Entertainment: Retail

Industry Note November 27, 2017 Entertainment: Retail Black Friday 2017 Review Analysts Michael Pachter 213-688-4474 Michael.Pachter@wedbush.com Alicia Reese 212-938-9927 Alicia.Reese@wedbush.com Nick McKay 213-688-4343 Nick.McKay@wedbush.com Matthew Breda 213-688-4480 Matthew.Breda@wedbush.com Black Friday 2017 featured a number of compelling video game hardware discounts, with Sony appearing to win Thanksgiving week with a $199 price point for the PlayStation 4 with a 1TB hard drive. We noted multiple retail locations with zero or minimal inventory of the discounted console by Friday morning, whereas the other devices on offer, including the Nintendo Switch, appeared to largely be in-stock through Friday. GameStop decided to open its doors on Thanksgiving Day in 2017, a departure from its practice in past years, competing for consumer wallet share on Thursday against fellow retailers Best Buy, Target, and Walmart. Underlining its ambition to be relevant one day ahead of Black Friday, GameStop somewhat surprisingly had the best hardware deal that we saw late last week, offering the aforementioned 1TB PS4 with a $50 gift card. Microsoft countered Sony s compelling PS4 offer with a 500GB Xbox One S for $189, a $90 discount. Target offered a $25 gift card with the purchase of the device, among the best deals that we saw. Multiple retailers had $50 off of Xbox One S consoles. For their high-end devices, Sony offered $50 off of the PS4 Pro, while Microsoft chose to maintain the $499 MSRP of the recently-introduced Xbox One X. Nintendo opted against discounting its newest hardware device, the Switch, which was available at all of the retail locations that we visited for $299. Activision Blizzard s Call of Duty: WWII appeared to be the most popular game available last week, with Best Buy offering the lowest price we saw at $39.99, representing a $20 discount. A Best Buy location that we visited had completely sold out of the game by Friday morning. As in past years, EA s newest FIFA and Madden games and Take-Two s newest NBA game appeared to be among the most popular titles on offer, with all three games benefitting from their customary Black Friday discounting. Similar to the Switch hardware itself, Nintendo s most popular Switch software title, Super Mario Odyssey, did not see discounting. EA s Star Wars Battlefront II was not among Black Friday s discounted titles despite the publisher s high-profile last-minute decision to pull microtransactions from the game. We think Best Buy had a successful Black Friday. In the Best Buy stores we visited on Black Friday, traffic and inventory levels were higher than the prior year. TVs were the top selling items, and among the TVs sold, customers were mostly opting for the 50-inch or greater size. According to our online checks, Best Buy offered better pricing overall than Amazon between Thanksgiving and Sunday, November 26. While pricing remained roughly consistent on both sites between Thanksgiving and Saturday, November 25, pricing increased modestly on Sunday, November 26. We will continue to monitor both sites on Cyber Monday and throughout the Holiday period, as we believe this is a vital data point for determining whether Best Buy can achieve its full year guidance. Mixed results from our consumer electronics channel checks on Black Friday. Fitbit offered a mix of discounts depending on the retailer, with inventory levels reflecting moderate sell-through of various products. GoPro s HERO6 inventory was low in the stores we checked, while HERO5 inventory was notably higher, suggesting that GoPro may have to discount HERO5 over the holiday period. Wedbush Securities does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Please see pages 14 16 of this report for analyst certification and important disclosure information. Page 1

