This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Video Game Firms Can't Win With Executives

SAN FRANCISCO -- The video-games industry grew a blistering 43% last year as sales reached $17.9 billion, bolstered in large part by eagerly anticipated titles and the arrival of the latest generation of consoles.

Despite a breakout year, a number of senior video-game executives in the past four months have been forced out or had to step down.

Games publisher THQ (THQI) was the first to see an executive go. On Nov. 11, CFO Edward Zinser resigned by "mutual agreement" after three years in the post.

Two days later, Atari (ATAR), a smaller video-games company that has been in danger of getting delisted from the Nasdaq, saw its CEO David Pierce leave.

In February, Phil Harrison, head of worldwide studios for Sony Computer Entertainment, stepped down.

This month, publisher Midway's (MWY) CEO David Zucker found himself in the firing line.

His exit was followed by an announcement that Warren Jenson, CFO of Electronic Arts (ERTS), would leave his position at the end of the month.

While each company cited its own reason for the change, industry watchers say a common thread behind the executive shuffle is the inability of the companies to capitalize on the industry's tremendous success last year.

The actions underscore the point that senior game executives are being held accountable for poor company and stock performance as investors' patience runs thin with underperforming companies in the highly competitive sector.

"Each company took a right when the road was bending left," says Jesse Divnich, an analyst with The simExchange, an online fantasy stock market for video games.

Michael Pachter, an analyst with Wedbush Morgan, agrees. "The pressure is big if you don't succeed," he says. "Investors are less patient with companies that don't go up in value."

The companies' missteps have been glaring in a year when the industry saw explosive growth.

Nintendo's Wii console and its handheld gaming device, DS, turned into one of the industry's biggest catalysts, creating a lucrative casual gaming audience that preferred easy, fun games to more drawn-out, complicated story lines.

By contrast, Midway and THQ failed to have any big blockbusters. And EA saw itself bested by its rival Activision, which moved to the top of the pack with its hit games.

"EA and Midway focused more on titles within ultra-competitive genres such as action and first-person, while THQ simply had no sense of direction and failed to appeal to gamers at all ends of the market. Sony's (SNE) failure is similar," says Divnich.

Despite being the clear market leader with its older PlayStation 2 console, Sony's latest console -- PlayStation 3 -- trails its smaller rival Nintendo by a wide margin.

Similarly, games publisher THQ saw its market share slip significantly in 2007 after the company delivered two duds: Stuntman: Ignition and Juiced 2. The company didn't have a single title in the top 10 selling games in 2007, according to the NPD group.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,055.87 -116.81 -0.68%
S&P 500 1,982.77 -11.52 -0.58%
NASDAQ 4,508.6880 -19.0010 -0.42%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs