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Analyze This: Will The Games Industry Give Hollywood A Run for Its Money This Summer?

With summer game sales debuting alongside Hollywood summer smashes, Gamasutra asks Wedbush Morgan, EEDAR, and OTX analysts: out of the games being released over the summer, which games will shine, and which will succumb?

[They are the professional analysts whose job it is to research, keep track of, advise their clients, and opine to the media about the gaming business. Analyze This cuts right to the chase: Rather than reporting on a subject, and throwing in quotes by analysts to support or refute a point, Gamasutra offers up a timely question pertaining to the business side of the video game industry and simply lets the analysts offer their thoughts directly to you. Each person's opinion is his own and will (probably) not necessarily agree with their fellow colleagues'.]

Earlier in May, Hollywood was in a tizzy over the release of GTA IV, fearing that its popularity (the money spent to buy the game, and the time spent playing it) would negatively affect the box office for the movie industry's blockbuster releases this summer. But the results from the "showdown" between the Iron Man movie and GTA IV suggest that a blockbuster movie and a blockbuster game both targeting the same audience can peacefully co-exist.

Still, we wondered about the rest of this summer. So we asked Nick Williams of OTX, Jesse Divnich of Electronic Entertainment Design and Research, and Michael Pachter of Wedbush Morgan Securities:

Besides GTA IV, what is the one top summer-release title that you are keeping an eye on?

What do you project could become sleeper, little-reported hits this summer?

Which highly expected title, if any, coming this summer do you feel may ultimately disappoint in sales?

Which of the gaming platforms (including handhelds and platforms) do you expect to pick up steam over this summer?

Finally, though you are biased as a professional analyst who covers the gaming industry, do you think this summer in particular will be the one when Hollywood truly should be fearful of competition by the gaming industry for the public's summer entertainment money?


Nick Williams, OTX Research

One summer release I'm keeping my eye on is Too Human for the Xbox 360. Platform exclusivity has always had a significant influence on hardware sales, and this console cycle is no different.

Microsoft has done a superb job of minimizing Sony's historical advantage with regards to exclusive software content. But with the PS3 launch of Metal Gear Solid 4 this summer, the pressure is on Microsoft to continue putting out quality exclusive content.

Too Human is next in line for the Xbox 360, and I would not be surprised if it had a similar impact on the market as BioShock did last August.

One game that could end up being a pleasant surprise this summer is Alone in the Dark. Atari is looking to lay the foundation for a more stable future, and the launch of Alone in the Dark could be a big step towards this goal.

One platform that could stand out is the iPhone. Apple recently announced a flurry of new international partnerships, and there are also rumors swirling of a new iPhone launch this summer. All signs point towards significant sales growth over the next few months, and that means a larger audience of potential gamers. EA, Sega and Gameloft all have iPhone games in development, and I suspect we'll start to see new releases towards the end of the summer.

Atari's Alone in the Dark

In my view, the movie-verses-game debate is being completely over-analyzed, and I really don't think there is much there right now. As long as the experience of going to a see a movie is different from playing a game, the large majority of consumers will have time in their schedules to do both. That is not to say that publishing studios should ignore what games and movies are coming out; they should use this information to gauge potential cross-promotional partners, rather than competitors.


Jesse Divnich, Electronic Entertainment Design and Research

The big title this summer will likely be Star Wars: The Force Unleashed, which is one of the few games that will target all the major market segments. There is the long anticipated Wii-and-Lightsaber combination.

All eyes are also on Wii Fit. It's not so much on whether it will be a success, but whether other publishers can generate revenue off this new device. It will be interesting to see if the Wii Fit will ultimately be looked at as exercise equipment, or an entertainment peripheral that also has fitness benefits.

The casual market gets bored of games pretty quickly; especially those that cling to the new "diet craze" for three months and then [the device is] tossed in the basement to collect dust. The core gaming market would purchase [Wii Fit] more for entertainment [and] would likely make follow-up purchases of third-party titles.

Metal Gear Solid 4: Guns of the Patriots, Haze and SOCOM U.S. Navy SEALs: Confrontation are essential to Sony this summer to drive PS3 hardware [sales]. These three games will also test Sony's ability to expand its multi-player popularity to a competitive level against Xbox Live.

Konami's Metal Gear Solid 4: Guns of the Patriots

Saints Row 2 could be this summer's sleeper hit, or completely disappoint in sales. THQ's strategy was to release a Saints Row title during a "non-Grand Theft Auto" year. Unfortunately, Rockstar delayed GTA IV until April 2008. Now THQ is in a difficult scenario. I am curious to see if this sandbox action genre will follow a similar path to that in the first-person shooter genre, in which there is always demand for a good FPS.

It is not that the other industries in the leisure sector need to fear the video game industry, but, rather, they need to fear the economic climate change. Game publishers and console manufacturers are doing an excellent job at spotting this trend and capturing these new markets.

This is not suggesting that blockbuster movies this summer need to worry about box-office revenue; consumers will find the time and money to view those "must see" summer flicks. It is likely that mediocre titles will suffer the most -- B-rated actors in C-rated movies just won't survive during these tough economic times.


Michael Pachter, Wedbush Morgan Securities

Since you include GTA IV as a summer release, I think that Wii Fit is the other game to watch. Obviously, the Gamasutra crowd is more interested in Metal Gear Solid, but I think Wii Fit is going to shock people with its performance. It looks to me like the game will sell 1 million in the U.S. the first week, and another 300,000 per month in perpetuity.

As for a sleeper, I think that expectations are low for Little Big Planet and for Mercenaries 2, and think both will vastly exceed expectations.

There are too many potential disappointments to count. I think Saints Row 2 could disappoint -- Borderlands, Guitar Hero: Aerosmith, Don King Presents: Prize Fighter, This is Vegas, and many others.

It's clear that the Wii will pick up steam, given that Nintendo has increased production by around 500,000 per month. We should expect U.S. allocations to increase to somewhere around 900,000 per month, so the Wii should perform well. I think Sony's real lift comes after summer. Barring price cuts, the others should perform well but not materially better than over the first three months of the year.

Nintendo's Wii Fit

I think that the logic that Hollywood and video games compete is flawed. At the current rate, game sales are running at an annualized rate of around $2 billion above last year's U.S. levels. To the extent that "other entertainment" is impacted, you need to consider all entertainment, including sporting events, DVD purchases, book purchases, concert tickets, free TV, VOD, Internet surfing, etc.

So at best, box office represents around 10 percent of the entertainment hours consumed, meaning that the annual impact on box office is around $200 million -- 10 percent times $2 billion video-game growth. That's a rounding error, and you certainly won't be able to discern the impact over the summer only.

Got a business-related question concerning the games industry that you would like to suggest for discussion in Analyze This? Are you a professional analyst and would like to take part in this column? Email [email protected]

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