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SouthPeak Reports $2.6 Million Loss, Explains Strategy

Following a quarterly release slate of just two games, SouthPeak's second fiscal quarter showed a $2.6 million loss -- but explains why its strategy and business model positions it advantageously for the months ahead.
Although it was able to return to profitability last quarter, Virginia-based Two Worlds publisher SouthPeak announced today a $2.6 million loss for its second fiscal quarter. That's compared with a $1.2 million profit in the same period last year. The company says it shipped far fewer titles over the quarter because it preferred not to challenge the crowded holiday season with any risky games. The two titles released during the quarter included the Wii, DS and PC title Horrid Henry, and the Wii and DS title My Baby: First Steps. SouthPeak says that over the holiday, its key My Baby franchise saw unit sales increase by 45 percent year over year. The two titles combined for net revenue of $10.1 million during the period, compared with $17.3 million in the same quarter of 2009. SouthPeak also reduced its expenses 29 percent to $5.3 million. "We shipped only two new titles as a strategic decision to release those games that we knew would succeed during the peak fourth calendar quarter selling season," says CEO Melanie Mroz, who expects this choice positions SouthPeak more competitively going forward -- it looks forward to launches like Dementium 2 and TNA Impact: Cross The Line for PSP and DS -- the latter a result of its acquisition of those assets from defunct Midway. Says SouthPeak chairman Terry Philips: "Our unique business model allows us to leverage our relationships with independent developers to optimize our risk-return profile and substantially control costs." "We are seeing an increasing market shift of larger publishers focusing on their owned and branded games, which offers SouthPeak increasing access to new titles at nominal fees from emerging developers," he explains. "Partnerships such as our recent Deep Silver agreement also provide us with access to exciting new titles to capture additional revenue streams and enhance our global brand."

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