I have been tracking the reserve history of thq of the past several quarters. Thought I would share. Those of you who read MF will have seen this before.....but I am out to make some decent meaningful posts and hopefully win a free SI membership:
the columns are quarter / net revenues / reserved revenue / gross revenue / % reserved
1q 1996 $6,582 $694 $7,276 9.5%
2q 1996 $12,087 $1,424 $13,511 10.5%
3q 1996 $11,102 $1,164 $12,266 9.5%
4q 1996 $20,483 $1,921 $22,404 8.6%
1q 1997 $11,839 $1,159 $12,998 8.9%
2q 1997 $12,265 $862 $13,127 6.6%
3q 1997 $16,355 $1,555 $17,910 8.7%
4q 1997 $48,903 $6,933 $55,836 12.4%
1q 1998 $48,453 $6,516 $54,969 11.9%
Notice that before 4q 97 and 1q 98, reserves had traditionally been in the 9% range, but ballooned to around 12%.
Odd, huh???
Think about it. In those quarters, so much of the revenue generating games (NWO in 4q and Nitro in 1q) were sold through by the end of the quarter. So why reserve more, when it clearly isn't needed????
My Thoughts:
1. Why beat estimates by any more than they did?
2. Save up now so you can have lower resvs once you start having to do year over year comparisons to the 4q 1997 and 1q 1998. Drop more to the bottom line then to keep the consecutive quarters of improving earnings streak well alive.
3. Saving up to be able to launch quest en masse without risking a charge if it were to have bombed. If this is the case, i would expect reserves to drop back down this quarter, since Quest didn't bomb.
4. Saving for more PC games in 3q - they carrier higher risk for return.
Chris |
