Weekly Bylines Roundup

The week before Labor Day is the among the quietest in terms of news. Here's a list of my stories this week.

Midway Games Looks for John Woo Hit
8/28/2007
Its new video game, developed with the acclaimed action director, is set for release next week.

TiVo Widens Loss
8/29/2007
A writedown pushes the company to a large loss in the second quarter.

Take-Two Tones Down 'Manhunt 2'
8/24/2007
A more muted version of the game gets the coveted M rating and a place on popular consoles.

I plan to make my weekly bylines roundup a regular feature on my blog. It will help me keep track of the stories I do.

Corporate Doublespeak (Or When Companies Lie)

I sometimes wonder if I am being excessively critical or cynical when companies issue statements or answer questions.

But in the last few days I have seen some blatant examples of corporate "doubespeak". First, Sony and the PlayStation 3 price cut.

When fliers from Circuit City's upcoming sales ad surfaced on the Internet Thursday, they showed a $100 price-cut on the PS3. I reached out to a Sony spokesperson who said the company doesn't want to comment on "unsubstantiated claims."

The next day, Sony President Ryoji Chubachi told Reuters in an interview that Sony has no plans to cut price of the console "at present."

Sorry, if I am being dense, but I would think that means Sony is not planning a price-cut at least in the next few days, if not weeks.

Turns out "at present" is literally that. For three days later, Sony announced the price cut.

I am not sure what kind of credibility the company has if its senior executives lie outright to the media. Mr. Chubachi doesn't need to talk to the press if he isn't aware of what the management is really thinking or what its moves will be. But I am positive his interviews with Reuters was with the blessing of other Sony higher-ups.

The right thing for Sony to have done here is accept that there was a leak and immediately announce the price cut. Sure they would have had to advance their intended announcement by four days but that's a small price to pay.

My next example: Microsoft. For months and months Microsoft denied it had a problem with the Xbox 360. In February when I reached out to the company about increasing reports of hardware failure with the Xbox 360, Microsoft PR dismissed my concern. Their response? The failure rate was within "normal range" for electronic devices.

So why did Microsoft say Thursday it will take a charge of $1.05 billion to $1.15 billion in additional warranties for the Xbox 360? Microsoft admitted it was receiving a lot of complaints about the console's problems from its users.

There's a chance that Microsoft didn't know the complete extent of the problems in February when I reached out to them but I find that hard to believe. I think Microsoft knew it had an issue but didn't want to admit it. They wanted to see if it would go away quietly.

When it didn't, or maybe got worse, they spun the story as one where the company was concerned about the users and so offering extended warrantly.

Not surprisingly, Microsoft gets so much flak from the media.

That brings me to the question of the day: When being less than truthful is not okay in personal life, how do executives go to work and think it is fine to do so? Don't professional standards come from an individual's personal ethics? Or do you need a split personality to survive in the corporate world?

To me it is shocking that a company's senior management would not place integrity and credibility on top of its must-have professional values.

Sigh.

A Different Way to Play the Wii

Nintendo has created a huge hit in the Wii. Clearly, the company's investors are very happy with its performance. But there are other ways to play the video game cycle. Chip makers like Analog Devices, Qimonda or Broadcom, whose components power the Wii, are some other interesting bets to make for those who would want to capitalize on the Wii's success.

From my article in TheStreet.com:

Chip Stocks Win With Wii

Inside the box were names such as Analog Devices and ST Microelectronics, both of which supply the sensors in the console's remote that enable and interactive feeling when playing the game; Broadcom, whose Wi-Fi chips connect the Wii remote (wirelessly) to the screen; and memory chipmaker Qimonda.
...
The Wii could eventually account for 40% to 45% of all hardware sales for this generation, Nintendo executives have said. That could translate into 40 million to 50 million units sold throughout the life of this console cycle, says Roger Ehrenberg, president of financial intelligence firm Monitor 110. Ehrenberg, who follows the games sector closely, does not own stocks in any of the gaming or chip companies mentioned in the story.

"As sales of the Wii kick in, I am sure these other companies will benefit either in terms of a near-term bump in EPS and/or an intermediate-term increase in market cap," says Ehrenberg.

THQ Bets Big on Wii

Many analysts and fund managers have been telling me recently they think THQ is the most undervalued of all the game publishers currently.

I did an interview with THQ's CEO Brian Farrell yesterday. Here's the story on TheStreet.com today.

THQ is betting against conventional wisdom in the video-game business. The company is eschewing a one-size-fits-all approach to creating games in favor of segmentation that will match the content to the demographics of the gamers who are most likely to use the device.

The company is also channeling development resources toward the Wii and plans to release 11 games for the console in fiscal 2008.

But that can be a risky plan. Unlike the earlier console cycle where Sony's PS2 ruled over rivals, analysts say that this time around, the three new systems could garner near-equal market share.

For game publishers this means the older plan of creating a title just for one system, known as third-party exclusives, is no longer viable. In an interview with TheStreet.com, Farrell says THQ's plan can still be cost-efficient, and the company's bet on the Wii could pay off in a year.

More at TheStreet.com

Electronic Arts Accelerates into Asia

Electronic Arts has been struggling to get into the game in Asia, where revenue steadily declined last year and the company has had few hits.

Now the leading video-game publisher in North America has a plan: EA is buying its way into the continent, one company at a time.

On Monday, the company announced its latest deal, a 15% stake worth approximately $167 million, in one of China's largest online game operators, The9.

It's the second such investment that EA has made in the last three months. In March, the Redwood City, Calif.-based EA said it would take a 19% stake in Korean online game company Neowiz for about $105 million.

More at TheStreet.com

PS3 vs. Wii (April)

Round one of the PS3 vs. Wii match went to Nintendo. Nintendo's Wii outsold Sony's PS3 by a huge margin in April according to The NPD Group.

The NPD Group tabulates monthly hardware and software sales in the video games industry and it is closely watched by everyone in the business.

My story on April's NPD data is here.

From the NPD story: Sony sold just 82,000 PS3s in April, compared with 360,000 Wiis, fewer even than the 84,000 devices of the Game Boy Advance, a fading console from Nintendo that was released in 2001. Both the Wii and PS3 were launched in November.

I also think Sony will be forced to cut price of the PS3 because it needs to spur sales. That story is here.

THQ Makes The Right Moves with Saints Row

THQ scrapped its plans for a PS3 version of the Saints Row game, a move that messed up the company's guidance for the first quarter. Investors have sent the stock down 4%.

They may be wrong. THQ did the right thing.

With sales of the high-priced PS3 consoles yet to take off -- and without the kind of resources that its much larger rival Electronic Arts -- THQ is better off concentrating on consoles with a sufficiently large installed base to recover game development costs.

More at TheStreet.com