Winners and Losers

CFOs in the video game industry offer others tips on how to adapt to rapid changes.

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For some CFOs, the back-to-school season means one thing: evenings at home scolding their kids for spending too much time playing video games when they should be doing their homework. As anyone with teenagers knows, the ensuing confrontations are worthy of the epic showdowns that make these games so wildly popular.

But that’s not the reason why this month’s cover story, “The Players,” profiles the video game industry. It’s a booming global business, with total annual revenue expected to increase from around $48 billion today to nearly $70 billion by 2012. What’s striking about this young industry is the speed at which the leading video game companies have to adapt, rapidly jettisoning strategies that aren’t working as consumer demographics change practically overnight. As CFOs in the business know, survival requires continuously raising the stakes. Currently that includes industry-redefining consolidation, as Thomas Tippl, CFO of Activision, explained to us while adding the finishing touches to a major merger with Vivendi’s Blizzard, which will create one of the largest video game companies in the world.

It’s not only other game companies that will want to replicate these tactics soon. The rapid deterioration of the credit markets are catching many off-guard, including those appearing at the bottom of our new scorecard of credit default risk. Prepared — as in previous years — for CFO Europe by Moody’s KMV, the research starts in the “Credit Check” article. While the median credit quality of Europe’s largest non-financial debt issuers is more or less the same as when market conditions were more benign three years ago, raising capital is getting tougher by the day and investor confidence is increasingly fragile. The upshot is that companies which appear to be in good shape today may be heading for trouble. Making sure that it’s not “game over” for your company certainly won’t be child’s play.

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