Used Game Sales Propel GameStop to Solid Year, Q4

Almost a quarter of GameStop’s [GME] sales came from used games for the year and Q4, the company said its earnings statement today.

The company raked in an astonishing $2.0 billion in used game sales last year, compared to $1.5 billion in the previous year. The $2 billion represents 23 percent of GameStop’s sales, while the same category made up almost half—48.1 percent—of the company’s profit.

For the year ended January 31, GameStop reported a net income of $398.2 million, or $2.38 per diluted share on revenues of $8.8 billion. That compares to a net income of $288.2 million, or $1.75 per diluted share on revenues of $7 billion the year before.

For the quarter—which included the holiday season—GameStop’s net income was $232.3 million, or $1.39 per diluted share on revenues of $3.4 billion. The company’s net income in the same quarter the previous year was $189.8 million, or $1.14 per diluted share on revenues of $2.8 billion.

“In spite of the current worldwide retail environment, GameStop’s financial performance is being driven by delivering to consumers what they want: stores in a wide range of locations, knowledgeable associates and most importantly, options that provide value. Our affinity with consumers, combined with our solid business model, prudent financial management practices, expansive brand presence and strategic merchandising, allowed us to achieve a record eighth straight year of sales and earnings growth. In 2008, we opened or acquired 1,002 stores worldwide, including the acquisition of Micromania, the largest video game retailer in France,” CEO Dan DeMatteo said in a prepared statement.

The company expects this year’s sales to grow between 10 and 12 percent, and its diluted EPS to fall between 18 and 22 percent higher than last year. For the current quarter, GameStop expects results to be flat to a 2 percent growth, due to the fact it’s up against a quarter last year which saw the release of Super Smash Bros. Brawl, Mario Kart Wii, and Grand Theft Auto IV. Still, it is encouraged by the release of major titles like Street Fighter IV, Resident Evil 5 and Halo Wars in Q1 this year.

The company will open 400 stores internationally this year, half of which will be here in the US, GameStop said.

Analysis: February sales numbers

Legs. Nintendo games have ‘em.

Capcom brought one of its biggest guns out last month in the form of Street Fighter IV, but still couldn’t topple Nintendo’s Wii Fit juggernaut in The NPD Group’s February sales numbers. Sure, if you took SFIV’s numbers on PlayStation 3 and Xbox 360, the title would have outsold Wii Fit by more than 200,000…but no single SKU could touch Wii Fit.

Get used to it, too: Wii Fit is much more than just a game, it’s a platform. Until Nintendo starts selling its Wii balance board separately, consumers must purchase Wii Fit to take advantage of the growing library of games that use the board.

About those legs: with DS sales totaling more than a half million last month, it’s no wonder Nintendo’s older yet killer apps for its handheld are selling well. Mario Kart DS and New Super Mario Bros, released in November 2005 and May 2006 respectively each outsold titles like THQ’s Deadly Creatures for Wii, a title that drew decent reviews. It is hard to imagine a DS library without those two staples of Nintendo gaming.

Good or bad reviews don’t always have an impact on sales, as we’ve seen with the two-year-old Wii Play, which placed fourth on the chart but was generally met with mixed reviews. Our straw poll at local Maryland retailers suggest that Wii Play is a mere $10 game that comes with an extra remote that several consumers require.

Aside from SFIV, Sony’s [SNE] Killzone 2 positioned itself as yet another PS3 exclusive that could help move systems. While popular exclusives are a great way to do that, so far Sony isn’t buckling on a PS3 price cut despite mounting pressure from publishers, who are now neck-deep in Wii Kool-Aid.

One big title isn’t in the top 10 because NPD does not track online content sales: Grand Theft Auto IV: The Lost and Damned, exclusive to 360. While Take-Two Interactive [TTWO] won’t give specifics, it did say the downloadable episode represented the largest dollar take in Xbox Live history. That’s no surprise considering it was also one of the most expensive at $20.

