Warner Bros. Q3 Home Entertainment/Video Game Revenue Down YTY

With few movie releases due the coronavirus pandemic production shutdowns, and the video game industry awaiting launches of new generation consoles, Warner Bros. Oct. 22 reported third-quarter (ended Sept. 30) operating revenue of $383 million for its games, home entertainment and ancillary content segment. That was down 23% from revenue of $497 million during the previous-year period.

The studio’s top-selling packaged media release in 2020 continues to be led by Oscar-winning Joker, with $43 million in revenue from the sale of 2 million combined DVD/Blu-ray Disc units since its Jan. 7 retail release.

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Theatrical revenue declined more than 22% to $1.06 billion from $1.37 billion last year. TV production revenue fell almost 35% to $960 million from $1.46 billion. When combined with games and home entertainment, studio revenue dropped 27.7% to $2.41 billion from $3.33 billion last year.

If there was a silver lining to the results, film and TV production costs in the quarter dropped 27.4% to $1.17 billion from $1.61 billion during the previous-year period.

GameStop Inks Strategic Partnership With Microsoft

Video game retailer GameStop Oct. 8 announced it has entered into a multiyear strategic partnership agreement with Microsoft to help expand its physical and digital video game offerings in the cloud, as well as enhance the chain’s retail technology infrastructure.

GameStop operates more than 5,000 retail stores worldwide, in addition to an e-commerce platform and the PowerUp Rewards customer loyalty program. Through the partnership, GameStop hopes to standardize its business operations via Microsoft’s cloud solutions and hardware products to deliver enhanced digital “experiences” to customers.

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“This is an exciting day at GameStop as we announce the advancement of an important partnership that capitalizes on the power of our operating platform and significant market share in gaming to accelerate our digital transformation; drive incremental revenue streams; and over time, further monetize the digital world of gaming,” CEO George Sherman said in a statement.

Under the agreement, GameStop will standardize its back-end and in-store operations with Microsoft’s portfolio of cloud-based business applications and customer data. This is to enhance store personnel with integrated business operations, including finance, inventory, e-commerce, retail and point-of-purchase sales.

For example, cloud-based in-store software could enable store personnel to access information on a customer’s gaming preferences and purchase history in real time on product availability, subscriptions, pricing, and promotions in order to provide a differentiated and more personalized in-store shopping experience.

GameStop plans to roll out Microsoft Office 365 and Microsoft Teams to its stores, empowering more than 30,000 store associates with enhanced productivity and collaboration tools.

“By harnessing the power of Dynamics 365 and Microsoft 365, GameStop will be able to modernize its technology infrastructure and support store associates and consumers in new and exciting ways,” said Matt Renner, president of U.S. Enterprise Commercial at Microsoft.

Store associates will be equipped with new Microsoft Surface devices,  enabling them to move freely within the store footprint, meeting the needs of customers faster and more efficiently.

GameStop is also expanding its Xbox family of product offerings to include Xbox All Access, which provides an Xbox console and 24 months of Xbox Game Pass Ultimate to players with no upfront cost. GameStop and Microsoft will both benefit from the customer acquisition and lifetime revenue value of each gamer brought into the Xbox ecosystem.

“GameStop’s extensive store base, focus on digital transformation in an omni-channel environment and expert gamer associates remain an important part of our gaming ecosystem,” added Phil Spencer, EVP of Gaming at Microsoft.

‘Resident Evil’ 4K Release Moved Back to Nov. 17

The live-action video game film franchise “Resident Evil” will come out in a 4K Ultra HD collection Nov. 17 from Sony Pictures Home Entertainment.

It was originally scheduled for Nov. 3.

The limited-edition gift set marks the first time all six films are on 4K Ultra HD disc with HDR and Dolby Atmos audio. The films will also be available digitally in 4K with HDR.

The “Resident Evil 4K Ultra HD Collection” includes Resident Evil, Resident Evil: Apocalypse (both the original theatrical version and an extended cut), Resident Evil: ExtinctionResident Evil: AfterlifeResident Evil: Retribution and Resident Evil: The Final Chapter as well as hours of bonus content across all six films, including archival featurettes that have been previously unavailable on disc.

Based on the popular video game series by Capcom, the “Resident Evil” franchise stars Milla Jovovich (The Fifth Element) as Alice, a superhuman security expert pitted against the sinister Umbrella Corporation as the world’s population is transformed into flesh-eating creatures by one of its most dangerous biological weapons.

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Netflix to Bow ‘Resident Evil: Infinite Darkness’ Anime Series Based on Games

Netflix in 2021 will release an original anime series, “Resident Evil: Infinite Darkness,” based on the “Resident Evil” games.

The horror-action series, centered on the stories of the two popular characters, Leon S. Kennedy and Claire Redfield, will be produced and supervised by Capcom’s Hiroyuki Kobayashi, who is responsible for bringing out numerous titles in the “Resident Evil” series.

