Disturbance in the force? GameStop disses ‘Star Wars’ – CNBC
Great, expectations are, for the coming flood of “Star Wars” films, games and merchandise. In December, “Star Wars: The Force Awakens” is expected to do nearly $200 million in box office sales on its opening weekend. And ahead of the release, Lucasfilm (purchased by The Walt Disney Co. for $4 billion in 2012) has released a game with EA entitled “Star Wars Battlefront.”
Heady expectations for the game are one reason why EA shares have risen 45 percent this year. But there may be a disturbance in the force.
On Monday morning, videogame retailer GameStop reported earnings that missed estimates. And when management was asked specifically about the “Star Wars” launch, chief operating officer Tony Bartel admitted: “We had high expectations that diminished somewhat as it got closer, and then it failed to hit those lowered expectations.”
EA shares fell sharply following those remarks.
A bit later in the call, Bartel added bullish color to his comments, saying that “while ‘Star Wars’ is off to a bit of a slow start, we do believe it’s going to rally very strong as we get closer to the movie.”
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For Michael Pachter, who covers both EA and GameStop for Wedbush, the retailer’s lack of faith is a bit disturbing.
The real problem, Pachter says, is that the retailer doesn’t understand the way in which “Star Wars Battlefront” sales are likely to differ from sales of other big games.
“I actually think GameStop managements’ expectations were too high for ‘Star Wars’ because they failed to anticipate how big of a gift that game will be,” the analyst told CNBC.
When a “Call of Duty” game is released in November, it will see nearly half of its sales in that month, and another half in December. But the mix for “Star Wars Battlefront” should be substantially different â€” because unlike a “Call of Duty,” “Star Wars Battlefront” will largely be a gift purchase rather than a purchase for self-consumption, Pachter said.
The fact that after a few days, “Star Wars” appears to be missing expectations is likely a reflection of imprecise forecasting, the analyst said. It may simply sell differently than the hits GameStop has become accustomed to.
“I think the GameStop guys fail to consider that ‘Star Wars’ is a gift game. Grandma is going to give it to little Johnny, period,” Pachter said.
EA shares are down a further 2 percent on Tuesday.
Neither EA nor GameStop immediately responded to requests for comment.