‘Intertainment’ Boosts Gameloft, Meetic Amid Meltdown

It’s Friday night and Giovanni Barbaro, a 33-year-old Milan coffee shop owner, is buying videos instead of going to the movies.

“I can watch them as many times as I like,” Barbaro says, emerging from a Blockbuster Inc. outlet with Keanu Reeves’s “The Matrix” and two other films. “The fact that life’s getting expensive makes me think more about what I spend on entertainment.”

British, French and Italian consumers are reducing spending at bars, restaurants and theaters faster than anyone else as recession, plunging stocks and rising unemployment grip Europe. That may be a boon for companies such as Internet dating site Meetic and video-game seller Digital Bros SpA. Home entertainment is one of the last things Europeans will cut back on, along with cigarettes and alcohol, a Nielsen Co. survey showed.

“Staying in has become the new going out,” says Tarlok Teji, a partner at Deloitte & Touche LLP in Leeds, England, who oversees research on the U.K. retail industry. “Heading to clubs, bars and restaurants for lavish events is over for many of us. It’s a mega-trend and it’s here to stay.”

This Christmas, Britons will spend an average of 126 pounds ($194) on socializing, 12 percent less than last year, according to Deloitte. Teji says the shift to “intertainment” will drive companies to offer more family-oriented services.

Playing Together

Gameloft, Europe’s biggest maker of games for mobile phones, charges 7 euros ($9.04) for its “TV Show King,” a three-round trivia contest that can be downloaded and played by four people at a time. The Paris-based company predicts sales for this quarter will rise 50 percent as it adds games for multiple players, says Gonzague de Vallois, a senior vice president.

“An entire family can play together and many of the games can be played virtually indefinitely,” de Vallois says. “No fuss, no packaging, no shops: our distribution model is well adapted to the circumstances” as people stay home more.”

Gameloft rose 5.5 percent to 1.92 euros as of 10:32 a.m. in Paris trading. The stock is down 68 percent this year. Ubisoft Entertainment SA, Europe’s biggest maker of video games, yesterday said first-half earnings excluding non-recurring items increased more than five-fold. Montreuil-sous-Bois, France-based Ubisoft advanced 5.5 percent to 19.35 euros.

“Video games are a form of entertainment that remained accessible to all,” says Emmanuel Soupre, a fund manager at Neuflize OBC Asset Management in Paris, which oversees the equivalent of $26 billion. “This is favorable in such an environment. These stocks now have an attractive valuation.”

Soupre said he holds Ubisoft shares and will consider buying Gameloft.

Internet Dating

Meetic, the largest publicly traded dating Web site on the continent, charges 30 euros a month for full access to user profiles as young people look for cheaper ways to make connections. The company reported record daily sales for Oct. 5, the day before the Dow Jones Stoxx 600 Index posted its steepest decline since 1987.

Shares of Meetic, based in Boulogne-Billancourt, France, have risen 14 percent since dropping to a 12-month low on Oct. 17, compared with a 5.2 percent drop in the SBF-250 Index, a broad measure of French shares. Seven of 10 analysts tracked by Bloomberg advise buying the stock.

Digital Bros, the Milan-based distributor of video games such as “Cooking Mama” for Nintendo Co.’s game consoles, recorded a 30 percent increase in sales for the 12 months ended in June. Its shares have jumped 19 percent in the past month.

“There are more opportunities for us as more people stay home and tighten their belts,” says co-Chief Executive Officer Raffaele Galante. “People prefer to buy a sandwich for one euro and a video game which can last for 100 hours.”

European Savers

Seventy percent of Britons, 57 percent of French and 56 percent of Italians are slashing spending on out-of-home entertainment, compared with 54 percent of those in the U.S. and Canada, according to Nielsen. The survey of 26,202 Internet users in 52 countries was conducted from Sept. 22 to Oct. 6.

Europeans save more and tend to be more pessimistic than Americans because the job market is less flexible than in the U.S., says Laurence Boone, an economist at Barclays Capital in Paris. Europe has the highest level of household savings in the world, according to the Organization for Economic Cooperation and Development. The ratio for the euro zone reached 13.9 percent in the second quarter, compared with just 2.7 percent in the U.S.

“In times of trouble, the first thing you do is to cut spending related to entertainment,” Boone says. “You stay home more. You look for cheaper options. You save more money. Consumers are anxious.”

Barbaro, the Milan cafe owner, says customers who used to visit his place three times a day now come only once. Many now prefer an 80-cent espresso to a 1.30-euro cappuccino, he says.

‘Return of Nesting’

Restaurants, dance clubs and pubs are all being hurt by the financial crisis. Luminar Group Holdings Plc, the U.K.’s biggest nightclub owner, said Oct. 30 that a decline in sales had accelerated since September as more people stay home on Friday nights. Groupe Flo SA, owner of the art deco Paris brasserie La Coupole, is scaling back plans to open new restaurants.

Meanwhile, Domino’s Pizza U.K. & Ireland Plc, Britain’s largest pizza-delivery chain, recorded an 8.8 percent increase in third-quarter sales as more people ordered its pizzas, which cost as little as 5.99 pounds.

Domino’s shares have slipped 4.1 percent this year, compared with a 45 percent slump in the FTSE 250 Index.

“It’s the return of nesting,” said James Russo, vice president for marketing at Nielsen in New York. “It’s a tremendous opportunity for all those companies offering products tied to this at-home experience.”

Dallas-based Blockbuster, the world’s largest movie-rental chain, this month began a 250,000-euro ad campaign in Italy to promote its 4.95-euro two-night rentals. An evening movie ticket in Milan costs 7.50 euros on average.

“There is a feel-good factor in watching a movie when you are forced to tighten your belt on spending,” said Chris Reilly, CEO of Blockbuster’s Italian unit. “It becomes a treat.”

Source: Bloomberg