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The Video Game Industry reported better-than-expected earnings beat ratio in the quarter ended Jun 30, 2014. Both Electronic Arts (EA - Analyst Report) and Activision Blizzard (ATVI - Snapshot Report) posted strong earnings beats this quarter. This was primarily due to higher demand for games on new consoles from Microsoft (MSFT - Analyst Report) and Sony (SNE - Snapshot Report) and continuing growth in mobile game sales.

EA benefited from robust revenue growth driven by higher digital and mobile sales. Robust performance from Call of Duty, World of Warcraft and Diablo III helped Activision Blizzard to report better quarterly results.

Among mobile game developers Glu Mobile (GLUU - Snapshot Report) reported an impressive quarter primarily driven by popularity of the Kim Kardashian: Hollywood game. However, the company issued a cautious gross margin outlook for the third quarter due to higher spending.

Candy Crush-maker King Digital (KING - Snapshot Report) touched a 52-week low of $13.65 on Aug 13, after it reported weak revenue growth in the second quarter. The company also provided lackluster guidance for fiscal 2014.
 

Company

Revenues

Beat/Miss%

EPS

Beat/Miss%

Activision Blizzard

$658.0

8.5%

$0.04

500.0%

Electronic Arts

$775.0

9.2%

$0.10

176.9%

NetEase

$446.0

3.3%

$1.48

4.2%

Take-Two Interactive

$151.6

-7.8%

($0.24)

44.2%

Zynga

$175.0

-8.8%

($0.02)

33.3%

Glu Mobile

$41.0

25.2%

($0.02)

71.4%

King Digital

$593.5

-4.0%

$0.52

4.0%

Nintendo

$732.0

15.8%

($0.09)

18.2%

Changyou

$178.0

-4.1%

$0.04

121.1%


Overall, the video-game industry revenue growth in the quarter ended Jun 30 remained lackluster. Lack of new games from EA, Activision and Take-Two will continue to hurt top-line growth in the upcoming quarters.

Further, both EA and Take-Two Interactive (TTWO - Snapshot Report) delayed their new game launches (Battlefield and Evolve re-scheduled in 2015), which will negatively impact video-game sales. However, this will benefit Activision Blizzard, which is set to release Destiny and Call of Duty: Advanced Warfare in the upcoming holiday season.

Not much is expected from mobile game-makers like Glu and King Digital, who have yet to show strength in their overall product portfolio. Till now, they have been more of a one-hit game company. King Digital recently admitted that it is finding it difficult to replicate the success of Candy Crush with a new game.

Video Game Market – Other Stories Now

Sony recently announced that PlayStation 4 sales hit 10 million since its release in November last year. Microsoft, Sony’s competitor in the console market, reportedly sold 5 million units of Xbox One.

EA recently announced that its new free-to-play game EA SPORTS FIFA World will launch a new game engine for PC players. The company also announced the launch of Shadow Realms, a new 4v1 story-driven online action role-playing game.

Reportedly, Activision’s upcoming Destiny shooter game has set a new industry record as the most pre-ordered new title. The developer of the game Bungie also announced that the first expansion pack for multiplayer, The Dark Below, will be available in Dec 2014.

Activision announced that it will launch Skylanders Trap Team on iPad, Kindle Fire and Android-based tablets on the same day as on the consoles.
 
EA recently announced that it is expanding its subscription service to more countries, which will help it to add new players. The company is set to offer the service in North America, Australia, New Zealand and western European countries including the U.K. and France for the time being.

International Game Technology recently received early termination of the required waiting period under the Hart-Scott-Rodino Antitrust Act with respect to its previously announced acquisition by GTECH S.p.A.

Performance

Over the last 5 days, Glu Mobile was the leading stock as it added about 6.87%. The company has been the biggest gainer in the last 6 months, with EA a distant second.

Glu Mobile’s recent game releases have been the primary growth factor for the stock. However, Zynga (ZNGA - Snapshot Report) continued to lose during the period, primarily on intensifying competition, from the likes of Glu and King Digital and less-than-impressive product pipeline.
 

Stock Price Chart (as of 8.13.2014)

 

Last 5 days

Last 6 months

ATVI

0.70%

16.21%

EA

5.98%

32.02%

MSFT

2.87%

17.17%

NTES

1.60%

7.34%

GLUU

6.87%

43.59%

TTWO

5.10%

13.29%

ZNGA

1.25%

-41.89%


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