is dropping the Elevation Partners offer and moving towards SCi. Like I said earlier, Elevation Partners is in the business of making money, not in the business of making video games. Let me tell you the secret of making money as an investment company. The secret is – buy cheap and sell expensive. Everything in between in just management decisions.

I guess that Elevation Partners just thought that the price was too high. If the price is high at the start, it takes lot of managerial talent to get the price even higher. Let’s face it. Eidos management has almost bankrupted the company by now, so obviously there wasn’t much trust to the management’s ability to show the money.

Therefore Eidos goes to SCi, which happens to be in the business of making video games. They have proven track record and they have plans to elevate once glorious British video game industry back to the highest pedestal where it belongs. Eh, not quite so, but you get the picture.

For the Eidos share price this is sad news. It is quite possible that there will not be competing offer and therefore price starts to fall. If Eidos price falls, then SCi price will fall too. Investors think that it is nonsense to pay such high prices from either of companies, because the case is already settled. Now it is just your stock against mine. This lock-up means that cycle goes both ways, positive and negative. Final result, now it doesn’t take increasing sums to buy Eidos. This is all the excitement we have left. We can wait and see, if someone is dropping hefty offer just before the deal is done.

Nintendo financial results

Another Gamesindustry.biz article. Apparently Nintendo has done well during the past year. Weak yen has done lot to realize the financial standing. They are planning to increase dividends, because owners have been complaining about measly dividends that they have given earlier. Correct me if I’m wrong, but isn’t is so that Japanese companies tend to rely on bank loans more than their own capital. This would mean that banks have stronger lock on the company’s actions than investors and therefore dividends could be lower. Well, just a thought.

Eidos climbing higher

Did you notice that Eidos is again valued over 100 million pounds? Tomb Raider Chronicles had this piece of news. Strong showing, remember what I said about positive pricing cycle? If this positive cycle goes on, then it means that any further offer from Elevation Partners will even raise the tempo, because they just have to set their price so that it estimates even further price increases. For the moment, the dynamics of this deal still work for SCi’s advantage. Elevation has to show more than 100 pounds to turn the tide, so tight the lock-in of Eidos shareholders seems to be.

Another article about virtual items

I noticed yet another mainstream media article about IGE and the new and fascinating way of life as a virtual item seller. IGE estimates market size to be around 880 million dollars and bulk of this value comes from Korea and China. Brokers employ players from poor countries to create the supply. Some comments from Castronova, which makes the article bit more interesting.

Gizmondo hits the retail channels

Gizmondo is reported to be selling well. Half a million pre-orders are in the bag. The Gameindustry.biz story doesn’t tell whether these orders that are now going to retail channels, have already found end user buyers or not. Ingredients are here for similar dud as what happened with N-Gage, nice amount of deliveries to stores but no buzz among the gamers.