Analyst Doubts Effectiveness Of Annualized Game Franchises

In a new research note, Wedbush Morgan analyst Michael Pachter questions the conventional wisdom among some publishers that major franchises should see a new release every year. With the exception of sports titles, and games like Call of Duty that are driven by the network effects of online multiplayer, Pachter said he thinks most franchises can't sustain an annual release. "We... think that a balance between the EA approach (games every two years) and the Take-Two approach (games every six years) is appropriate," Pachter wrote, noting that there is value in not waiting too long between even quality releases. "We still think that if Take-Two were able to deliver its key franchises every three or four years instead of every five or six, its share price would appreciate dramatically," he continued. Across the industry, Pachter noted game publisher stocks performed much worse than the market overall in June, driven by a steep 18 percent drop in Nintendo stock following the E3 unveiling of the Wii U. Nintendo's performance will likely continue to decline, Pachter said, as the company starts splitting a smartphone-shrunken portable market with Sony and its PlayStation Vita. Pachter also addressed the rumors of an impending Zynga IPO, saying a rumored valuation of between $15 and $20 billion for the company "may be defensible" despite being "more than the enterprise values of Activision, Electronic Arts, Majesco, THQ, TakeTwo and Ubisoft combined."