What You Need to Know About Video Games in September

By Danny Favela - September 10, 2012 | Tickers: ATVI, EA, FB, MSFT, NTDOY.PK | 0 Comments

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Ye Olde Game Investors:

Things are finally cooling down from the summer heat.  Don't complain about a calm scene, though.  This boredom is the perfect opportunity to gauge excitement to come! 

With a strong contender in the MMO space, a new title from the former undisputed champion, and a silent -- and thus cheap! -- powerhouse making an announcement this month, there's lots to prepare for during this month's short respite.

Highlights and Replays

If you saw last month's article and know your way around the Korean stock market, congratulations on your newfound monies courtesy of NCSoft:  036570)!   

I joined you on my own advice.  In the beta, you and I saw player enthusiasm, service stability, and solid features that make Guild Wars 2 an obviously strong title with unprecedented quality in the MMO market.  The same can be said for their launch, which was seemingly flawless throughout the "head start" days leading up to the official release date.

Boasting significant numbers, NCSoft's ArenaNet is playing it cool with their community team taking player concerns in stride through popular mediums they know and love.  Their hybrid monetization model (the "pay-once, free thereafter" scheme I clued you in on last month) ensures that no player is ever turned away for any reason other than quality.  The optional microtransactions mean a dev team happily creating more goodies to continuously engage with players while keeping morale as high as the income.

This success is not going away anytime soon.  Why, it would take the strength of a bear -- of a panda, to be exact! -- to even try to challenge this growing leader.

Clutch Play: Literally Impossible for WoW to Boast Less Than 1.2 Million Subscribers

Enter Mists of Pandaria, the latest World of Warcraft expansion from Activision Blizzard (NASDAQ: ATVI).  Their launch is 18 days away.  The typical cycle of a release will bring back numbers to the service, but what's interesting is the smart cushion Blizzard has allowed itself.

1.2 million players took advantage of the year-long WoW pass earlier this year, available as a limited-time deal with Diablo III.  A "year long" means "well past the next quarter."  When Diablo III, World of Warcraft, and Skylanders Spyro's Adventure are your biggest earners, it's nice to say that one of those biggest thirds will never be seen as a failure when compared to competitors like Star Wars: The Old Republic ​from Electronic Arts (NASDAQ: EA).

Blizzard has smart people.  Their kind of talent will now have played Guild Wars 2 and they want to do just as flawlessly when launching WoW: MoP.  The two titles are a fantastic study in user interaction design as a juxtaposition to EA's Star Wars: The Old Republic.  Logging in -- right now, at the time of this writing -- gives confusing messages about playing for free, but leads to subscription plans.  There are no signs of a free-to-play date.

Don't hold your breath for Star Wars: The Old Republic numbers this month.

It would be a disservice not to mention Activision Blizzard's Skylanders Spyro's Adventure sequel, Skylanders Giants, planned for October.  The buzz might feel like Pokemon fanaticism from a few years back -- or even up to now, for some of us.  With that, September should see a nice boost in the average price for ATVI stock, especially if you took advantage of August's $11.40 low.

The Sleeping Giant: Nintendo Has Something to Say

Some game designers say: never count Nintendo out.  In terms of business, consider this: Has there ever been a holiday shopping season without a Nintendo option?

Count on Santa's list getting longer with whatever Nintendo (NASDAQOTH: NTDOY.PK) announces in six days.  Whether it's the new Wii-U "console," a new 3DS, or something slapped with a Legend of Zelda logo, September may be the perfect, boring time to capitalize on a historically low stock.    

There's a reason Nintendo's outlook is not bleak, even if their relentless inventing may seem quirky to the rest of the industry at the time of announcement.  It's the same reason players will return to the next World of Warcraft expansion, it's the foundation Guild Wars 2 is building for NCSoft's profit, and it's what drives me to keep trying to log into Star Wars: The Old Republic despite my great hatred for many of their decisions.

Game Rule of the Month

Tech companies outside of the video game space are also discovering that community is at the root of modern success.  There are plenty of complaints about Facebook's feature decisions, but Facebook is in no real danger so long as there are friends whose complaints can be complained about.

In video games, you need to identify just how strongly a video game product or service ties players together.  Get to know which space you want to invest in so you don't misplace criteria.

1. Communities by Company

Blizzard Entertainment is one of the best examples for creating a community of gamers by relating to them directly.  Their reputation as gamers-making-games-for-gamers builds a community of loyal players -- players that will return for the next expansion or title.  Similarly, Nintendo has built its brand in such a way that it has a supportive following.  Anyone that played the original Nintendo Entertainment System likely felt a hint of sadness when hearing that Nintendo Power's issue in December will be its last.

2. Communities by Service

This is where you should start drawing the distinction between the aforementioned companies and companies like Microsoft (NASDAQ: MSFT) and Facebook (NASDAQ: FB).

Microsoft's communities are built around the XBox LIVE online service.  Players meet on a session-by-session basis, within particular products, as governed by the network system itself.  The amount of vitriol spewed from players' mouths could make sailors weep; this is not a community built on kindness, but instead is a kinship of frequently changing anonymity and particular behavior governed by the title being played.

Facebook games operate in the same manner.  The titles themselves feed on the nature of the network on which they are played.  Pigs given to your farm are plentiful because they came from your many connections.  Whether it's a coin, aid to defeat a dragon, or a new mafia member, the success of each title depends on the nature of the network.

Understanding the way these communities operate within the service will reveal companies like Zynga, which had great successes from the mere copying of titles.  They applied that network strength to those copies, which naturally reinforced communities.

3. Communities by Product

Communities around the product are great for investors because they're so easy to identify.

Gamers happen to be extremely creative.  If you want to know whether a community for an MMO or particular console franchise is strong enough to bring in good sales in the future, simply type in the game's name into the art site, deviantart.

If you see plenty of hand-drawn pieces or people wearing costumes that remind you of the game's art, you have a winner on your hands.  There's a curiously true joke that your game has reached a respectable level if it has inspired fan art from the community.    

Determine the Winners

Some community managers are doing the work for you, telling you about the amazing murals Guild Wars 2 players are painting in their own bedrooms.  Follow them on Twitter and Reddit.  Look for the best Skylanders instructional video to find out that stores are selling out of toys, that customers are voraciously looking for more.

The best thing about communities in games is that they reinforce themselves.  They judge themselves by how many views or Likes they've gotten with a passion that matches most marketers paid to do the same. 

If you can find thousands of community works, prospective customers can too. That means more newcomers building an even larger community toward an even more successful stock.

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