While it’s a foregone conclusion that certain sectors of the video game industry have been quite naughty this year, it seems everyone is suffering as game sales dip during what is traditionally the most profitable quarter for interactive entertainment. The industry-wide slump has forced major publisher/developer Midway to lay off somewhere between 8% and 11% of its workforce, according to Daily Variety.
Also hurt is Electronic Arts (EA), which Tuesday updated its fiscal outlook with the announcement that it expects third- and fourth-quarter net revenue and earnings to be ‘well below both the financial guidance provided by EA on November 1, 2005, as well as current consensus estimates.’
“Holiday sales are not meeting expectations,” says EA chairman and CEO Larry Probst. “For the December quarter, it is likely the industry will be down double digits on a percentage basis.”
Despite having the No.1 best-selling game with Call of Duty 2 for Xbox 360, publisher/developer Activision also downgraded its outlook, blaming significantly increased marketing spending and a general 20% drop in software sales in the U.S. during the critical months of October and November.
‘For the quarter, we still expect to generate significant revenues; however, we are disappointed that our earnings performance will come in substantially below our previous outlook,” states Michael Griffith, president and CEO of Activision Publishing, Inc.
Some fingers are pointing at a dearth of quality in 2005 game titles and gamer reluctance to spend money on current generation product as more next-gen consoles make their way to stores in 2006. The only next-gen console to arrive at retail in time for the 2005 holiday rush is Microsoft’s Xbox 360, which hasn’t been selling as fast as expected due to product shortages. Next year brings competition in the form of Sony’s PlayStation 3 and Nintendo’s Revolution. The excitement building around these releases has game makers hopeful for a better greener Christmas in ’06.
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