Analyst Claims Game Industry Safe from Economic Trouble

Analyst Claims Game Industry Safe from Economic Trouble

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Wedbush Morgan securities analyst Michael Pachter isn't seeing any major financial problems for the game publishers due to the tough worldwide economic times.

With the Dow Jones Industrial Average down around 16 percent, rising unemployment and billions of government dollars going toward bailing out bankrupt banks, its easy to be pessimistic about gaming's financial future.

However, industry-renowned analyst Michael Pachter is hopeful that developers and publishers, big and small, will be minimally affected by the economic crisis.

"All of the [top] publishers [like Take-Two, THQ, EA, Activision, and Nintendo] have sufficient cash to fund their operations," he says.

According to Pachter, the smaller operations are already taking preemptive steps to survive any cash crunches caused by consumers having fewer dollars to spend on games.

He explained, "Atari/Infogrames just completed an innovative deal with Namco Bandai, and Eidos recently received a capital infusion. Midway factored its receivables with its parent company, and Majesco did a private placement . All should have sufficient cash to fund operations for the next year or so."

Tumbling stock prices don't hurt day-to-day operations. "I don't think that share price makes much difference to the publishers' operations over the near term," he said. "None of them are in a position to have to issue new stock in order to get their business done, at least not over the next two years."

The main impact the economy has had on the industry is the slowdown of acquisition and merger deals, a recent industry fad for the past couple of years that gamers might be pleased to see end. "I'm not sure that there's much in the way of continuing consolidation or ongoing merger negotiations after EA dropped its bid for Take-Two," added Pachter.

Since most companies have coffers full of cash reserves and little debt, Pachter concluded, "I don't think that the market meltdown will impact game delivery for a couple of years, if ever."

Source: 1Up

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Goes to show you were consumer priorities lie.

Screw the mortgage, screw healthcare...but NO ONE better take my console!

Kinda a weird cultural commentary that at a 30,000 foot level view, people are panicking about stocks, securities, gas, unemployment, etc...but magically we have enough to get new AAA release titles every few weeks.

Figures....God we're spoiled.

Hmm, good news, I guess. But kind of sad, too, like you said, Alone Disciple.

Except for the startup company that's looking for a business loan. They're less likely to get it.

Good news for the big businesses and medium ones, bad news for startups and indies.

Dude,

My EA share price took a dive 2 weeks ago..

So umm, yes, there is an effect. (With WAR having the largest MMO release, you would have thought it would go up eh?)

I'd love to see his reasoning as to how a part of the economy is safe from issues that affect all of the economy.

Now if only gaming companies could make games worth the amount of money that they shell out to advertise them...

BobisOnlyBob:
Good news for the big businesses and medium ones, bad news for startups and indies.

Only if they're trying to do it just to make money. If I were a startup, or part of one, I would be trying to kiss all of the valve butt I could to get on Steam, and into gamer review mags.

If you've got great ideas that would play really soon, it's the best time to try for a startup. You will get the most scrutiny possible, but if your product is sound, SOMEONE will fund you.

Lord_Jaroh:
Now if only gaming companies could make games worth the amount of money that they shell out to advertise them...

I'll be damned if that isn't the best view on the gaming industry today.

Bretty:
Dude,

My EA share price took a dive 2 weeks ago..

So umm, yes, there is an effect. (With WAR having the largest MMO release, you would have thought it would go up eh?)

I think that has less to do with the economic issues and more to do with the poor reception of the SecuROM.

thebobmaster:

Bretty:
Dude,

My EA share price took a dive 2 weeks ago..

So umm, yes, there is an effect. (With WAR having the largest MMO release, you would have thought it would go up eh?)

I think that has less to do with the economic issues and more to do with the poor reception of the SecuROM.

When they help launch an MMO. Which breaks all MMO release records and the stock price still falls? No, this is a market thing, not industry or company.

 

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