MORE BAD NEWS FOR GAMECUBE AS EIDOS DROPS SUPPORT

Although NOA executives have been saying for months that company was taking steps to improve its relationship with 3rd- party publishers, Eidos decision followed similar move by Acclaim Entertainment in June. Acclaim announced it was reducing its support for GameCube to games already in development and older, established franchises and spokesman said “we don’t foresee launching any new brands on GameCube” (CED June 25 p6). More troublesome news for Nintendo actually came month later from THQ CEO Brian Farrell, who told analysts in conference call that his company was “not developing any sort of exclusive titles for GameCube at this point in time” (CED July 28 p4). THQ has been one of Nintendo’s strongest 3rd-party publishing partners and it continues to support Game Boy Advance (GBA) handheld platform aggressively. Various other publishers over last few months have said they were scaling back number of SKUs they would be releasing on GameCube.

Comments by Eidos’s McGarvey when company announced its preliminary fiscal year results last week (CED Sept 5 p4) suggested it viewed current console market as 2-horse race between Microsoft’s Xbox and Sony’s PS2. McGarvey said “our view is that we don’t see the new hardware systems until calendar 2006” because “we think both Sony and Microsoft have a vested interest in continuing to lengthen the cycle, to take advantage of their investment.”

Although Nintendo executives have insisted in recent months that company already is working on next console and has no plan to quit console arena as Sega did, some industry observers remain unconvinced that company actually will hang around for another cycle.

Nevertheless, most U.S. analysts have yet to paint GameCube situation as all gloom and doom. For example, RBC Capital Markets analyst Stewart Halpern said Thurs. that Eidos was “not a big player” for GameCube to begin with so it was “minor loss” that publisher no longer would support it. Eidos said last week that 27 new game SKUs it shipped in fiscal year ended June 30 included 7 for PS2, 5 for Xbox and rest mostly for PC.

NOA Senior Vp-Sales & Mktg. George Harrison, meanwhile, downplayed significance of losing Eidos support Thurs., saying: “As we move into our critical holiday season, the Nintendo GameCube library will expand to 320 games by year-end, the biggest support for any Nintendo console ever. And a vast majority of those titles are from 3rd-party developers. Some of the biggest developers in the industry, including Electronic Arts, Lucas Arts and Capcom are all on board.” Offering examples, he said: “Electronic Arts is developing a number of feature-exclusive games that take advantage of the connectivity between Nintendo GameCube and Game Boy Advance, such as Madden NFL 2004, Tiger Woods PGA 2004 and Harry Potter: Quidditch World Cup. Capcom has created 2 Nintendo GameCube-exclusive titles that have received good initial reviews: Viewtiful Joe and P.N.03. And LucasArts has a GameCube-exclusive game -- Star Wars Rogue Squadron III: Rebel Strike. Soul Calibur II was recently released by Namco for all 3 home consoles and the Nintendo GameCube version is out-selling the PS2 and Xbox versions. We also understand that developers sometimes need to make difficult financial decisions, but we also know that both Eidos and Acclaim have said they are willing to develop for the Nintendo GameCube if the right opportunity availed itself.”

It also can be argued that of 3 console makers, Nintendo doesn’t need 3rd-party publishers to extent that its competitors do because of strong franchises such as Donkey Kong, Mario, Pokemon and Zelda for which Nintendo itself develops games.

Although Nintendo said last month that GBA sales boosted its results in first quarter, it admitted that GameCube sales continued to disappoint even though its installed base remained far ahead of Xbox in Japan (CED Aug 7 p5). Nintendo also said it had stopped producing additional consoles on temporary basis until retail channel was cleaned out of excess inventory. But sales data for Japanese market compiled by Media Create (MC) for week ended Aug. 31 offered some upbeat news for Nintendo, saying GameCube sales topped even PS2 in week with 27.79% market share vs. PS2’s 27.58% thanks to new bundle offering (CED Sept 10 p4).

Separately, THQ said Thurs. it had signed exclusive, multititle GBA co-publishing deal with Sega Europe (terms not disclosed) that expanded companies’ existing relationship to international territories. As part of deal, THQ said it would co-publish 3 titles based on Sonic the Hedgehog franchise -- Sonic Pinball Party, Sonic Battle and Sonic Advance 3 -- as well as Shining Soul II and Shining Force, across Europe, Australia and other international territories starting with Sonic Pinball Party this winter. THQ Senior Vp-International Publishing Timothy Walsh said: “Our 2 Sonic-branded releases, Sonic Advance and Sonic Advance 2, enjoyed sales of more than one million units at retail in North America” according to NPD Funworld sales data. Sega Europe Exec. Vp-Sales & Mktg. Mike Sherlock said: “This partnership not only helps us realize our commitment to expand our overseas presence, but also gives us the opportunity to further strengthen the Sega brand name in the international marketplace.”