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The Channel Checkers has been tracking the sentiment of game store employees on their enthusiasm for GTA IV, the new game released by Take Two Interactive last week.  Our most recent survey covered from April 21 to April 28. We found that approximately 62% of respondents to our survey believed that GTA IV would be the next big game in May. While that number was positive in general it was well below the 80-90% response rates we saw fro Halo 3 in the fall of 2007.  We believe that GTA IV will underperform the expectations since it is clear that the game needs to be as big a hit as Halo 3 if not bigger.

We believe that sentiment surveys like ours are very predictive of game success in the video sector. The opinions of those working at the video retail outlets is powerful especially when aggregated in significant numbers and surveyed consistently.

We wonder if Electronic Arts might abandon its bid for Take Two once it becomes clear that GTA IV is not as powerful a franchise as many had hoped.

On Wednesday, April 23rd NextWave announced it would sell off its spectrum assets to top bidders. Nextwave holds WCS, AWS and EBS/BRS spectrum assets. Estimates for Nextwave’s spectrum on the open market total close to $900 million according to some market analysts. We believe that the company’s total spectrum holdings are likely not worth more than $450 million. We question why deep pocketed parties would not have bought Nextwave outright, the company’s market capitalization stands at roughly $600 million as of Friday April 25th, as opposed to paying premium prices for bits and pieces of multi-frequency bandwidth across the U.S.

There is an estimated value of roughly $400 million for NextWave’s EBS/BRS spectrum. The value ranges on a MHZ POP basis is $0.40-$0.50 per MHZ POP. We see the value of NextWave’s EBS/BRS holdings as being worth far less after lengthy research on the specifics of NextWave’s holdings. Our primary concern about the company’s EBS/ BRS holdings is that NextWave leases substantial portions of its claimed EBS/BRS coverage. We found this in NextWave’s 10-K:

Our AWS, WCS and BRS spectrum is held directly through FCC licenses. Our EBS spectrum has been leased on a long-term basis from current license holders.

 

(5)

We lease EBS spectrum from multiple parties in the greater New York, New York metropolitan area, including geographic areas in New York, New Jersey and Connecticut. These leases give us access to different amounts of spectrum in specific parts of the market area. The terms of these leases range from 20 to up to 60 years when their renewal options are included.

 

(6)

We lease EBS spectrum from The Orange Catholic Foundation in the Los Angeles, California (Orange County) area. This lease has an initial 10 year term and contains five renewal options for 10 years each to extend the term of the lease.

 

(7)

We lease EBS spectrum from The University of California in the San Francisco, California area. The lease has an initial 10 year term and contains 2 renewal options for 10 years each to extend the term of the lease.

 

(8)

We lease EBS spectrum from Bradley University in the Peoria, Illinois area. This lease has an initial 10 year term and contains two renewal options for 10 years each to extend the term of the lease.

 

(9)

We sublease EBS spectrum from the North American Catholic Educational Programming Foundation in the Mobile, Alabama area. This sublease has an initial 29 year term and no renewal options to extend the term of the subleas

In addition to the EBS leases we also found that the company in 2002 leased BRS spectrum from the Archdiocese of New York’s Department of Education.

Nextwave is currently obligated to roughly $1,000,000 per year in future EBS license lease payments. It cost Nextwave about $20,000,000 in 2007 to acquire additional California EBS license leases. Nextwave’s 10-Q & 10-Q/A financial filings with the Securities & Exchange commission reveal their overall spectrum lease expenses & liabilities; Nextwave does not specifically segregate out their EBS leases. In exchange for being able to commercially lease the surplus EBS bandwidth licensed by an educational institution, Nextwave gives hints of how they structure their leases financially; It appears that Nextwave probably: - pays initial fees to the licensee, - pays the capital equipment costs in order to use the FCC EBS license (for both FCC EBS licensee & Nextwave), - makes installment payments to educational institution, possibly including a percentage of Nextwave’s revenues from the use of the EBS license - they are also complicated by how they finance them with corporate notes, and how they account for their them in their financials to comply with IRS & FCC regulations, and lease terms. There are valuation estimates for NextWave’s EBS/BRS spectrum of $0.40-$0.50/MHZ POP. Given the company’s lack of ownership of spectrum in major metropolitan areas like New York, Los Angeles and San Francisco. NextWave’s BRS spectrum is not national and it would seem hard to believe that it could yield greater value than the more substantial network operated by Sprint and Clearwire in the BRS frequencies. It would appear that somewhere between $0.10-$0.15 per MHZ/POP would be a better estimate for the value of Nextwave’s BRS holdings than the ranges of $0.40-$0.50 we have seen published.

We find that many of NextWave’s AWS spectrum holdings reside in primarily low density population areas. In the AWS markets, we believe that a generous valuation for NextWave’s spectrum lies somewhere between $0.20- $0.25/MHZ POP, which is a relatively consistent metric with the average of the small market bids in the 2006 AWS auction as cited by Jupiter Research (http://weblogs.jupiterresearch.com/analysts/armbrust/archives/2006/08/aws_auction_win.html).

Nextwave’s WCS holdings may hold some value to independent bidders but again we see challenges in the fact that the WCS holdings are not national and would require essentially constructing many transaction to find buyers for each specific license. In a lengthy license by license sales process we cannot help but imagine that the buyers hold the advantage and would work Nextwave down on valution for each piece. We believe that the WCS spectrum should valued at a discount compared to comparables.

Nintendo of America, the maker of the insanely popular Nintendo Wii consoles, says the inventory of the game is improving and a good thing too for fans. The Channel Checkers surveyed 32 electronics, game and console stores across the nation this week and asked whether the Nintendo Wiis were in stock, if not, how long before more arrived? The stores included GameStop, EB Games, Blockbuster Video, Toys R Us and Best Buy. Thirteen or 41% of respondents claimed that the Nintendo Wii was not in stock, while 19 or 59% said they stocked the console. Of those who said they did not stock Nintendo Wii, 16 or 50% said they would have the console within one week, 9 respondents or 28% said it would be two weeks and 7 or 22% said it would be four or more weeks before they would stock the product.

Our most recent research of video games and consoles at retailers (59% were Gamestop locations), showed that the Nintendo Wii had reclaimed the honors as top video game console at 48% of stores that responded (up from 36% in our previous survey). The Xbox 360 was only cited as top seller by 28% of stores, a large change our last survey’s findings of 43%. The Sony Playstation 3 dropped to top seller at only 10% of stores, down from 21% in early March and 16% in February. The newly released Mario Super Smash Brothers Brawl (played on the Wii console) was the top selling game at 30% of responding stores. Call of Duty IV was seen as tops by 14% of respondents, while the previously top seller Halo 3 and Army of Two were each only named as tops by 10% of respondents. Grand Theft Auto remains the most highly anticipated game for launch in the next three months, according to 52% of respondents (up from 29% earlier in the month). The recently launched Mario Super Smash Brothers Brawl had been named as the most anticipated game by 29% of respondents just weeks before its launch earlier this month.

Our friends over at TickerMine have run some interesting reports on fuel efficient cars in the current high gas price environment. Sales of alternative fuel cars are still buoyant but could be flattening soon, judging by a recent Tickermine survey. Tickermine surveyed managers at 31 car dealerships around the country and found that cars were in stock, as opposed to two years ago when eager consumers were directed to a waiting list. Asked which was the best-selling hybrid car and the Toyota Prius still trumped the other models with 11 respondents or 35%. The Toyota Camry Hybrid was second most popular with three respondents or 9.6%. The Ford Escape and Ford Focus tied in third place with two respondents each or 6.45% and the Toyota Highlander came in last with one respondent or 3.2%. Asked whether the cars were in stock and an overwhelming 29 respondents or 93% answered yes. Only two respondents or 6.45% answered no. One cited the Ford Escape as sold out, the other cited the Prius 2008.

Publicly traded until it was taken private last year, Alltel was the subject of our most recent survey. We polled Alltel stores across the country and found that LG phones are the bestsellers. Thirty-seven percent of respondents named as bestsellers LG models including the AX8600, AX 145, Rumor and Scoop. Motorola was the next most frequently named manufacturer, with 30% of those surveyed calling it their best seller. The most frequently named model was the RAZR. The top email device for Alltel stores was the Blackberry Pearl, named by 26% of respondents. Other Blackberry models brought that manufacturer’s total to 67% - making it by far the bestselling brand. Motorola won the prize for bestselling music device, with 44% of respondents naming various Motorola models. Twenty-two percent of those surveyed named the MOTOROKRtm Z6m, and 15% named the MOTORAZR2 V9m.

The Nintendo Wii continues to be scarce in the US. Following up on a survey done in January, we polled Best Buy, EB Games, Gamestop, Target and Walmart in the US and Canada in February. Of these stores, 68% did not have the Wii in stock. The average wait was almost 2 ½ weeks to obtain the game console. The one store which had a significantly higher percentage of Wii’s in stock was EB Games. At that store a customer had a 50% chance of finding one in stock.

In our survey over the first two weeks of February of broad line electronics retailers we found that the Apple iPod continues to lead the market for MP3 players. The Apple iPod was seen as the “best” MP3 player by 75% of our respondents (up from 71% in our December survey) while Microsoft Zune player was seen as “best” by the remaining 25% (up from 11% in our December survey). Interestingly Creative Zen, Sandisk and other vendors were shut out in this category. We asked about the cheapest MP3 players in the market as well in our survey and found the Best Buy brand Insignia player cited as the “cheapest” by 25% of our respondents (note that roughly 50% of our survey responses were from Best Buy stores) and 21% cited the Sandisk Sansa line of MP3 players. Brands such as Nextar, Creative, Isonic and iLo were also mentioned as being the “cheapest”. We also asked respondents to tell us if they viewed a stand alone MP3 player or a combination music phone to be the better device. 50% of respondents stated that a music phone is the better device while 39% said that a stand alone MP3 player was better. This is a shift from our December survey where more respondents preferred the MP3 players to a music phone by a margin of 49% to 42%. Storage capacity and sound quality were the primary elements cited by MP3 player supporters while convenience and the 2:1 benefits of the music phone were mentioned by those preferring the music phones.

Kohl’s Corp., the US department store chain, is having a reasonable year so far in spite of an overall sluggish retail sector. We interviewed 30 stores across the nation and asked how business was, whether there was any excess inventory, is the weak economy and housing market jinxing business and which women’s fashion line sells best? Of the 30 respondents, five or 16.6% described business as very strong. Twelve or 40% found it above average and 13 or 43.3% found business average. Ten respondents or 33.3% reported having no excess inventory while four respondents or 13.3% reported having some, namely in winter clothing which is typically discounted in spring. The majority of those polled, 13 or 43.3%, weren’t sure whether the housing market and weak economy were effecting business but seven respondents or 23.3% saw either some impact now or potential future impact. Only ten or 33.3 % said the markets had no bearing on sales at all. Women’s apparel sales ran the gamete from Apt. 9, the dress casual line ranking as the best seller with five respondents or 16.6%. Croft & Barrow, the outerwear and sleepwear line tied with Sonoma, the lifestyle line with four respondents or 13.3% while Vera Wang, Levis and Daisy Fuentes, which makes accessories, swimwear and casual wear brought in three responses or 10%. Chaps, the career and slinky evening wear line ranked bottom with two respondents or 6.6%.

Chipotle Grill is a hot topic these days with a massive valuation and a market segment in between casual dining and fast food.  How is the chain doing and what are customers looking to get there? We surveyed 30 stores to take a look.

Our most recent survey of Chipotle Mexican Grill restaurants shows that a whopping 80% of respondents indicated that customers choose Chipotle because of the menu, compared with 9% because the food is organic and 11% who cited both the menu and the organic food as the reason. The star of the menu that keeps them coming in is the Burrito, chosen 57% of the time; varieties ordered included chicken (41%), steak (29%), barbacoa (12%) and carnitas (6%). The Burrito Bowl was the second most frequently ordered item (26%) followed by Fajita Burritos (14%) and Tacos (3%). The average check size for a party of two is $23.83. More respondents (74%) indicate that the restaurants are crowded at lunch time than reported that dinner had the bigger crowds (26%). Compared to a year ago, 43% of sites reported that the restaurant is busier, 46% say it is the same and 6% say it is less busy. Restaurants less than a year old made up 26% of the responses with older restaurants representing 74%.

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