More great news: Game developers glow over Rambus based Playstation 2
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It's out! Game developers glow over PlayStation 2
October 26, 2000 12:00 AM PT
by Matt Berger
It's a good day to make video games.
Just ask Bobby Kotick, chairman and chief executive officer of Activision (ATVI), a multimillion-dollar game development firm that earlier this week celebrated the close of a cash-positive quarter, and today celebrates what he calls "the biggest launch in the history of video games." This, coming from the head of the company that in 1980 introduced Pitfall for the Atari 2600.
At the start of the business day, retailers across America expect to open their doors to a long line of America's finest gamers as Sony Computer Entertainment (SNE) debuts its U.S. version of the PlayStation 2 -- a 128-bit, supersized video game console that threatens to turn television sets into the hub for home entertainment.
The all-in-one machine retails for $299, doubles as a DVD and CD player, and is equipped to upgrade into an Internet device with PC functions.
But just as PacMan is nothing without the Mrs., the PlayStation 2 (PS2) console is relying heavily on its companion software to move forward. With today's U.S. launch, 26 game titles will be available for purchase with 24 more expected to hit stores by the end of the year. (Only 12 games were available for the March 4 launch in Japan.)
And while Sony halved the number of machines that will reach the U.S. market today to 500,000, Kotick and other developers are banking on the rollout of PS2 to reinvigorate the video game software market. (See "You'll have to wait a little longer for PlayStation 2.")
Jumpstart on sales
The proof is in sales. Taking advantage of the media stir, game publishers, from Activision to top-selling developer Electronic Arts (ERTS), released several of their titles for the PS2 a week before the consoles went on sale.
On its first day in stores, Activision said it sold 1,100 copies of its video game Orphen through just one of its retailers -- and buyers didn't even have a console to play it on.
Electronic Arts released six games before the launch. Its top-rated virtual snowboarding game SSX was already in stores as early as Oct. 19, as were copies of NHL 2001 and Madden NFL 2001.
As of Wednesday, Electronic Arts had reportedly sold 50,000 copies of Madden.
"I'd say that's a tremendous start," said Don Mattrick, Electronic Arts' president of worldwide operations.
In the first quarter ending in June, U.S. revenues for console video games totaled $1.2 billion, according to market research firm PC Data. About 28 percent of those sales were for PlayStation titles, trailing second behind Nintendo's Game Boy Color, which attracted 34 percent of the market share.
Activision divided its revenue from games sales across various platforms as follows: 45 percent from Sony PlayStation, 10 percent from Nintendo's Game Boy, 7 percent from Nintendo 64, 5 percent from Sega's Dreamcast and 25 percent from PC games.
"If you were to look three or four years from now, the revenue breakdown will not be to dissimilar," Kotick said. However, he added that the numbers those percentages represent should be much larger.
Activision earnings take off with PS2
In the wake of the PS2 release, many of the independent game publishers spent the week performing two of the most nerve-wracking activities: shipping products and reporting earnings.
For the second quarter ending Sept. 30, Activision posted a net income of $4.3 million, or 17 cents per share, compared with $1.1 million, or 4 cents per share in the same quarter a year earlier. Activision exceeded Wall Street estimates of 9 cents per share, as compiled by First Call/Thomson Financial, but failed to ignite investor. The company's stock has slipped more than $1, or about 7 percent, since Monday to close Wednesday at $13.88.
Revenue for the company -- $144.4 million -- surged 25 percent from $115.4 million in last year's second quarter.
In the last year, Activision has grown its market share from 2.5 percent to 9.6 percent. While that is still dwarfed by the industry leader Electronic Arts, it is a clear sign of the company's future.
"We moved to a new strategy of focusing on big brands and very recognizable proven properties," Kotick said.
In the past three years, Activision has set its sights on expanding its presence. The company gained the rights to publish titles based on popular franchises, including Star Trek, Disney's (DIS) "Toy Story 2," "A Bug's Life" and "Tarzan," as well as properties from Marvel Comics, including Spiderman and X-Men. Kotick said Activision now pulls in about 80 percent of its revenue from those properties.
The bulk of its growth began in 1997, when Activision began picking up marketing, publishing and distribution firms. In August 1997 it acquired Raven Software, followed by the acquisition of Head Games Publishing in June 1998. The company continued its buying spree in 1999 with the acquisition of Expert Software. Probably its most valuable buy so far is Neversoft Entertainment -- the developers of top-selling product Tony Hawk's Pro Skater series -- which the company bought in 1997. |