TMS Entertainment, which has birthed various anime series, will produce the series, while Quebico, led by Kei Miyamoto, the producer of Resident Evil: Vendetta, will be in charge of 3DCG animation production.

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With the first game released in 1996 on Sony PlayStation, the “Resident Evil” series is nearing its 25th anniversary.

Futuresource: Video Games Entering ‘Netflix’ Moment

With the pending arrival of new-generation video game consoles from Sony PlayStation and Microsoft Xbox, the transition toward online gaming, including subscription-based platforms, is heating up.

New data from Futuresource Consulting said worldwide consumer spending on game software, hardware and accessories reached $194 billion in 2019 — excluding another $17 billion spent on in-game ads, video streaming sites and e-sports.

Specifically, London-based Futuresource contends gamers will increasingly switch to subscription-based platforms such as Fortnite, PlayStation Plus, Google Stadia, GeForce Now and Xbox Live Gold and Game Pass.

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“Gaming may be on the verge of having its Netflix moment,” analyst Morris Garrard said in a statement. “We’re seeing it transition from one-shot content sales into all-you-can-eat subscription-based content access.”

Garrard said widespread adoption and consumer spend on subscription-based games will drive platform adoption.

“As these platforms gain more extensive content catalogs, consumer traction will increase, accelerating the transition towards all-you-can-eat gaming subscription services,” he said.

Software, which includes packaged media and digital game titles, remains the “golden child” of gaming, generating $143 billion in revenue in 2019, or 74% of total gaming spend across software, hardware and accessories, according to Futuresource.

As increases in connectivity and on-device storage have facilitated a move to digital content, software monetization strategies have evolved accordingly.

“Games publishers have adopted innovative ways to profit from content, from the sale of downloadable content, to in-game sponsored advertising [i.e. Wordscapes] and wider entertainment opportunities such as in-game concerts and e-sports,” Garrard said. “All of these additional revenue streams are helping extend the lifecycle and increase the profitability of a title beyond the initial purchase.”

Another Investor Wants Say on GameStop Restructuring; Shares Up 20% in Pre-Market Trading

Everyone wants a seat on a resurgence bandwagon. After Sony and Microsoft disclosed winter release dates and pricing for next generation PlayStation 5 and Xbox Series X and Series S video game consoles, interest in retail chain GameStop and how it’s run is booming — at least afterhours.

RC Ventures Sept. 21 increased its stake in GameStop to 9.9% from 9.6%, and said it had met with the retailer’s CEO George Sherman and senior management. No doubt Ryan Cohen (“RC”) wants a seat at the table entering the winter holiday retail season. And when Hestia Capital Partners and Permit Capital Enterprise Fund, who own about 7.3% of the video game retailer’s outstanding shares, joined the GameStop board in June, Cohen’s desire makes sense.

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And the market apparently agrees, sending GameStop shares up more than 20% in aftermarket trading to $10.54 per share. That followed a general retail decline yesterday that saw the chain’s shares close down 7.6% at $8.75 per share.

Regardless, GameStop shares are up 100% over the past two months with the chain realizing $200 million in cost restructuring in 2020 — notable achievements in a market jittery as it sees GameStop as a relic of the past when consumers were going to physical stores to buy, sell, and trade video games.

Purnha Investment Research contends investors and consumers may be ignoring the power of GameStop’s brand in the gaming space. It says that after years of restructuring, the GME stock is trading at valuations cheaper than other restructuring plays in the retail space.

“What the market has yet to acknowledge is that all is still not lost,” Purnha wrote in a Sept. 22 note.

Indeed, the firm notes that GameStop has been able to fulfill 70% of all online purchases picked up at local stores — even within an hour or two. With the new consoles have a disk drive, they continue to cater to a gamer playing both physical and digital software — at least for the next several years.

“Retail stores play a strategically important role for console manufacturers — be it for brand building, maintaining the relationship with hardcore users and collectors, educating customers, or sale of accessories,” Purnha wrote.

GameStop Partners With ‘Buy Now, Pay Later’ Company Ahead of Expected Winter Video Game Market Surge

With Microsoft and Sony unveiling pricing and release dates (Nov. 10 and 12, respectively) for next-generation video game consoles and software, GameStop has partnered with QuadPay to offer consumers an in-house “buy now, pay later” financing option that incorporates their existing credit or debit cards.

GameStop is seeking to build out the capabilities and services of its digital and in-store ecosystem by offering gamers a variety of payment options to more-affordably purchase video games and other merchandise this holiday season.

QuadPay lets consumers split any purchase into four interest-free installments paid over six weeks using their existing credit card or debit card when they shop online or in-store. It is available at GameStop’s retail stores and at GameStop.com.

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“As we continue to find new ways to expand the purchasing choices for our customers, we are pleased to partner with QuadPay to offer a new flexible payment option that will enable customers to affordably purchase the products they want from us this holiday season,” Chris Homeister, chief merchandising officer for GameStop, said in a statement.

