DFC Intelligence  

Press Release


Date: February 11, 2003
Contact: David Cole
(858) 780-9680

Video Game Companies See Increase in Revenue/Income According to New DFC Intelligence Report

San Diego, CA -- February 11, 2003

Market research firm DFC Intelligence announced the release of a new 600 page research report on the 19 leading companies in the video game and PC game industry.  The report, Market Leaders in the Video Game and Interactive Entertainment Industry, analyzes each publisher’s history, financial performance, the strengths/weaknesses of their corporate strategy, product lineup, development teams, marketing and distribution skills and future potential.

The good news for the video game industry was 35% aggregate revenue growth for the past fiscal year.   Furthermore, aggregate operating income in fiscal 2002 was 11.5% of revenue compared with an aggregate loss in fiscal 2001.  However, the report notes that these gains have not translated into stock price increases.  According to DFC Intelligence, the average video game company’s stock was down 51% from January 2000 to January 2003.

DFC Intelligence claims that there is a significant difference in the prospects of each of the companies in the interactive entertainment industry.  The report divides the companies into four categories.  The first category consists of the four market leaders: Electronic Arts, Microsoft, Nintendo and Sony.  These are the dominant companies in the industry. 

The report notes that in the past five years, Sony has emerged as the leading force in the video game industry.  From fiscal 1995 to fiscal 2002, Sony has reported $36 billion in revenue from video games, compared with $32 billion for Nintendo.  On the other hand, Nintendo has reported significantly higher operating income.  Nevertheless, the momentum is clearly on Sony’s side.  Nintendo has been consistently profitable, but their revenue has not significantly grown in the past ten years.  According to DFC president David Cole, “Sony has had a very strategic focus, and their willingness to take a short-term loss has given them a long-term leadership position.” 

The second category of companies include the Japanese-based companies that have their roots in the arcade business: Capcom, Konami, Namco and Sega.  These companies are faced with the problems of a declining arcade business and a slow Japanese economy.  Their biggest challenge will be expanding on an international basis.  According to Cole, “the Japanese arcade companies have some of the best developers and game assets in the world, but they have a poor track record of expanding into the U.S. and Europe.  These companies could be much larger if they put a major focus on international expansion.”

The third category of companies includes Activision, Take-Two Interactive and THQ.  These are companies that have experienced strong growth on the strength of one or two very successful product lines.  The challenge for these companies is taking the earnings from their hit product line(s) and building a consistent, dependable revenue stream.

The final group consists of the European companies that have grown rapidly through expansion: Eidos Interactive, Infogrames, Ubi Soft and Vivendi Universal Games.  These companies have large product lines but face the challenging tasks of absorbing acquisitions, managing debt and building up a solid marketing infrastructure outside Europe. 

DFC Intelligence is a research firm focused on interactive and digital entertainment. For more information contact DFC at 858-780-9680 or go to the DFC web site at www.dfcint.com.

Contact: David Cole

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