Wall Street Best Bet? Video Game Makers

Brian.oco 0 Tallied Votes 791 Views Share

I have to admit, on my perch here overlooking Wall Street, of the industries traders typcially jawbone about, video games arean't at the top of the list.

Exhibit "A". At a dinner Wednesday night with three options traders over some Kobi steaks and some good wine, all the talk was about consumer stocks, and how they might be impacted by the ongoing credit crunch (in fact, August consumer confidence numbers released today are down a bit).

On the other hand, I have two boys, both of whom choose their "good report card" rewards from one industry - - and one industry only.

Video games. Heck, I don't need a calendar anymore. All I need is the date of the next Wii video game release and my 11-year-old and my eight-year-old will remind me of that date every chance they get.

I bet they're not the only boys who do so.

So, while consumer confidence is down, the sales of video games are at least one big shiny bright spot in the consumer stock arena.

Let's review the most recent numbers (from the market research firm, NPD). This week, news comes out that U.S. sales of video games and hardware jumped 46 percent in August from a year earlier, with Microsoft seeing sales of its Xbox 360 console shoot up after a price cut.

The top game was Electronic Arts' Madden NFL 08 for the Xbox 360 which sold 897,000 units.

It's no surprise to me, running a Wii household, that Nintendo's Wii console held on to its title as the most popular piece of hardware, selling nearly 404,000 units, almost as much as the Xbox 360 and Sony's PlayStation 3 combined.

One revolutionary new marketing tactic that Nintendo used with the Wii was to get people who didn't play video games . . . into playing video games. A brilliant stroke, and one made much easier by the Wii's relatively low price ($250 versus Sony's Playstation 3's $500 pricetag, down from its opening price of $600 last year) and it's easy-to-master motion-sensing controller. Even Dad's like me can get into the action, and probably a lot of Mom's, too.

"It really goes back to our story of the different audience we are trying to pursue," said George Harrison, head of marketing for Nintendo of America. "While Microsoft and Sony are focusing on the hard-core gamer, we are trying to focus on what we call the expanded audience."

Sony is trying hard to follow suit, cutting the price of the PS3 by $100, as I noted above. But without a breakout game and stuck with the same old video game model that Nintendo successfully (and probably historically) updated, they're not making enough traction. Yes, the price cut, enacted in July, has boosted sales by 61 percent over the two months since the price cut. But the company is still leaning heavily on its old PlayStation 2, which sold 200,000 units in August, giving the company some much-needed revenue support. That won't last forever.

Still, there is money to be made in the consumer marketplace these days, and (particularly) Nintendo and Sony are making it.

There's a lesson here. Just because consumer sentiment seems to be pulling back a bit, that doesn't mean Americans are going to avoid all consumer sectors. As long as there are kids who get good report cards, there'll always be room in my stock portfolio for video game makers.

Dani 3,990 The Queen of DaniWeb Administrator Featured Poster Premium Member

I have to say that I am one of those Wii people, attracted by the prospect of being able to play those 1990s classic Nintendo games I used to love and (for the first time) current games despite not having a masters degree in MMORPGs or having grown up on PlayStations or GameCubes or the XBox.

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