Zumba 2 Reignites Majesco's Holiday Sales

| About: PolarityTE, Inc. (COOL)
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On November 15, Majesco (NASDAQ:COOL) released "Zumba Fitness 2," the next installment of its wildly successful Zumba franchise. Sales of the sequel have only been modestly positive. As a result, shares of COOL have fallen 10% in recent weeks.

However, investors appear to have missed a critical oddity. Zumba 2 has done something more important than flying off the shelves – it has reignited new unit sales of the original. This was first predicted in the SeekingAlpha article “Zumba Craze Means Majesco Shares Are Poised To Triple.”

This phenomenon is bullish for three reasons:

  1. After a full year of expectation-beating sales, the original "Zumba Fitness" title was beginning to fade. Investors likely left it for dead. The latest numbers say otherwise (more on this in a moment).
  1. A larger base of Zumba 1 buyers creates a larger base of future Zumba 2 buyers. This will give the sequel a bigger (albeit delayed) boost than many may be expecting. Based on the stock’s recent action, this is clearly not something that investors have priced in.
  1. The Kinect version of Zumba 1 has benefited more than the Wii version and has a list price of $49.99 versus $39.99 for Zumba 2. This $10 premium is even higher in reality, because vendors like Amazon (NASDAQ:AMZN) sell the Kinect version for $45 versus $30 for Zumba 2.

This sort of occurrence is extremely rare in the video game industry. Normally, games sell very strongly in their first month and then fall off a cliff. In contrast, Majesco’s Zumba and Cooking Mama titles have historically started at a modest pace, but continue selling well for several months (and even quarters) thereafter.

The first installment of "Zumba Fitness" was a perfect example. It took over three months for the game to sell its first million units. Since then, sales have actually INCREASED, averaging an additional million units every three months. This pace slowed in the weeks leading up to the release of Zumba 2, but has since re-accelerated.

In fact, according to vgchartz.com, the "Zumba Fitness" franchise sold close to 500,000 in the two weeks ended December 10. That’s almost 6x its average over the prior 12-months. Just as impressively, the breakdown shows that the original Zumba title is seeing a rebound in new unit sales (as opposed to used copies, which don't contribute to Majesco's revenue).

For example, sales of the original "Zumba Fitness" for Xbox/Kinect jumped to 60,000 units last week. During the prior three months, the game had been selling less than 10,000 per week. On Walmart.com, the game was ranked #487 two weeks ago. This week, it moved into the top 30…and then sold out. A rebound of this magnitude is highly uncommon.

The original Zumba for Wii is also experiencing renewed success. On Walmart.com, Zumba 1 moved back into the top 10 this week, coming in at #9 (up from #17 in the week prior).On Amazon.com, it moved back into the top 10 among Wii games three weeks ago. As of today, it’s still there. It has also moved up to #5 on Amazon’s “Most Wished For” list among Wii games.

There are two key contributors to this resurgence:

  1. Sequels to highly successful music games (like "Just Dance" and "Guitar Hero") tend to spark renewed sales of the original. Music franchises are largely driven by new songs. If a customer falls in love with a sequel before experiencing the original, there's a good chance the customer will go back and buy the original.
  1. Most gamers know that the latest iteration of a game is usually the best one to buy. However, unlike most games, "Zumba Fitness" targets women over the age of 30 (my mother, who recently retired, loves Zumba). After surveying several Zumba fans, we found that most would buy Zumba 1 before Zumba 2. Their rationale? Simple...when it comes to classes, instructional videos, and movies, the first one always comes first.
  2. It makes sense when you think about it that way. Indeed, most of the people we surveyed view the Zumba games in the same light as the Zumba instructional DVDs.

As for Zumba 2, the game is quickly gaining steam at Walmart.com (from #27 to #20 this week) and Gamestop.com (from #19 to #6). At Amazon.com, the game has already been doing well. It held on to the #3 spot after moving into that position (from #21) two weeks ago. It is also #3 on Amazon’s “Most Wished For” list.

Looking at the rest of vgcharts’ latest data, COOL had 12 actively-selling titles in the market last week, likely an all-time high for the company. Adding it all up, we observed a total of 370,000 unit sales worldwide last week.

To date, vgchartz has proven to be a predictive source of data. If that remains the case, COOL likely generated close to $15 million in revenue over the past two weeks. That’s nearly 30% of Wall Street’s estimate ($52 million) for the entire January quarter (13 weeks). If this trend continues, COOL should be on its way to yet another earnings beat and a strong 2012.

The odds are in its favor, as the Zumba craze continues to build steam. Most recently, the American College of Sports Medicine reported that Zumba is now #9 on the list of top trends for the coming year. Last year, it didn’t make the top 20. The latest stats confirm the ACSM’s findings. As of mid-2011, more than 12 million people were taking weekly Zumba classes at over 110,000 locations worldwide. This is nearly double the 7.5 million people who were taking weekly classes at 60,000 locations a year ago.

Zumba performed very well after the holidays last year. A replay of that trend appears probable, driven by a larger installed base of Xbox Kinect systems, gift card related purchases, and New Year resolutions. Also, in Februrary, a new version of Zumba Fitness for the Kinect platform will "Join The Party."

Disclosure: I am long COOL.