The financial crisis and ArmA2/BIS

[MehMan 0]

Seeing how the world is currently not very well off financially I'm wondering how BIS is coping with the crisis? Is there any impact? Where do BIS get most of it's finances, do they borrow money like Midway Games or do they rely on sales?

Also are there any predicitons how the crisis might affect the sales of ArmA2? Some parts of the world seem to be doing well, despite the grim forecast, but what's the BI take on this?

[Deadfast 43]

Czech Republic was so far lucky to mostly avoid the crisis

[POTS 0]

Well, any company that saves and has good credit will do just fine. Unless the local government decides to bailout and cause inflation, then there money is devalued. So BIS is very luck right now, probably has good credit and wealth because of saving and VBS2. Lets hope there government doesn't devalue there currency through inflation.

[.kju 3244]

The core question is probably if as much as people as in the past

will (be able to) buy new hardware.

[Michael_Wittman 0]

The question is that the USD$ is falling dramatically wich will make the game price not very attractive for american casual gamers... I dont think we are going to see a devaluation in the Euro€

[gsleighter 0]

Price points for new games are falling, though, too, at least in the US. Fallout 3 was $40 dollars, Crysis Warhead was $30, I keep seeing new A-grade titles being released for the PC with these lower price points.

[sk3pt 0]

Crysis Warhead is more like an expansion pack...

[maxqubit 1]

... do they borrow money ...

Wasn't this the cause of the 'crises'? (spending money which you didn't have)

Anyway, i hope ArmA2 will see the light (on 360 too), and hopefully in 2009 i might add.

[lockjaw-65- 0]

Maybe it will sell more than expected because people will be looking for escapism and what better way to escape realities than engrossing yourself in a sim like this

[vilas 477]

i hope we will not have to buy new PC for new game and it will be working on PC from 2007, 2008

and i hope it will be working without problems on requirements listed on box without any problems, ctds...

there are parts of the world where new PC is really big financial problem, where PC parts and electronics are more expensive than in "rich countries" even for 15-20% (because of importers), thats why i hated so much Arma which was not working althought i had PC which fulfilled requirements (on 1 year credit)

crysis or not - i hope new PC won't be necessary

i cannot imagine buying new PC

[kavoven 4]

Seeing how the world is currently not very well off financially I'm wondering how BIS is coping with the crisis? Is there any impact? Where do BIS get most of it's finances, do they borrow money like Midway Games or do they rely on sales?

Also are there any predicitons how the crisis might affect the sales of ArmA2? Some parts of the world seem to be doing well, despite the grim forecast, but what's the BI take on this?

As far as I can see, BIS is a company that doesn't feel the direct impact at the moment, since they use the money they earned with OFP(Elite), ArmA and VBS. The sales-peaks of those games are quite some time ago and thats where the money comes from.

So they shouldn't need borrowing money at the moment.

Furthermore I think, that VBS is a not so small part in their income and I don't expect countrys which use VBS at the moment to cut their military budget in a way, that the military wouldn't have the money anymore for training soldiers...

[MontyVCB 0]

Its not an understatment in saying BIS/BIA have made a nice little earner with VBS1 & VBS2. They should be fine for the future.

[MehMan 0]

Well it depends on how much cash they get out of that, but remember, it splits two ways, it funds BIA and BIS. and the military sector can bring in only so much for two companies.

[Commando84 0]

I hope Bi sticks around, hopefully the industry and the world will get out of the whole crisis.

If I can I'll probavly buy 2 copies of Arma 2, depends on my financial situation next year when im moing to a new country to study and stuff.

[baddo 0]

Don't worry about it.

Life is too short for worrying about these sorts of things.

Just make sure that your own financial survival isn't dependant on things which 'melt' when there is a global financial crisis. Then it's pretty much out of your control so why worry about it.

[walker 0]

Hi all

Recession or Depression?

