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.