Story sourced from Thomson Reuters
By Liana B. Baker
Want to know why video game stocks pop or drop? Check the reviews. For years, investors have turned to video game reviews to help make buy or sell decisions, moving the share prices of some video game companies higher or lower. They consult the website Metacritic, which tracks a large amount of reviews and comes up with an average score, as well as reviews from top video game outlets such as News Corp’s IGN.com and GameStop Corp’s Game Informer. And with the holiday shopping season approaching, when companies in the $64 billion video game industry generate the bulk of their sales and earnings, investors will be scouring reviews more closely than usual.
“The review scores are a first indicator of how a game will perform commercially,” said Jesse Divnich, a consultant and analyst for EEDAR, a research firm focused on the video game industry. “Investors will keep a close eye on them to measure potential success of a game.”
Shares of Electronic Arts fell 6 per cent last October after review scores for Medal of Honor, a military game in which EA had invested millions of dollars, came in below rival shooter games such as Microsoft’s Halo and Activision Blizzard’s, Call of Duty.
Just as negative reviews can harm video game stocks, positive reviews can boost them. Shares of Take-Two Interactive surged 10 per cent over three sessions and reached a 52-week high in May after its crime-solving game, L.A. Noire, received glowing reviews and achieved a high score on Metacritic.
One of the reasons why video game reviews carry so much weight with investors is because avid gamers tend to rely on them to help make purchasing decisions.