The financing option comes as Microsoft reintroduced its Xbox All Access, enabling consumers to split the cost of a console purchase for $24.99 monthly over 24 months.

GameStop joins QuadPay’s network of more than 4,700 integrated merchants and global retailers. Within days of implementing their system, QuadPay claims merchants typically see an increased conversion rate up to 20%, and average order values increase up to 60%.

Sony PlayStation 5 Bowing Nov. 12 Priced at $500; Digital Edition at $400

Sony Interactive Entertainment Sept. 16 disclosed the launch date and pricing for its next-edition PlayStation 5 video game console. The PS5 launches Nov. 12 priced at $500 for a unit capable of playing 4K UHD Blu-ray and standard Blu-ray Disc content. A digital-only PS5 without disc capacity will sell for $400. Sony disclosed the details in a special webcast.

The pricing and release date comes after rival Microsoft said it would release the new-edition Xbox Series X and Series S on Nov. 10 priced at $500 and $300, respectively.

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The PS5 will feature 4K-compatible games playable on a 4K UHD TV, play so-called “ray tracing,” that offers true-to-life shadows and reflections on certain Sony games; support for 120fps and 120Hz games; HDR resolution; and future-proofed for 8K resolution.

GameStop Narrows Q2 Loss; Sales Fall 27%

Video game retailer GameStop Sept. 9 reported a second-quarter (ended Aug. 1) loss of $111.3 million, which was a significant improvement from a loss of $415.3 million during the previous-year period. Revenue fell 22% to $942 million, from $1.3 billion a year ago.

The world’s largest video game brick-and-mortar retailer said the coronavirus pandemic helped reduce some operating costs while propelling the chain’s e-commerce sales. The quarter saw an 800% increase in global online sales, and a $133.7 million reduction in SG&A expenses — underscored by a 50% reduction in inventory costs and $181.9 million in free cash flow for the quarter.

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“We believe the actions we are taking to optimize the core operations of our business by increasing efficiencies and creating a frictionless digital ecosystem to serve our customers, wherever and whenever they choose to shop, are enabling us to navigate the COVID-19 environment, while positioning us well for the launch of the next generation of consoles,” CEO George Sherman said in a statement.

The CEO said the quarterly revenue decline was due to the impact of operating during the last few months of a seven-year-long current-generation console cycle and the subsequent limited availability of hardware and accessories; a 13% reduction in total store operating days due to store closures driven by the pandemic; and a 10% reduction in the store base, as part of the company’s “de-densification” strategy, partially offset by almost 40% of closed store sales recaptured through the transfer to neighboring locations and online, leading to improved cash flow.

Comparable store sales declined 12.7%, adjusting for fewer store operating days due to store closures as a result of the global COVID-19 pandemic.

“While the ongoing pandemic continues to create a somewhat uncertain environment in the short term, we are very pleased by the consumer response at GameStop to the few recent video game product introductions and we believe we are ready, with expanded service and payment options, to handle the expected surge in demand and participate in a very significant way in the console launches later this year,” Sherman said.

Michael Pachter, media analyst with Wedbush Securities in Los Angeles, said GameStop’s top-line results were ahead of management’s initial expectations driven by heightened ongoing consumer demand during the pandemic, along with particular strength from the chain’s e-commerce channel.

“We believe management is executing nearly flawlessly in what had previously appeared to be a hopeless situation,” Pachter wrote in a Sept. 10 note.

Futuresource: COVID-19 Had Positive Impact on Gaming

New data from Futuresource Consulting found by the end of this year, the gaming software market will be worth $154 billion, and gaming hardware will end the year at $15 billion, with 51 million consoles shipped.

Much of that growth will be digital as next-generation game consoles will offer an all-digital version, devoid of a disc drive, spurring further digitalization of gaming content access. Indeed, Microsoft just revealed that the Xbox Series S will cost $299, and $499 for the Xbox Series X when they bow on Nov. 10 in the United States.

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In the meantime, Nintendo is expected to have a strong year due to less competition from Sony and Microsoft in the first three fiscal quarters, as gamers await the PS5 and Xbox Series X.

“There has been a strong response to the title Animal Crossing: New Horizons, and its timely launch at the beginning of the pandemic,” analyst James Manning Smith wrote in a post. “The title has found success through its appeal across demographics, appealing to young gamers and families, as well as the franchise’s nostalgic older fanbase, offering the perfect escape from a difficult year.”

Futuresource said that beyond next-generation consoles, mobile gaming has remained the fastest growing segment of gaming software spending, largely due to rapid growth in emerging regions. This year, mobile gaming will account for 50% of total gaming software spend, driven by the coronavirus pandemic and social distancing. It is forecast to increase its market share to 52% by 2024 due to its popularity and accessibility in emerging markets.