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As WP's senior editor, I edit review and preview articles, attempt to keep up with the frantic pace of Rainier's news posts, and keep our reviewers on deadline, which is akin to herding cats. When I have a moment to myself and don't have my nose in a book, I like to play action/RPG, adventure and platforming games...

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Game Analysts See Blockbuster Months Ahead

by Judy on July 12, 2004 @ 3:20 p.m. PDT

The U.S. video game industry saved its best for last this year. When video game publishers report quarterly results in the weeks ahead, the focus for investors and analysts will be on a coming slate of blockbuster games that need to live up to their advance hype for the industry to avoid falling short of the still heady expectations for sales growth.

Starting in early August, consumers will see the release of some of the most hyped and most eagerly anticipated games ever: "Doom III," "Halo 2," "Grand Theft Auto: San Andreas," "Metroid Prime 2" and "Metal Gear Solid 3," with the possible releases of "Half-Life 2" and "Gran Turismo 4" as well.

Banc of America Securities analyst Gary Cooper called the games a "Murderers' Row" of blockbusters, and suggested last week that some game publishers simply get out of the way and postpone certain titles to avoid the bruising competition.

"The reality is that the second half of 2004 should witness the largest sales of video games in any six-month period in the history of the video game industry," Cooper wrote in a report. "There is no mistaking the potential for solid sales and profits and solid business fundamentals of the video game industry right now."

The new games have enviable pedigrees. The last two "Grand Theft Auto" games were each No. 1 in their year of release; the original "Halo" is the best-selling game ever for Microsoft Corp.'s Xbox; and the last "Gran Turismo" is thought to be the top seller of all time for the dominant gaming console, Sony Corp.'s PlayStation 2.

"Doom III" comes from a line credited with creating the modern PC shooter-game genre, "Half-Life 2" follows on a game still being played actively six years after its release, and "Metroid Prime 2" and "Metal Gear Solid 3" are the latest entries in historic gaming franchises.

THQ, ACTIVISION TOP JUNE

But before looking for holiday riches, the financial community has to get through quarterly earnings season, expected to be a relatively quiet one for the games business.

Driven by "Spider-Man 2" and "Shrek 2," Activision Inc. is widely expected to have the best chance to beat expectations for the June quarter. Wedbush Morgan Securities analyst Michael Pachter said this week Activision should beat the Wall Street consensus for earnings of 5 cents per share by at least 2 cents.

Others have also tipped THQ Inc. for the possibility of a smaller-than-expected loss in the quarter, on strong sales of the well-received military game "Full Spectrum Warrior" and regular steady performance of its games for kids.

For the most part, though, investors were uninspired with game stocks over the last few months.

Aside from THQ, which gained 13 percent in the quarter, and Midway Games Inc., which surged 58 percent as it was taken over by Sumner Redstone in May, most game publishing and retail stocks were either flat or down in the last three months. (Redstone, the chairman and chief executive of Viacom Inc., individually and through his company, National Amusements, holds close to 80 percent of Midway's outstanding shares, a recent regulatory filing shows.)

But what Activision, THQ, industry titan Electronic Arts Inc. and others did in the last three months is not expected to be nearly as important as what they and others will do through the rest of this year.

"In terms of just name cachet, it's one of the biggest years I can remember," said John Davison, editorial director of the Ziff-Davis Media Game Group, which publishes a number of leading game magazines and Web sites.

"I've been doing this for 14 years and I don't remember that many AAA games coming out, essentially in a six-week period, ever," he said.

That surge will give the industry a shot in the arm, he said, one it needs, considering that analysts have said it will be increasingly hard for the business to meet growth forecasts of 8 percent to 10 percent for the year -- absent a major second half.

"What I hope is it's going to start moving hardware again," Davison said. "There's nothing that's really been driving growth yet this year."

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