In the handheld arena, PSP didn’t even sell half as many units as DS, but rumors of Sony’s handheld’s demise are greatly exaggerated. Instead, Sony is ramping up an impressive lineup for the system later this year. We wouldn’t be the least big surprised if PSP’s year-on-year sales are higher this fall, but still won’t come close to the DS(i) juggernaut.

Meanwhile, Microsoft’s [MSFT] 360 continues to cement its second-place standing. According to NPD analyst Anita Frazier, February was the system’s biggest non-holiday month since September 2007 when Halo 3 launched.

The industry as a whole continues to see growth. February saw a 10 percent rise in sales versus February last year. NPD says unit sales grew more (11 percent) than dollars did because of a slightly lower average selling price in all categories compared to last year.

Majesco Shares Soar After Strong Q1

A mere two days after reporting a big jump in revenue and sales, casual game  connoisseur Majesco Entertainment’s [COOL] share price broke the $1 barrier in morning trading for the first time since September 12, a more than 19 percent increase over yesterday’s close.

The surge in Majesco’s stock price comes a little more than six months after Majesco was warned by Nasdaq to get its share price at or above the minimum share price of $1. At the time, Majesco had a deadline of February 18 to get its share price back up.

However, Majesco got a reprieve from Nasdaq’s standard when the stock market temporarily suspended its minimum bid price requirement, according to a Majesco SEC filing. The Nasdaq suspension expires next month and Majesco needs to have a share price at or above $1 for 10 consecutive business days by August.

Majesco is one of a few companies that is turning a low cost structure into a decent profit by publishing casual games on popular platforms such as Wii and DS. These casual games typically sell for a maximum of $30, representing a value in consumers’ eyes.

Holiday Mama: Majesco Q1 Sales Increase 75.8 Percent

Holiday sales of its flagship Cooking Mama franchise across four SKUs played a  key role in helping Majesco Entertainment [COOL] increase its revenue almost 76 percent, the company said today, adding it has increased guidance for the current fiscal year.

The company reported a net income of $4.2 million, or 15 cents per share on revenues of $32.8 million for the quarter, which ended January 31. That compares to a net income of $2.4 million, or 10 cents per share on revenues of $18.7 million in the same quarter last year.

“Our success was driven by strong demand across our product line, specifically for our Cooking Mama titles and the newly released Jillian Michaels’ Fitness Ultimatum 2009, which has become a hit with approximately 500,000 copies sold to date,” said CEO Jesse Sutton.

In a conference call with investors, Sutton said Majesco could have done better when it comes to marketing its key titles, and intends to do so going forward. Gardening Mama, coming to Wii at the end of this month, figures to be one of those key titles.

Majesco implemented a casual gaming strategy three years ago in which it would publish mostly on Nintendo’s console and handheld platforms. New titles, such as the upcoming Gardening Mama, usually debut on Wii at an attractive $30 price point. Wedbush Morgan analyst Michael Pachter told Wired last year that Majesco’s lower cost structure enables it to make a profit off of significantly lower revenues when compared to a AAA title from a larger publisher.

The rest of the fiscal year will also see the release of a remake of the NES classic, A Boy and His Blob for Wii, due in Q4. The title has been getting decent press at the mainstream gaming sites and will be one to watch.

The company has increased its outlook for the full year and expects its revenue to fall between $75 million and $80 million, and earnings per share to be between 10 and 14 cents.

Op/Ed: Let’s End the Movie/Game Sales Comparisons

Our friends in the PR business will scoff at this, but it’s time to end the movie vs. game sales comparisons, once and for all.

This nasty yet somehow effective marketing tactic began almost 10 years ago on 9/9/99, the launch date of Sega’s final console: Dreamcast. Back then, Sega marketing gurus, led by now-EA Sports President Peter Moore proclaimed the console generated more revenue--$98.4 million—on its launch day than the $28.5 million first day showing of Star Wars Episode I: The Phantom Menace.

Dreamcast’s launch price was $200, did not pack in any games, came with one controller and no memory unit. So it’s safe to say that most of those who purchased a console easily attached some games and at least memory unit, bringing the average purchase total closer to $275. On the other hand, the average movie ticket price in 1999 was between $6 and $7.

