Electronic Arts Rising on Medal of Honor Pre-orders – But Should It?

by Michael Comeau on September 30, 2010

Electronic (ERTS) is rallying today today on the announcement that the new Medal of Honor game just hit a record record for pre-orders.

I don’t regard this as some kind of crowning achievement though, for the simple reason that the last MoH game, Medal of Honor: Airbone was an absolute dog and released at the same time as Call of Duty: Modern Warfare:

So EA is bragging about pre-orders of a heavily-marketed game that has insanely easy comparables. It’s not much of an achievement to outsell 5+ year old games that were made when the industry was smaller and the console FPS market wasn’t the juggernaut it is today.

But let’s see what’s going on in Amazon’s (AMZN) video-game department:

1) Both the PS3 and Xbox 360 versions of Medal of Honor are in the top-10 selling items list.

2) Activision’s ATVI) rival title Call of Duty: Black Ops is a bit further down the list, but that’s not a big deal because of its November 9th release date. Medal of Honor will be out a month earlier on October 12th.

So overall, Medal of Honor looks like it is should do pretty well out of the gate.

But would I buy EA’s stock on that prospect?

No.

Here’s why:

1) Video-game sales tend to be front-end loaded – meaning bigsales come when a game is first released before tailing off. (there are some exceptions, like Nintendo’s Mario games)

Well, I think Medal of Honor sales will absolutely collapse when Black Ops is released – so there’s basically a one-month window for EA. Come November, Medal of Honor will likely be discounted to $50 or less.

2) The video-game industry still stinks. I can’t remember a month in the past two years when video-game industry sales didn’t disappoint. So even if MoH does well, we still have to worry about the rest of EA’s portfolio.

And remember, the dominant trend in the video-game software industry remains the rise of free or cheap apps – not expensive packaged software.

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