I'm not going to increase my 1999 estimates yet. My EPS estimate for 1999 has been $4, a 30+% increase from 1998. For the past several days, I've been working on a comprehensive equity research report on THQI. I plan on making it publicly available next week.
Does everyone realize the significance of having a 10-year license? I'm not referring to exclusivity or longevity, but the improving technology in the video game software. As I mentioned a week or two ago, THQI's future wrestling games (regardless of the license) could be developed by GameFX. Specifically, I mean a 128-bit wrestling game for the Sega Dreamcast. By the end of 1999, CD/DVD technology will enable several GB of data on each disc.
Imagine if THQI releases one of the first 10-15 titles for the Dreamcast: WWF Wrestling in 128-bit! Despite the higher development costs, the gross margins will be high, and the sales volume will be tremendous, assuming the platform is successful.
By 2004, there may be 256-bit video game consoles (although at that point, PCs will sell for similar price points and set-top boxes may integrate video game functions). In 5 or 6 years, the graphics and animation of video games could look very close to actual TV. So the security that THQI has gained with this long-term license is substantial, because they have rights for all platforms.
Todd |