The more meaningful comparison would be the amount of consumers who purchased a Phantom Menace ticket vs. those who purchased a Dreamcast.

It’s simply an awful comparison, yet it continues to occur today.

Fast forward nearly nine years later to April 29, 2008. Rockstar Games’ blockbuster Grand Theft Auto IV is launches for PlayStation 3 and Xbox 360, raking in an amazing $310 million in revenue on its first day alone, impressive by any standard.

Today, Guinness sent out a press release noting GTA IV’s remarkable and record-breaking day, adding that it generated “five times the revenue generated by The Dark Knight in its first 24 hours of release.”

GTA IV came in two flavors: the $60 regular edition and a $90 collector’s edition packed in with some extra goodies. We don’t have the breakdown of sales for those two SKUs, but call it a gut feeling the less expensive one sold more. Regardless, we’re once again dealing with two products—a game vs. a movie ticket—sold at two very different price points.

What concerns us is the amount of blogs that chose to report off this press release and not once remind its audiences of the apples and oranges difference between the two products. The only similarity they share is that they are both entertainment products.

So it is with an impassioned plea that we at The Game Trade Journal ask the game marketers to stop the movie/game sales comparisons. You had us at $310 million.

Take-Two Beats the Street, But Loss Still Widens

While Take-Two Interactive [TTWO] executives are glad it beat Wall Street  estimates for its Q1, there will be no celebrating at its downtown New York headquarters anytime soon as long as it’s still in the red.

The company posted a net loss of $50.4 million, or 66 cents per share on revenues of $256.8 million for the quarter, which ended January 31. That compares to a net loss of $38 million, or 52 cents per share on revenues of $240.4 million in the previous year’s Q1. Wall Street was expecting a loss of 73 cents per share.

Take-Two attributed the loss partly due to $6.2 million in stock-based compensation as part of its management agreement with Zelnick Media, which pays CEO Ben Feder. The company also incurred expenses due to “unusual legal matters” related to the attempted hostile takeover last year by Electronic Arts [ERTS] as well as governmental inquiries and civil lawsuits.

“Looking to the balance of the year, the economy remains challenging and uncertain, and our industry will not be immune to this environment. Consumers will be highly selective in their purchases, including interactive entertainment,” said Chairman Strauss Zelnick.

Thanks in large part to the PC release of Grand Theft Auto IV, most of Take-Two’s revenue—24 percent—came from that platform. On consoles, Wii provided the company with 19 percent of its revenue, compared to 18 and 15 percent on Xbox 360 and PlayStation 3, respectively.

For the rest of the fiscal year, which ends on October 31, the company will release new titles in some of its most popular franchises. Notable releases will be Bioshock 2 (platforms unannounced, but count on PC, 360 and PS3), Grand Theft Auto: Chinatown Wars (DS), Grand Theft Auto: Second Episode (360, working title), Mafia II (PC, 360, PS3), NBA 2K10 (multiplatform), Red Dead Redemption (360, PS3) and The Bigs 2 (multiplatform).

What Game Industry CEOs Make

Times are tough, but not if you’re an industry chief executive.

CEOs from other industries in America have come under a lot of scrutiny, and it’s usually the ones getting government bailouts. We were inspired to see last month when General Electric [GE] boss Jeffrey Immelt forgo more than $23.7 million in bonus and incentive money, but not terribly surprised because his company made use of government support.

So how does Immelt’s outrage-saving move relate to game CEOs? While few CEOs reaped bonuses in their last fiscal year, stock options and incentives were awarded to key players making their total compensation about 12 notches above healthy. We couldn’t help but wonder if the money spent on bonuses/incentives could have gone toward saving a few jobs. At least game company CEOs weren’t flying corporate jets to Washington asking for billions in bailout money.

Below we outline the total compensation of CEOs of publicly traded US game companies, based on their proxy statements filed with the SEC. These companies use external compensation committees to decide pay based on a variety of factors including competitive executives’ pay, and individual and company financial objectives.

