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Analysts: Game Biz Sustains Even As Stocks Fall

Analysts: Game Biz Sustains Even As Stocks Fall Exclusive

September 30, 2008 | By Leigh Alexander

September 30, 2008 | By Leigh Alexander
More: Console/PC, Exclusive

Yesterday, the Dow Jones saw its biggest overall drop in history, losing about 7 percent in total, over 700 points by market close, while the NASDAQ tumbled nearly 200 points, or 9 percent.

NASDAQ-traded gaming stocks were not immune, and most major publishers took hits. Consumer site GameSpot crunched yesterday's market closing numbers, showing that Activision Blizzard appeared to see the most impact, falling 13.8 percent to close the day at $14.12 per share -- a loss of $2.26.

Electronic Arts, which trades higher than its software industry peers saw a higher per-share loss of $3.63, but a lower total percentage than its largest rival at 9.16 percent. THQ lost 7 percent, and Take-Two lost about 4.5 percent to close at $15.43 -- recall that the company recently shunned EA's bid to buy them on the basis that $25.74 was too low a bid.

Neither Microsoft nor Sony escaped unscathed, either, seeing 8.72 and 5.09 percent share value losses respectively. But in spite of this impact, analysts say there's actually little reason for significant concern about the long-term financial health of the games biz.

"There really is no impact... nobody’s running out of money," Wedbush Morgan analyst Michael Pachter tells Gamasutra, noting that none of the game companies have borrowed any credit that's likely to be impacted by the lending crisis.

"Pretty much everything is going to get made as-is and sold," he says. "I don't see a global recession impacting games much."

Lazard Capital Markets analyst Colin Sebastian says that the beleaguered economic conditions may actually have a favorable "cocooning" effect on the game industry, thanks to a better cost-per-hour of games versus other media like films, and retailers will "remain vigorous in their support" of games.

"We also continue to believe that the video game sector will continue to generate solid growth as consumers shift more of their leisure time from passive to interactive entertainment," says Sebastian in a recent analyst note.

"Moreover, while the video game category is also not
immune to the current weaker spending environment, we believe that the category should continue to benefit from the popularity of Nintendo products Wii and DS), and the cyclical ramp in sales of the PS3 and Xbox 360."

And while Activision Blizzard may have been the company to see its stock take the biggest hit among its fellows during yesterday's market plummet, Sebastian actually believes it's still the best pick for the holiday season, owing to its release slate and the stability it gets from World of Warcraft's subscription revenue base.

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