Vivendi Games’ Q1 earnings plunge

Period has difficult comparison with last year's Warcraft release

By Danny King -- Video Business, 5/14/2008

MAY 14 | Vivendi said today that its games unit’s first-quarter profit fell 53% from a year earlier, when it released the second version of its World of Warcraft franchise. The division helped pull the parent company’s earnings down 9.6% in the first quarter.

The games division’s earnings before interest, taxes and amortization was 50 million euros ($77.4 million), down from 107 million euros, a year earlier, Vivendi said. Sales for the division, which will be merged with Santa Monica, Calif.-based Activision to form the world’s largest games publisher, dropped 24% to 221 million euros.

A year ago, Vivendi’s Blizzard Entertainment released World of Warcraft: The Burning Crusade, which helped push the game’s worldwide subscriber base to 10.7 million from about 8.7 million a year ago, Vivendi said.

Among the so-called massively multi-player online games, Warcraft has a 62% market share, dwarfing the 7.5% share held by U.K.-based Jagex’s RuneScape, according to Web site MMOGChart.com.

Vivendi will release Warcraft’s next version, World of Warcraft: Wrath of the Lich King, during the second half of this year.

In December, Vivendi agreed to merge its games unit with Activision in a $9.85 billion transaction. The new company, to be called Activision Blizzard, would have revenue approaching $4 billion, leapfrogging Electronic Arts as the world’s largest games publisher. The European Union approved the merger last month.

Electronic Arts responded in February by making a $2 billion bid for Take-Two Interactive, whose Grand Theft Auto IV set one-day and first-week all-time records for videogames after its April 29 release. Take-Two shareholders have since rejected the bid, though Electronic Arts said in an earnings call yesterday that its offer still stands.

Last week, Activision said it had a fiscal fourth-quarter profit as revenue almost doubled to $602.4 million on its latest versions of Guitar Hero and Call of Duty.

Overall, Vivendi’s net income fell 9.6% to 697 million euros, with gains in its mobile, Internet and telecom businesses offset by the drop in games earnings. Vivendi’s revenue rose 5.2% to 5.28 billion euros.

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