Activision CEO Bobby Kotick: $14.9 Million

Kotick is the recipient of the industry’s largest bonus last year, a cool $5 million on top of his base pay of $899,560. He also got $3 million in incentives.

As with most CEOs, the lion’s share of Kotick’s total compensation in 2008 was in his exercised stock options, which was $5.9 million.

Of note, Kotick’s total compensation the year before (before Activision’s acquisition of Vivendi) was a mere $2.8 million. We’re relieved he’ll be able to put dinner on the table this year.

Oh, and Activision’s 2008 bottom line? A loss of $107 million.

Electronic Arts CEO John Riccitiello: $5 Million

Riccitiello’s base pay was a modest $750,000 in EA’s last fiscal year ended March 31, 2008, but the longtime exec who returned to the company in 2007 was awarded $3.6 million in stock options. He was also paid $625,350 in incentives.

EA, in Q3 of its current fiscal year, posted a loss of $641 million in Q4 and expects a loss of between $3.29 and $3.56 per share for the year.

 THQ CEO Brian Farrell: $2.7 million

Times are tough for THQ, so why shouldn’t they be a little tougher on their  Chairman/CEO Farrell? Farrell’s 2008 take was $600,000 lower than what he made in 2007, so now he’ll have to settle for the BMW over the Bentley.

Although Farrell’s base pay was $651,087, the bulk of his total compensation came from $1.4 million in option awards.

THQ’s net loss in Q3 was $192 million and would not give guidance for Q4. However, Wall Street expects Farrell’s company to lose about 30 cents per share for the quarter.

GameStop CEO Dan DeMatteo: $4.9 million

Matteo is relatively new to the CEO club, taking the reigns from R. Richard Fontaine late last summer. Still, in the previous year as GameStop’s COO, DeMatteo was handsomely compensated.

The used game king of retail will report its year-end earnings in the middle of this month, but both Matteo and Fontaine are already reaping the benefits following an improved sales and profit guidance notice a few weeks ago: $2.4 million bonuses for each of them.

Now that stores like Toys R Us and Amazon.com [AMZN] are seeing the high-margin benefits of used game sales, they’ve entered the same arena as GameStop. Our question is, what will DeMatteo do to counter this? Perhaps GameStop will continue to do what it does, and wait for the others to fail.

Midway CEO Matt Booty: $387,584

Put an asterisk next to Booty’s name for this list: he wasn’t officially Midway’s CEO until late October last year, and the meager salary he made was as the company’s SVP of worldwide studios/interim CEO.

Booty’s former boss, former CEO David Zucker took in $1.5 million in total compensation.

The rest, as they say, is history. Midway is now facing the possibility of going out of business after filing for bankruptcy protection and selling the publishing rights for its next big game, Wheelman.

Majesco CEO Jesse Sutton: $943,847

Sutton, CEO of one of the few profitable American publishers had a base pay of $356,073 and a bonus that almost equaled that amount, thanks to his company riding the Cooking Mama wave on Nintendo’s systems.

Sutton’s company will keep the Mama momentum going this year with the release of Gardening Mama and will bring a favorite of older gamers (including this editor), A Boy and His Blob for Wii.

Our advice is for Sutton to not rest on his laurels: Majesco’s net income was a mere $3.4 million last year.

Take Two CEO Ben Feder: $1

No, Feder didn’t just make $1 last year, but that is all Take-Two paid him personally, excluding health benefits. Feder’s checks come from privately held Zelnick Media, a management company founded by Take-Two Chairman Strauss Zelnick.

The CEO of all things Grand Theft Auto, BioShock and 2K Sports led his company to a profit of $97 million last year, thanks in part to a little game called Grand Theft Auto 4, which reportedly sold a few copies.

Somehow, we think Feder isn’t living amongst the paupers.

Activision “WoWs,” But Where’s Wireless?

We knew World of Warcraft was popular, but Activision Blizzard’s [ATVI] flagship MMORPG accounted for almost the same amount of revenue as its entire take across all consoles.

