Fickle consumers aren't playing by the rules of the game anymore. But that doesn't necessarily favour new players over old. Consider the circumstances of two game makers, Mattel and Zynga. The world's biggest toymaker and the online gaming firm come from different worlds but both share a common need to produce a steady parade of hits to grow sales.
The companies' shares moved in opposite directions after they announced fourth-quarter results. Mattel's shares fell more than 10 per cent after it reported sales slid six per cent from last year. Zynga's stock price, meanwhile, jumped more than 20 per cent after it said it planned to axe nearly a sixth of its existing workforce while splashing out more than half a billion dollars on UK-based NaturalMotion to shore up its push into mobile devices.
Like other consumer companies, 69-year-old Mattel is struggling to adjust to big shifts in shopping patterns. In a call with investors, it cited research showing foot traffic at US retail stores down as much as 15 per cent from last year during the run-up to Christmas. But the toymaker also made some bad bets. Despite investing "heavily" in ads and promotions, its products failed to inspire. As Chief Executive Bryan Stockton put it: "We just didn't sell enough Barbie dolls."
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Contrast that with loss-making Zynga, which is still trying to turn itself around after problems with new games crashed its shares in 2012. The Silicon Valley upstart led by Mark Pincus has yet to prove it can consistently produce hit properties, rather than just buy them at inflated prices. Zynga thinks cutting about 300 jobs can help it save up to $35 million before tax this year - roughly $115,000 per outgoing worker. But it's buying NaturalMotion's 260 employees for almost $2 million apiece. That should inspire concern, not renewed confidence.
The rules of the game business may be changing, but over the long-term, the winners may still be the same.
