The numbers haven’t painted a beautiful portrait of the video game industry recently. However, the games divisions for a number of major media corporations have been bringing more than a few smiles to shareholders as second quarter earnings reports continue to roll out. One of the biggest winners was Time Warner (NYSE: TWX).
So what�s the story? May’s video game sales, compiled by NPD Group, showed a business environment plagued by declining software sales, the only good news coming in the form of strong momentum for publishers like Take-Two Interactive (NASDAQ: TTWO), whose Red Dead Redemption has all but kept the industry afloat in the second quarter. Microsoft Corp. (NASDAQ: MSFT), Sony (NYSE: SNE), and Nintendo (PINK: NTDOY) enjoyed healthy hardware sales, but overall, the industry was flat throughout May and June. 2010 just hasn’t been a great year for game makers.
On the other hand, Time Warner’s Filmed Entertainment division, which includes games division Warner Bros. Interactive and whose second quarter ended June 30th, saw an 8% rise in revenue over 2009, pulling in $2.5 billion thanks to strong sales of Lego Harry Potter: Years 1-4. (It should be noted that Lego Harry Potter, which released on every major game platform, didn’t hit the market until June 27th).
Viacom (NYSE: VIA) also benefitted from its place in the videogame space.� The company’s Media Networks division, home to the MTV and Harmonix-made, Electronic Arts (NASDAQ: ERTS) Rock Band game franchise, finally cut its losses at the end of the second quarter. Revenue was up 6 percent over 2009, up to $2.09 billion, thanks to lowering losses on Rock Band branded games. This comes after Viacom’s poor first quarter of 2010, where the company pointed at Rock Band as the cause of significant losses in ancillary revenues.
Despite declines in the games market during the economic downturn over the past two years, Time Warner and Viacom’s games divisions are solid proof that continued investment in videogame development is a wise move for major entertainment corporations. Not to mention an increasingly important venue for generating revenue.
Disney (NYSE: DIS), whose major game release this past spring, Split/Second, failed to perform as well as expected, continues to invest more and more in the game space. Disney recently acquired the social games developer Playdom for the massive sum of $763.2 million.
That just goes to show video games are more than child�s play on Wall Street.
As of this writing, Anthony Agnello did not own a position in any of the stocks named here.
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