Financial Crisis such as as the current World Recession or possible Depression tend to affect large companies and those that are supply chain dependent most.

This is because of inherent complexity. With a complex business model the points of failure increase. Large companies fail unless they have prepared for the recession or are cash rich enough to invest their way out of the recession.

Small companies in a recession such as parts companies or software sub contractors tend to get hit worst as they have little clout and rely on others for their profits.

A small or medium sized company that is close to its customers and thus not reliant on others will survive better. Its fixed costs are smaller.

A shortened supply chain is key.

So what is your strategy?

If its a recesion large companies that are cash rich will be able to invest their way out of it, but not if it is a depression.

Those large companies that predicted the downturn and altered their company to deal with it will survive whether it is a recesion or depresion. They do this by reducing down to their core business and by having a business that reacts fast to the the smaller number of oportunities that finacial downturn engenders. Such companies are marked by short supply chain.

Large companise that are set for the downturn and are cash rich tend to thrive in a finacial chrisis.

BIS are medium size company and rely on a short suppy chain and can if needed reduce it to one link.

The fact BIS have been expanding their product range may indicate that they are cash rich. Certainly I have seen signs that they are able to invest in advertising new and existing products as well as expanding their development.

Competition

As always competition is important; is your sector of the market full of competitors?

In the case of BIS if you are talking about simulation, the only real possible competitor is Codemasters. We do not know yet because we do not know if Codemasters will release a game ala COD4 which would compete in the COD4 market (a very saturated market) or a simulation which is what BIS will release.

BIS's Military arm BIA is a government contract cash cow that makes money off existing development and while there are many specialised competitors in that environment none really compete in the same field. Most rely on market buyer ignorance and specialised fields, plus barriers to entry to protect their market. In truth most cannot produce a product of the same quality as VBS. Government contracts in the current climate are very good, any one else notice how many companies are trying to get government funding? Banks, Car manufacturers, infrastructure developers, err everybody?

Codemasters on the other hand has many competitors. Because its business model is to create many different games and compete against the other big developers in the game market. This competition drives down their margin. Codemasters has to support each game development team across a large market of products. This drives up their costs.

In the case of BIS little competition in its niche market means no major margin depressor.

Indications are that BIS is cash rich. This means that in a depressed advertising market, with advertising deals to be had; they should finally be able to advertise their product better this time.

Discretionary Spending

The other key factor is discretionary spending. A game is a descretionary spend. What you will find is that the games companies with a large number of mediocre products in a highly competitive market will fare worse. Much as Woolworth's have in the UK.

A further factor is quality. High quality products will still sell though with decreased numbers. As an example Toyota because it has recognised quality and reliability sells, but GM Ford and Chrysler do not.

What most people will do is spend on a known product rather than the copy. Since ArmA is the original and Codemasters product the copy, I leave you to guess the effect.

Advertising

In the past BIS and their Publishers have failed to advertise and BIS has had to rely on word of mouth advertising. It is good but cannot compete with a ten second TV advert at the start of a hit TV program.

All those big companies use TV advertising for a reason. They have lots of big expensive marketing people to analyse and tell them why it will make money. BIS can save itself some money by just copying an existing successful strategy.

Also business advertising is a legitimate business cost. If you are making a profit you are paying taxes. If you make no profit you do not pay taxes. Use your excess profits for advertising or give them to the tax man; which seems more sensible to you?

As a very rich businessman told me, never make a profit until you really have to.

Kind Regards walker

[Spetz 0]

with military contracts, they usually include maintenance and upgrade contracts, (expansions, patches etc.)

Also one way BIS could milk the military is 1-2 year liecenses for their software, most companies like norton do that with their software for each year.

Military Contracts are usually Jackpots for small to mid sized contractors, once u get the contract, the little fees increase, and slowly the companies make the contract worth more then they first were when tendered.