Activision, which finished its acquisition of Blizzard last summer, reported revenues of $1.1 billion in the MMORPG category alone, versus $1.2 billion across all consoles in 2008. WoW made up the bulk of those MMORPG revenues, fueled by the release of its expansion pack, Wrath of the Lich King. At the end of 2008, Activision boasted more than 11.5 million WoW subscribers worldwide.

On console, we wondered if there was a publisher who jumped on the Wii bandwagon sooner than later, and as it turns out, Activision is that publisher. The company posted $407 million in sales on Nintendo’s platform last  year, no doubt fueled by sales of is flagship music game, Guitar Hero World Tour, which retails for $190 for the full band kit. Activision’s Wii take is significantly higher than the next-highest third-party publisher, Electronic Arts’ $172 million.

And did we say goodbye to PlayStation 2 already? Maybe that was a tad early, as PS2’s huge installed base and the availability of several Guitar Hero titles on that platform allowed Activision’s PS2 take to total slightly more than its PlayStation 3 revenues. As ubiquitous as PS2 is, we still expect a huge drop in Activision’s 2009 take for that platform.

While it’s easy to see that massively multiplayer games take the largest piece of the pie (below), it’s what’s missing that has us scratching our heads: mobile games. Activision has shut down Vivendi Games Mobile, and while the company does license some of its more popular franchises to third-parties on mobile platforms, we couldn’t find where the company accounts for these revenues. Repeated calls and emails to Activision went unreturned at the time of this writing.

While we don’t think Apple [APPL] will stroll away with the mobile market, we can’t help but notice how increasingly relevant the company’s iPhone/iPod Touch platforms are becoming, and wonder what Activision is doing about it.

What of Xbox 360? Activision’s Call of Duty 4: Modern Combat continues to hold its $60 price tag more than a year after its release, while 2008’s Call of Duty: World at War and Guitar Hero World Tour pile on the dollars for a grand total of $361 million on Microsoft’s [MSFT] console. It’s no surprise that Activision is working on Call of Duty: Modern Combat 2  for a fall release.

Although PS3 is lagging in third place in the console war, Activision still managed $241 million in revenues for 2008, a tad more than EA’s $217 million.

Rounding out Activision’s revenue mix was PC and handhelds with $99 million and  $237 million, respectively. While we’re not going to beat the “PC gaming is dead” drum, in times when consumers’ dollars are being stretched thinner, consoles still represent a better value. But don’t take our word for it, as market research firms are predicting steep declines in PC sales this year.

On the handheld side of things, most of the Activision’s revenue came from DS, thanks to sales of—you guessed it—Guitar Hero On Tour, which was the best selling third-party title on the platform according to The NPD Group. PSP sales only accounted for one percent of Activision’s total revenue.

Red Mile to Acquire Full Rights to Heroes Over Europe

Atari will release its half of the publishing rights for Heroes Over Europe to Red Mile Entertainment upon initial payment as part of a buyout agreement between the companies, according to a recent Red Mile SEC filing.

Red Mile will pay Atari an undisclosed payment when the agreement is executed as well as two royalty payments based on Heroes’ sales. As part of the agreement, Red Mile and Atari agreed to a mutual release of claims such as Red Mile breached the co-publishing agreement. The filing did not disclose when Red Mile expects the agreement to execute.

It is not yet known whether Red Mile will (or can) publish Heroes itself, find another co-publisher or sell its rights entirely because just two weeks ago it said it was cash strapped and would likely close its operations by the end of this month if it cannot get more funding. Selling the Heroes rights would help in the funding department, but it’s unlikely such a move would be enough to sustain Red Mile.

A more likely scenario is finding a new co-publisher. Red Mile’s previous Heroes title, Heroes of the Pacific, was co-published with Ubisoft, which just recently stepped in and saved the fate of another title, Midway Games’ Wheelman. Getting Heroes Over Europe out the door may enable Red Mile to keep development going on its largest franchise, Sin City, due in 2011 if Red Mile survives.

Before Atari claimed Red Mile breached the co-publishing agreement, Transmission Games was working on Heroes and the game was due to ship this spring for PC, PlayStation 3 and Xbox 360. At the time, Transmission claimed Red Mile missed a milestone payment of $281,000.