And The Best Gaming Studio At E3 Is...

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Includes: ATVI, DIS, EA, MSFT, SNE
by: John McKenna

Summary

In terms of games, EA can leave E3 as the frontrunner for the second half of 2015.

SNE has the better in-house content compared to MSFT thanks to nostalgic relaunches and original content.

EA and DIS can bank on Star Wars even if the movie is a dud, but EA's Battlefront might be the leader in the 2015 holiday game market.

While the hardware reveals are always fun at E3, most people go to the convention for the same reason: the games. After all, what good is a console if the games for it aren't worth the price? More importantly, exclusive and non-exclusive titles help investors determine which game developers are better positioned for the holiday shopping season and the months following, which are key points in the calendar for major studios looking to impress the shareholders.

So which studios came out on top at E3 this year? Let's take a look:

Sony comes out on top for in-house studio games

On June 17, I said that Sony's (NYSE: SNE) press conference didn't match the energy that Microsoft brought, and as a result, Microsoft (NASDAQ: MSFT) had the better press conference. This is largely thanks to Microsoft's hardware division rolling out the HoloLens and the Oculus Rift announcement a few days earlier, as well as finally allowing backwards compatibility and tearing down the barrier between PC and console gaming.

When it comes to actual in-house titles though, Sony's seemed more exciting thanks to the remake of Final Fantasy VII as well as an Animal Kingdom-like game World of Final Fantasy to be released next year. In addition, Sony played to the crowd by rolling out long anticipated titles such as The Last Guardian and Shenmue III which was Kickstarter-funded.

In terms of PS4-first games, Sony succeeded in luring Activision's (NASDAQ: ATVI) Call of Duty: Black Ops III away from its traditional Xbox audience and made it a showpiece at its press conference. While the game will still be available on the Xbox, PS4 users will get exclusive access to maps and content. It's a bold gambit by both Activision and Sony, but given the continuing popularity of the franchise and the Black Ops story-arc, it should be a win for both companies.

Sony also scored with Rigs, a virtual battlefield game designed for Project Morpheus, in contrast to Microsoft simply showing off how Minecraft works on the HoloLens and keeping specific Oculus Rift titles out of the conference - if there are even any at the moment.

Microsoft had some decent games as well, but the main focus was on hardware and promoting popular sequels to established titles. The notable release was Halo 5: Guardians, which included a new story arc that initially has Master Chief as an NPC, as well as a new multi-player format where players and non-player characters fight simultaneously. Also released was Rare Replay, a collection of Rare Studios classics to celebrate the game's 30th anniversary such as Viva Pinata and Banjo Kazooie.

While popular, most of these games are reboots and sequels, and in Halo's case, a chance for 343 Games to atone for the abortive launch of The Master Chief Collection last fall. Sony brought more original content to the table in addition to some popular reboots. But from a gaming perspective, and from an investment perspective, Sony appears to have an edge in game sales for the moment.

Playing in a galaxy far away

Of the big three AAA developers this year, only Electronic Arts (NASDAQ: EA) had a dedicated press conference, and it was pretty clear that Star Wars will be the company's main focus going into the holiday season to coincide with the release of The Force Awakens. EA wants this to be the "year of Star Wars" and if one saw the conference via video game streams, it was the only thing gamers really cared about, particularly Star Wars Battlefront, an update of the decade old third person shooter.

According to the press conference, Battlefront will emphasize EA's Frostbite engine for smoother gameplay and open navigation, and will still enable players to pick between rebels and the empire, demonstrating both game modes at once. The game was praised for the variety of weapons that would be on offer, as well as the rendering of the environment, particularly the snows of Hoth. It is a popular title getting the 8th generation touch that it needs, and with the movie coming out at the same time, this appears to be the frontrunner going into the second half of the year.

Not one to miss out on the Star Wars tie-ins (especially since they own Lucasfilm), Disney (NYSE: DIS) also announced a new Infinity playset featuring movie characters from the past two trilogies, and will debut first on the PS4. The new playset is set to come out this fall and will have characters from the upcoming film as well as previous ones, which will appeal to both kids and adults alike who are gearing up for the new trilogy.

While the Infinity models will tickle the collectors' funny bone, it appears as though the new Battlefront reboot, as well as an update on the MMO franchise The Old Republic, were the larger draws and has a larger potential audience. Therefore, it would appear that EA is in the better position going into the holiday season out of these two companies. And given how they were the only AAA studio to hold a live press conference in addition to running a games booth on the floor, they have the advantage coming out of E3.

So which game companies are worth the investment?

If Sony can provide bundles for its PS4 and for Project Morpheus to include the new and relaunched titles for each machine, it could set itself apart from Microsoft in sales by adopting the bundle strategy its rival employed during the 2014 holiday season. It will be noteworthy to see which games Sony chooses to bundle with its PS4 this season because if it's a game like Last Guardian or Final Fantasy VII, it could make console and game sales pop. As for Morpheus, it won't be available until the "first half" of 2016, but a game like Rigs can be a strong launch title to offset the first-mover advantage for Oculus Rift. This gives Sony potentially three quarters from 2015-2016 to build on its gaming showcase from E3 and make up for Microsoft's potential hardware advantages.

As for AAA developers, Electronic Arts has the best chance of impressing gamers and investors this holiday season thanks to its Star Wars licenses. The movie is expected to be a big hit, which will help Disney, and the game tie-ins should succeed in tandem to the movie. Battlefront has enough street cred with nostalgic gamers that it could be a success on its own, especially if the full game is as visually and graphically pleasing as the preview suggests. And The Old Republic, while competing in an over-the-hill MMO marketplace, should get a boost as well. While the game, and the movie, will come out this fall, the peak of game sales won't be until the Christmas rush, but even if Episode 7 is a relative clunker, the games can stand up on their own, so EA has more upside with less risk than Disney, which will be dependent on the movie's performance more so than its own game tie-in.

Disclosure: I am/we are long ATVI.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.