Most companies get away with a small increase, plus the sleazy lobbyists in the pentagon cover the tracks

[stakex 0]

Well as far as how well things are going, or will go for BIS in the coming months, can only be awnsered by BIS themself... which I would assume they won't do. They might come out and say "everythings fine", which they likely are... but then again, how many times have we heard that from diffrent companies over the years only to see the compleat oposite weeks later. So even if things are in fact doing great, it makes little sense to make such an announcement. So consider the fact that we have no heard anything as a relativly good sign.

Where BIS gets their cash from is yet another question we all can guess at, but only BIS knows. I would guess that a decent portion of their cash does come from VBS sales and contracts, but who knows how much. Lets not forget however, its little secret that ArmA1 was rushed out the door very early to generate cash flow for BIS. I can't imagine they did that because they had a large pile of cash sitting around... and even then sales are ArmA1 couldn't have been smashing.

As for the crisis hurting sale? Well I think its more then fair to say ArmA2 has bigger things to worry about then the financial problems... such as the bad reputation of ArmA1, lack of popularity in ArmA2 style games to begin with, the let down of previously stated and now removed features, lack of serious press push to promote the game, and the fact that there is (from the known information) little incentive for the average fan of the series to buy the game if you already have ArmA1. The fact that the worlds economy is currently not doing all that great is near the bottom of ArmA2s list of possible sales troubles IMO. Not to mention BIS's release track record has been a bit iffy in the past, and we might not see ArmA2 till sometime in 2010 (would be a good thing if the games not ready of course), and by then the economy might be doing much better and be even less of an issue.

Bottom line is, no one here is really qualified to awnser your questions other then BIS, tho we can all speculate. All we can say with near certainty is that BIS is not going to shelf a game they have been working on for more then half a decade... so ArmA2 will be released, which is the main thing.

[POTS 0]

My recommendation to BIS, convert 50% of profit to gold, and let it sit in your vaults for a while. You'll probably make some money, 100% will if inflation strikes.

[Baff1 0]

Discretionary Spending

The other key factor is discretionary spending. A game is a descretionary spend. What you will find is that the games companies with a large number of mediocre products in a highly competitive market will fare worse. Much as Woolworth's have in the UK.

Actually that is why Woolworths have always been so successful.

The reason Woolworths have failed, although still operating a profit from their retail outlets and distribution business, is because when intrest rates were low they bought back all their shares with cheap bank loans.

Thus lowering their repayments to their investors and boosting their overall profits.

Then the price of bank loans rapidly increased, catching them out.

In a recession budget retailers typically do much better.

Likewise Toyota is not selling well. They have made their first loss in history this year.

They have exactly the same issues being suffered by Ford, GM , Volkswagon and Mercedes. Not enough people are buying big ticket items.

Ta Ta's 1,000 Pound car however is likely to be selling well.

[walker 0]

Hi Baff1

Debt is not a longterm working Business Model

So your explanation is that Woolworth's took out a loan they could not afford, that if they had been able to afford it they would not be having their shops foreclosed?

Hmm.

Wooolworths have been in trouble for about 8 years

By the way they have been in trouble for about 8 years if you follow the business press. They took out the loans to try to restructure their business model but never got round to it. They should have halved their number of stores and and refocused. Instead they squandered the loans on supporting a failed business model.

They have gone out of business. So according to you they are still a success?

I think you may wish to slightly revise that assessment. I think at the end they have a sensible management that realised their business model will not function in a recession.

Quality versus Stack it high sell it cheap

Both quality and stack it high sell it cheap are good core business models that still thrive; but Wooolworths forgot that and became neither.

They were stuck between quality retail and the one pound/dollar/euro shops; a sort of expensive pound shop or tatty quality shop. A kind of wish washy not realy there unfocussed business model. That Woolworth's began as a 6 penny nee pound shop I admit, but they decided to go upscale in their business model and lost their core business as a result. Marks and Spencer's went through the same but decided to aim for the quality market, people still buy quality; other than that they buy cheap as you pointed out with regard to Tata which is why pound shops who still run the original Woolworth's core business model still survive.

