Paul:
>1. You see the value of SW-Victoria in the latest
> tech- but then you say the lastest tech moves ahead.
> So next year the value would be zero, right?
No, next year the value would not be zero. SW had invested enough seed money to get the studio to a point where substantial technological gains could be made at marginal R&D cost. For a small amount of R&D capital, they could have maintained the technology for many years to come.
>a. Focus on kids products: Not as much competition.
> They may be on the same shelf at Toys
> R Us w/ their big budget competition, but are totally
> different in profits. Toy Story might sell good w/ big
> promo & Xmas, but goes away w/ next weeks trash- Hit or
> miss just like all the Entertainment titles.
> SW's Franklin Reading World(Ranked #1 at the E-Expo)
> can sell year after year.
Not as much competition for kids products? Have you actually gone and looked at the software shelf in Toys R Us lately? There has to be 200 products on those carousels. As for Disney Titles going away with next week's trash - I encourage you to take a look at PC Data for the past year. The most dominant title for the past year has been the Lion King Activity Centre. The top selling kids title for the past month has been Toy Story Animated Storybook. These titles are successful because they appeal to adults as well, and since adults are the ones holding the purse strings, these titles get purchased. I said it before, and I'll say it again: the kids market is affected by the same forces as the adult entertainment market because the money is spent by adults.
>b. Library of titles and licenses.
> SW has a library of titles that sold over $1.4 mil last Q.
> They're sitting in the warehouse at virtually 0 cost basis,
> and now they have triple the sales team to peddle them!
> Entertainment licenses and titles are also there to at 0
> cost.
> They just sold Apple "Buried in Time" installed in the new
> Performa this month.
Last time I looked, licensed properties are only 0 cost when the license has been paid in full. I just checked the archives and it looks like SW still owes Ripley's Believe it or Not a substantial sum. And, the back catalog of SW entertainment titles is essentially worthless because these products time in the sun has come and gone. There was a decent buzz going for the Riddle of Master Lu, but that faded months ago. And don't forget that it costs money to warehouse product, and if you don't have the money to pay the warehouse, they don't give you your product so you can't make any money to pay the warehouse...a real catch-22 that I'm going to wait to see if SW can break out of. Selling "Buried in Time" in a bundling deal isn't that great an achievement...the returns on bundling deals are usually barely enough to cover packaging with a tiny amount of profit on top. As for the "triple" sales force to peddle these titles, SW is back in the same boat that they were in with EA years ago: don't forget that Strategic Marketing Partners has NO experience selling children's educational products. When SW was using EA for distribution, SW titles sold in the 100's, mostly because EA was more interested in having their sales people push EA products onto the shelves. If Strategic Marketing Partners gets to work GTI again, do you think that their sales people will use up their 10 minutes with store buyers to push _Quake_ or Franklin's Reading World?
>c. Buyout candidate. The CEO is not so much making SW
> the next Brodorbund- she's selling it using the same
> formula she used the last time(as quoted in a San Jose
> paper in March):
SW has already been looked at by just about everyone when they tried to sell their entertainment studio. They were turned down by everyone (almost,) and to now go back to those same people and ask them if they're interested in buying the rest of the company...that's going to be a pretty hard sell.
I'm not trying to rain on anyone's parade here, but I think that it's important to look at the reality of this situation and understand what is really going on before you spend any money.
Bart. |
