Top video game industry analyst Michael Pachter did a great E3 Conference Preview with us a few weeks ago. Now, we have his Cheat Sheet recap of the event:
We attended the E3 Expo earlier this week in Los Angeles, CA, and met with over a dozen companies presenting products at the show, including Activision Blizzard (Nasdaq: ATVI), Electronic Arts (Nasdaq: ERTS), GameStop (NYSE: GME), Microsoft (Nasdaq: MSFT), Nintendo (OTCPK:NTDOY), Sony (NYSE: SNE), Take-Two Interactive (Nasdaq: TTWO), THQ (Nasdaq: THQI), and Ubisoft Entertainment (OTCPK:UBSFY).
The highlights of the show were Microsoft’s Kinect (formerly known as Project Natal), Sony’s Move Controller, and the Nintendo 3DS, all of which appear to be poised to drive incremental hardware and software sales. Many details remain unsettled, including pricing for Kinect and both pricing and launch date for the 3DS.
Microsoft launched a new slim version of the Xbox 360, now priced at $299 with a 250Gb hard drive, which is effectively a price cut due to the inclusion of a larger hard drive and built-in WiFi. All current Xbox 360 models were reduced by $50 in order to clear out existing inventory. Pre-show rumors that proved to be unfounded were the introduction of a Wii HD and new PSP 2, neither of which were announced.
There were few surprises on the software front, with most of the publishers showcasing games that had previously been announced. The only major reveals came from Nintendo, which brought back Kid Icarus, and from Sony, which intends to release a new version of Twisted Metal. The emphasis in 2010 was clearly on hardware.
Electronic Arts showed a solid lineup, and we think that anticipation is high for Medal of Honor, Dead Space 2, Need for Speed Hot Pursuit and Crysis 2.
Ubisoft’s presentation was uneven, with Assassin’s Creed: Brotherhood and Ghost Recon: Future Soldier looking great, but other games that appear to have uncertain prospects (such as Innergy, a laser tag game, Michael Jackson’s Music, and Shaun White Skateboarding).
Activision did not show games on the show floor, which we believe was a missed opportunity. Instead, the company devoted significant resources to a hugely successful and entertaining concert. While we enjoyed the concert immensely, we think that the company’s resources would be better allocated to making an impression on the show floor.
Microsoft, Sony and Nintendo each held impactful press conferences. Microsoft’s was focused on core games and on Kinect, with the major “reveal” being the new Xbox 360 model. Sony had the broadest range of announcements, with a focus on PS3, 3D gaming, PSP, Move, a new premium PlayStation Network offering, core games, and new partnerships with Valve and EA. Nintendo had a very crisp presentation, focusing on core games and the 3DS.
We viewed presentations of key games at E3, and were most impressed with Assassin’s Creed: Brotherhood, Call of Duty: Black Ops (the early favorite to be 2010’s best seller), Crysis 2 (which looked brilliant in 3D), Ghost Recon: Future Soldier, Gran Turismo 5 (also radiant in 3D), Halo: Reach, Killzone 3, The Legend of Zelda: Skyward Sword, Medal of Honor, and Star Wars: The Old Republic.
The show was once again very large in 2010, with the Los Angeles Convention Center hosting over 45,000 attendees (compared with 40,000 attendees in 2009, and 5,000 attendees in 2008 and 2007) and 300 exhibitors from 90 countries. E3 was a great spectacle, opening with a memorable (if perhaps over-the-top) Cirque du Soleil production for Microsoft’s Kinect, and a concert on Monday by Activision at Staples Center that featured many music industry headliners. E3 2011 is scheduled for June 7 – 9, 2011, and will once again take place at the Los Angeles Convention Center.
We expect modest share price appreciation for many of the major video game publishers after E3. We recommend that investors add to positions of Activision, Electronic Arts, and GameStop.
Disclosure: Wedbush Securieties does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.