Dieing Gracefully is not the same as surviving

It is the middle market products that are worst hit in a recession. As I pointed out Woolworth's are predominantly lower middle market. The management was good enough to get out before they went bankrupt rather than have the receivers called in. They controlled their own ending and maximised their returns to the end.

In essence as a company they died gracefully.

Big Three Versus Toyota

Now on the matter of Ford, GM, Chrysler and Toyota.

What is wrong with the big three?

For that past 8 years Ford, GM, Chrysler have been losing money on every car they sell. They have been trying to reorganise for about 16 years. Their real problems are:

FAILURE OF STRATEGIC VISSION. They have no vision of the future, they think it is the same as now.

1) Too many dealerships it needs to be reduced by 2/3 and has no future in a market where increasingly people buy products over the Internet. But stupid contracts they signed means they are stuck with them unless they go bust.

2) Too many competitors at least one probably two of them should go to the wall.

3) Failure to plan for the future, Petrol engines are dead all you have now are the zombie corpses of an out of date technology. They have few diesel cars. No Electric or hybrid cars. No hydrogen fuel cell cars (the real future for cars)

4) Their lack of quality is legendary who want a second hand Ford, GM or Chrysler?

5) They are too big and heavy and fuel inefficient.

6) Their staff agreements promote inefficiency and do not even pay as well as their rivals who as a consequence take all their good staff.

7) Their plant is ancient.

8) An overly complex supply chain.

I could go on the list is truly amazing. I wrote a reasearch assessment of the market back in the 1990s. Those are just some of the problems I and the rest of my colleagues pointed out then and they still have not been resolved over 10 years later. I should point out that Ford at least solved some of its worst problems regarding models.

This year all three would be bankrupt if they did not have government loans.

Why Toyota has a future

Toyota on the other hand has not made a loss in 70 years this year is their first operating loss. And they have sufficient capital to absorb it and go on.

Toyota has a future because it has a vision of the future:

1) They have future models lined up including existing diesel, hybrid and electric cars already in market and hydrogen Fuel cell car about two years off.

2) A competent well compensated staff.

4) The latest robotic plant

5) As to quality, Toyota's last, you have only to compare the second hand depreciation prices.

6) Toyota is not tied to a mass of really bad out of the way dealership contracts in all the wrong places that suck up vast amounts of profits, as are the other three. Toyota actually own most of their dealerships. So their supply chain is shorter.

7) Toyota cars are far more efficient.

8) Toyota has a very short supply chain and owns many of its suppliers.

So how does this apply to BIS?

Simple BIS has a shorter supply chain than game publisher based companies, thus lower costs, every point in the supply chain must make a profit, this drives up costs, if one of the points in supply chain makes a loss, it goes out of business as does every other business in the chain, as I pointed out.

Look at Zavvi. Woolworth's go out of business and so do they.

Kind Regards walker

[POTS 0]

You guys are funny, BIS is fine so why argue about something else on this thread.

[POTS 0]

Hi Baff1

Debt is not a longterm working Business Model

So your explanation is that Woolworth's took out a loan they could not afford, that if they had been able to afford it they would not be having their shops foreclosed?

Hmm.

Wooolworths have been in trouble for about 8 years

By the way they have been in trouble for about 8 years if you follow the business press. They took out the loans to try to restructure their business model but never got round to it. They should have halved their number of stores and and refocused. Instead they squandered the loans on supporting a failed business model.

They have gone out of business. So according to you they are still a success?

I think you may wish to slightly revise that assessment. I think at the end they have a sensible management that realised their business model will not function in a recession.

Quality versus Stack it high sell it cheap

Both quality and stack it high sell it cheap are good core business models that still thrive; but Wooolworths forgot that and became neither.

