Electronic Arts Plays Catch-Up After Shrug-Off of Wii
By Michael White
April 9 (Bloomberg) -- Video-game designer Nick Earl spent eight
months holed up with his development team rushing to adapt ``The
Godfather'' for Nintendo Co.'s Wii.
The reason for the long hours: Earl's employer, Electronic Arts Inc.,
like some of its competitors, underestimated demand for the Wii, whose
motion-activated wand lets players wield a virtual sword, mimic real
golf swings or strangle a victim. Instead, game makers put most of
their resources into Sony Corp.'s PlayStation 3, which was released
two days earlier in November with a more conventional hand controller.
Now, publishers are scrambling to get titles to the 3.56 million U.S.
and Japanese Wii owners who have made the machine the top-selling game
console this year.
``Those companies are backtracking,'' said Anthony Gikas, an analyst
at Piper Jaffray & Co. in Minneapolis. ``They're going to need to get
their best-branded product on that platform. That will take a good
nine to 12 months.''
A shortage of Wii games contributed to a 25 percent drop in sales in
February from a year earlier at Redwood City, California-based
Electronic Arts, the world's largest video-game publisher, said Todd
Greenwald, an analyst at Nollenberger Capital Partners in San
Francisco. Industry sales in February rose 28 percent.
Shares of Electronic Arts have risen 2.3 percent this year, the
smallest gain among the three biggest publishers.
Top Games
U.S. and Japanese sales of Wii players totaled 1.47 million in January
and February, said market researchers NPD Group Inc. and Enterbrain.
PlayStation 3 tallied 604,331, while stores sold 584,329 of Microsoft
Corp.'s Xbox 360 consoles. Wii is also leading in Europe, said London-
based researcher Screen Digest.
Wii games, all produced by Kyoto, Japan-based Nintendo, took three of
the top 10 sales spots in the U.S. in February, said NPD, based in
Port Washington, New York. Not a single U.S. publisher had a Wii game
in the top 20 in February.
Nintendo's lead will widen, pressuring companies even more. Researcher
IDC predicts Nintendo will ship 16.1 million players this year,
outpacing Microsoft's 9.87 million Xbox 360s and Sony's 9.1 million
PlayStation 3s. Wii game sales will total $2.2 billion, trailing only
Xbox 360, said IDC, based in Framingham, Massachusetts.
Electronic Arts wasn't the only publisher slow to see Wii's appeal.
New York-based Take-Two Interactive Software Inc., maker of ``Grand
Theft Auto'' games, had no Wii titles when the player was released and
now plans to have three this year, said spokesman Jim Ankner.
Activision Inc., based in Santa Monica, California, plans to release
six Wii games this year, giving the second-largest publisher a total
of 11, said spokeswoman Maryanne Lataif.
Miscalculation
Game companies had expected PlayStation 3 to dominate based on the
success of PlayStation 2, said John Taylor, an analyst with Arcadia
Investment Corp. in Portland, Oregon. Sony has sold more than 100
million PlayStation 2s since 2001, including 37.7 million in the U.S.,
making it the top-seller. Nintendo's previous console, GameCube, sold
11.7 million units in the U.S.
Perceptions changed when Nintendo unveiled Wii last May in Los
Angeles. Demonstration consoles attracted long lines of developers
waiting to swing a virtual tennis racquet.
``People got their hands on that controller and started playing games
and said, `This is fun, this is going to do better than we
expected,''' Electronic Arts Chief Executive Officer Lawrence Probst
said at a Morgan Stanley conference on March 5.
With six months to go before Wii's release and games requiring a year
or more to develop, publishers knew they were in trouble.
Redeploying
Electronic Arts bought Bountiful, Utah-based Headgate Studios Inc. in
November to bolster Wii development. With ``Godfather Black Hand
Edition'' and ``Tiger Woods Golf 07'' in stores, Electronic Arts has
six Wii titles and plans to have about a dozen in total this year.
``We came back and redeployed a lot of our resources,'' said Earl, who
heads Electronic Arts' Redwood Shores studio.
The results are seen in ``Godfather,'' where players use their hands
to shake the wand and an attachment, dubbed a nunchuk, back and forth
as if strangling or jostling someone. The wand also can be used to
punch or shoot victims.
``You really feel like you grab someone,'' Earl said.
The Wii may prove to be a windfall, since games cost just $2 million
to $5 million to create, a fraction of the $20 million to $30 million
spent on PlayStation 3 or Xbox 360 titles, analyst Taylor said. In
addition, Wii appears to be expanding the market, rather than stealing
sales from rivals, he said.
Ubisoft
Ubisoft Entertainment SA, maker of ``Rayman'' and ``Tom Clancy''
games, was the quickest to recognize Wii's appeal and is reaping the
rewards.
Wii games helped increase sales for the December quarter by 24 percent
to $405 million. In January, the company raised its 2007 forecast for
revenue growth to 16 percent from 10 percent to 12 percent previously.
Ubisoft, based in the Paris suburb of Montreuil-Sous-Bois, had seven
Wii games out by December and plans six more by June, said Tony Key,
vice president of marketing.
``It's not really a bet anymore,'' he said. ``It's a viable system
that's going to make us money.''
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