How the portals can fund the price war...or not

[cliffski]

http://www.gamesindustry.biz/article...-games-revenue

RealNetworks has reported a 15 per cent decrease in its 2009 second quarter games revenue; a fall which has contributed to an overall company revenue decline of 11 per cent.

Total revenue for the period was USD 135.7 million, which compares to USD 152.6 million in the second quarter of 2008. The company's net loss for the accounting period totalled USD 188.3 million; compared to USD 1.3 million the year previous.

So their losses were actually higher than their revenue?
Holy cow. And people expect to compete with this sort of pricing strategy?

[princec]

If they can afford to lose that in just a quarter, they must have some fairly massive cash reserves, or extremely confident VCs. If their strategy is to choke off the oxygen supply to their main competitors - that'll be the likes of BFG and such - then they'd better simply have Far More Cash Than They Do. I'm not so sure in the history of corporate warfare however that this tactic is a very wise one and carries massive risk. Effectively they are trying to double bluff each other until someone runs out of capital and croaks - a figure they don't know.

It is of course having no effect on indies.

Cas

[Nutter2000]

I can only presume since they're only saying a 15% decrease that they're talking economic loss not operating loss.
I.e. they didn't quite make their investors the same obscene amounts of money this financial year to date (accounting period) that they did in the previous year

So they probably made more money than they spent (operating profit) but didn't make as much profit as they did last year.

Could be wrong though

Iain

[Sue]

http://www.gamesindustry.biz/article...-games-revenue

So their losses were actually higher than their revenue?
Holy cow. And people expect to compete with this sort of pricing strategy?

I think the games industry article was a bit misleading. On RealNetworks own site they quote:

Net loss for the second quarter of 2009 was $(188.3) million, or $(1.40) per share, compared with a net loss of $(1.3) million, or $(0.01) per share, in the second quarter of 2008.

http://www.realnetworks.com/company/...BSk777345.html

So the losses being referred to are losses on the value of the whole company (share value) rather than losses on the balance sheet. I think this is the case anyway.

[Junkyard Sam]

The bizarre thing about the falling game prices is --- the dollar is also losing value. So we're seeing prices fall AND the dollars that are buying them are becoming worth less and less.

(Is that something like stagflation?)

And we still haven't felt the inflationary effect of this massive print of money going on with the bailouts... this won't take effect until the recovery (if there ever is one. Right now They havent even begun to address the root causes of our current situation...)

Now combine all of this with the economic weakness of America becoming a "service economy" --- now you have ungodly numbers of people getting into the games business because it's one of the few things we really make anymore. So you have floods of new developers contributing to the price war from the supply side...

I think all this stuff probably ties together.

* sorry this is so US centric, but I bet a lot of this has global consequences.

Losses, losses, losses, and more to come across the board. Big studios are going to shrink and outsource more, so that means even more of us competing in the "convenient games" market as an alternative...

-- Debbie Downer

[princec]

Cliff's figures show a 11% decrease in revenues and an actual net loss of USD 188.3 million. That is, they ended the quarter with $188.3m less in the bank than they had 3 months before with only a small drop in sales.

Cas

[MerscomMan]

http://www.gamesindustry.biz/article...-games-revenue



So their losses were actually higher than their revenue?
Holy cow. And people expect to compete with this sort of pricing strategy?

During Casual Connect, many of the portals were discussing trying to move up the price point, so I think it is unfair to say they are all supportive of the existing point and lower prices we have seen. In particular, Real, iWin and Oberon all announced various "Premium Pricing" strategies.

I personally am not sure that this is the answer to falling revenue or if it is at all a good idea in this economy, but I did want to point out that the portals are not embracing lower prices, especially given that this thread started on Real's announcement and they are one of the ones hoping to move the price point back up.

[princec]

Specifically interesting is that lowering prices hasn't increased revenues.

Cas

[papillon]

Notice also this thread:

http://gamezebo.com/games/mystery-lo...ndon-worth-299

People aren't feeling that buying a game for a measly three bucks is a no-brainer... which leads them to mentally devalue the games even further!

[Pallav Nawani]

Their games revenue this quarter was $29.8 million. Anyone know the comparable figure for Big Fish Games?

[GBC]

If you look at the financial statement, about 170m of those 188m is not a real loss, but a mark down in value of assets, required under Sarbox accounting practices. That's an important distinction to be made while looking at financials of US public companies nowadays. Basically, that's not money that went out the door.

[jmc]

They're just waiting for a bail out from the government! The US is now just like a communist country afterall, where the gov funds the companies in difficulty , why didn't i start "lehman brothers games" !??

Jmc.

[KNau]

Hey, at least they can celebrate that they're slmost 6 times more profitable (less lossy?) than EA!

[Game Producer]

Maybe they start price wars on stock prices too..

[jcottier]

If you look at the financial statement, about 170m of those 188m is not a real loss, but a mark down in value of assets, required under Sarbox accounting practices. That's an important distinction to be made while looking at financials of US public companies nowadays. Basically, that's not money that went out the door.

Exactly. Just show how serious games journalist are... All the articles I read about this was completely wrong.

[princec]

Oh that's ok then, it's just $18 million.

Cas

[Escapee]

Didn't Uncle Sam just relax the mark to market accounting rules? I don't understand why they could lose so much in asset value given the relaxation of this honest accounting practice.

[GBC]

Oh that's ok then, it's just $18 million.

Cas

Well, not necessarily from games: they break down revenue by division, and say that games are about 20% of the total, but don't break out profitability by division. As such, the game division could be responsible for all the loss, or 20% of it, or none, or making a profit... there's really no way to tell its profitability with the data supplied

[hddnobjcttmmngmntmtch3rlz]

GBC you beat me to the punch. REAL is not just a game distributor.