They were stuck between quality retail and the one pound/dollar/euro shops; a sort of expensive pound shop or tatty quality shop. A kind of wish washy not realy there unfocussed business model. That Woolworth's began as a 6 penny nee pound shop I admit, but they decided to go upscale in their business model and lost their core business as a result. Marks and Spencer's went through the same but decided to aim for the quality market, people still buy quality; other than that they buy cheap as you pointed out with regard to Tata which is why pound shops who still run the original Woolworth's core business model still survive.

Dieing Gracefully is not the same as surviving

It is the middle that is worst hit in a recession. As I pointed out Woolworth's are predominantly lower middle. The management was good enough to get out before they went bankrupt rather than have the receivers called in. They controlled their own ending and maximised their returns to the end.

In essence as a company they died gracefully.

Big Three Versus Toyota

Now on the matter of Ford, GM, Chrysler and Toyota.

What is wrong with the big three? b]

For that past 8 years Ford, GM, Chrysler have been losing money on every car they sell. They have been trying reorganise for about 16 years. Their real problems are:

FAILURE OF STRATEGIC VISSION. They have no vision of the future, they think it is the same as now.

1) Too many dealerships it needs to be reduced by 2/3 and has no future in a market where increasingly people buy products over the Internet. But stupid contracts they signed means they are stuck with them unless they go bust.

2) Too many competitors at least one probably two of them should go to the wall.

3) Failure to plan for the future, Petrol engines are dead all you have now are the zombie corpses of an out of date technology. They have few diesel cars. No Electric or hybrid cars. No hydrogen fuel cell cars (the real future for cars)

4) Their lack of quality is legendary who want a second hand Ford, GM or Chrysler?

5) They are too big and heavy and fuel inefficient.

6) Their staff agreements promote inefficiency and do not even pay as well as their rivals who as a consequence take all their good staff.

7) Their plant is ancient.

8) An overly complex supply chain.

I could go on the list is truly amazing. I wrote a reasearch assessment of the market back in the 1990s. Those are just some of the problems I and the rest of my colleagues pointed out then and they still have not been resolved over 10 years later. I should point out that Ford at least solved some of its worst problems regarding models.

This year all three would be bankrupt if they did not have government loans.

Why Toyota has a future

Toyota on the other hand has not made a loss in 70 years this year is their first operating loss. And they have sufficient capital to absorb it and go on.

Toyota has a future because it has a vision of the future:

1) They have future models lined up including existing diesel, hybrid and electric cars already in market and hydrogen Fuel cell car about two years off.

2) A competent well compensated staff.

4) The latest robotic plant

5) As to quality, Toyota's last, you have only to compare the second hand depreciation prices.

6) Toyota is not tied to a mass of really bad out of the way dealership contracts in all the wrong places that suck up vast amounts of profits, as are the other three. Toyota actually own most of their dealerships. So their supply chain is shorter.

7) Toyota cars are far more efficient.

8) Toyota has a very short supply chain and owns many of its suppliers.

So how does this apply to BIS?

Simple BIS has a shorter supply chain than game publisher based companies, thus lower costs, every point in the supply chain must make a profit, this drives up costs, if one of the points in supply chain makes a loss, it goes out of business as does every other business in the chain, as I pointed out.

Look at Zavvi. Woolworth's go out of business and so do they.

Kind Regards walker

Also to add, toyota puts there production very close to their consumers.

[Pulverizer 1]

Quote[/b] ]Toyota

I hereby suggest a thread label "Epic Win" to be instated on the forums immidiately, in addition to open, sticky and locked

[walker 0]

Hi all

In reply to Pulverizer:

All business's live in an environment.

The environment limits what can and cannot be supplied.

Other companies compete to use the environment.

If BIS were to fail as a business model then you can say goodbye to the simulation based FPS game.

And the Full Universe Simulator (FUS) which is what ArmA is becoming will be that much later arriving.

Kind regards walker