OXMUK
A range of financial analysts have pitched in on GAME Group's supply dispute with EA, and while there's talk of million pound losses, it's not all doom and gloom.
Peel Hunt's John Stevenson notes that the retailer remains crucial to the UK games business, and that plans are in motion to weather the credit crisis.
"We expect Mass Effect 3 will suffer as a consequence of not supplying Game, noting other titles that Game has not stocked recently, while lower profile, certainly failed to impress in terms of chart position," he told the Guardian.
"We understand Game is now selling the Ubisoft Vita titles, illustrating both the fluid nature of events and the importance of Game to suppliers in the UK video gaming market.
"Given recent events, further speculation and the loss of key titles will clearly not help customer confidence, future pre-order levels or Game's overall negotiations with banks, suppliers and wider stakeholders. That aside, the group is continuing to develop a strategic plan, which we believe will likely result in the disposal of international operations and some UK store closures."
If down-sizing is GAME's quick-fix RPG-style healing potion, next generation console hardware could be its overnight tavern stop-over. "The potential for new major console releases (Wii U confirmed for 2012, speculation regarding the next generation X-Box) will be a significant source of future revenue and cash generation for the group, which will be critical to underpinning any recovery plan."
That's the sunny outlook - now for the storm. "The focus very much remains on pure survival as opposed to revival at this stage," writes Singer Capital Markets analyst Mark Photiades.
"Working on the assumption that a decent triple A title sells 0.8m-1m titles in the first few weeks of release in the UK and assuming GAME has around 20% share, we calculate that by not stocking Mass Effect 3, GAME is potentially missing out on around £6m-£7m of revenues in the UK given the title will retail for £39.99.
"With new software margins of around 24% this could result in £1.5m-£2m of lost gross profit in the current year. It is also worth noting that margins will suffer as a result of the reward card points being offered in compensation. We estimate this could amount to another £0.3m of forgone gross profit as typically pre-orders account for around 30% of initial sales.
"So in total there could be £2m-£2.5m of lost UK profit in a year where we are already forecasting losses of £8m."
GAME's CEO Ian Shepherd rallied the troops on Twitter yesterday, declaring "we'll pull through". In a statement, the retailer claimed its inability to stock EA's March releases (with the exception of SSX) is a "temporary" setback.
Pull up a chair and peruse your crystal ball. Will GAME and Gamestation be alive and kicking in 12 months time?
http://www.oxm.co.uk/39344/analyst-next-gen-xbox-could-save-games-bacon/