Video Game Discussion Black Friday 2017 featured a number of compelling video game hardware discounts, with Sony appearing to win Thanksgiving week with a $199 price point for the PlayStation 4 with a 1TB hard drive. We noted multiple retail locations with zero or minimal inventory of the discounted console by Friday morning, whereas the other devices on offer, including the Nintendo Switch, appeared to largely be in-stock through Friday. GameStop decided to open its doors on Thanksgiving Day in 2017, a departure from its practice in past years, competing for consumer wallet share on Thursday against fellow retailers Best Buy, Target, and Walmart. Underlining its ambition to be relevant one day ahead of Black Friday, GameStop somewhat surprisingly had the best hardware deal that we saw late last week, offering the aforementioned 1TB PS4 with a $50 gift card. Microsoft countered Sony s compelling PS4 offer with a 500GB Xbox One S for $189, a $90 discount. Target offered a $25 gift card with the purchase of the device, among the best deals that we saw. Multiple retailers had $50 off of Xbox One S consoles. For their high-end devices, Sony offered $50 off of the PS4 Pro, while Microsoft chose to maintain the $499 MSRP of the recently-introduced Xbox One X. Nintendo opted against discounting its newest hardware device, the Switch, which was available at all of the retail locations that we visited for $299. Activision Blizzard s Call of Duty: WWII appeared to be the most popular game available last week, with Best Buy offering the lowest price we saw at $39.99, representing a $20 discount. A Best Buy location that we visited had completely sold out of the game by Friday morning. Our positive checks followed two earlier disclosures by GameStop and the game s publisher. Last week, GameStop disclosed that launch sales of the newest Call of Duty were up 64% in dollar terms from those of its predecessor a year ago. On November 8, Activision Publishing announced worldwide sell-through over the game s first three days of over $500 million, with overall unit sales at launch that had doubled year-over-year globally. Our channel checks last week increase our confidence that the newest Call of Duty can sell-in well over 20 million units in its launch quarter, returning the franchise to the heights seen prior to last year s disappointing Call of Duty: Infinite Warfare. As in past years, EA s newest FIFA and Madden games and Take-Two s newest NBA game appeared to be among the most popular titles on offer, with all three games benefitting from their customary Black Friday discounting. Similar to the Switch hardware itself, Nintendo s most popular Switch software title, Super Mario Odyssey, did not see discounting. Ubisoft s high-profile recent releases Assassin s Creed Origins and South Park: The Fractured but Whole were available at compelling discounts that likely helped to boost their appeal as stocking stuffers next month. EA s Star Wars Battlefront II was not among Black Friday s discounted titles despite the publisher s high-profile last-minute decision to pull microtransactions from the game. EA previously announced that the removal of microtransactions was not expected to have a material impact on its FY:18 guidance. We continue to believe that the loyal Star Wars fan base will enable the game to match the success of its 2015 predecessor. Page 2

Video Game Discounts Best Buy - Hardware Best Buy offered an Xbox One S with a 500GB hard drive for $189.99. It also offered the Madden NFL 18 Bundle, which includes the EA title and an Xbox One S with a 500GB hard drive, for $229.99, a $50 discount. It offered a free wireless Xbox One controller with the purchase of select Xbox One consoles with a 500GB hard drive. For the PS4, it had a 1TB model for $199.99, a $100 discount. It also had Sony s PlayStation VR Gran Turismo Sport Bundle for $299.99, a $100 discount. It had the Switch at its MSRP of $299.99. It had the 2DS with The Legend of Zelda: Ocarina of Time 3D for $79.99. Best Buy offered Xbox One controllers starting at $39.99, and all PS4 wireless controllers starting at $39.99. Last year, Best Buy offered $50 off of any Xbox One bundle, resulting in a starting price of $250. In addition, the buyer of any Xbox One S 1TB bundle got a free wireless Xbox One controller. It also offered the slim PS4 bundle with Sony s Uncharted 4: A Thief s End for $250, a discount of $50, with Sony s The Last of Us Remastered and Sony s Ratchet & Clank. PS4 and Xbox One controllers had starting prices of $40. It also had the New Nintendo 3DS Super Mario for $100. Best Buy - Software Games at the $14.99 price point included EA s Mass Effect: Andromeda, Microsoft s Halo 5: Guardians, Sony s The Last of Us Remastered, Ratchet & Clank, and Uncharted: The Nathan Drake Collection, Take-Two s Mafia III, and Ubisoft s For Honor. For the Switch, it had Telltale Games Minecraft: Story Mode - The Complete Adventure. Games at the $19.99 price point included Capcom s Resident Evil 7: Biohazard, Sony s Horizon Zero Dawn, MLB The Show 17, Uncharted: The Lost Legacy, and Uncharted 4: A Thief s End, Square Enix s Kingdom Hearts HD 2.8 Final Chapter Prologue, and Ubisoft s Tom Clancy s Ghost Recon Wildlands. For the Switch, it had Bandai Namco s Dragon Ball Xenoverse 2, Ubisoft s Rayman Legends Definitive Edition, and Warner Bros. Lego Worlds. For the 3DS, it had Nintendo s Pokémon Omega Ruby. Games at the $24.99 price point included Activision Blizzard s Call of Duty: Infinite Warfare and Crash Bandicoot N. Sane Trilogy, Bandai Namco s Tekken 7 Day One Edition, Bethesda Softworks The Elder Scrolls V: Skyrim Special Edition, The Evil Within 2, and Wolfenstein II: The New Colossus, EA s NBA Live 18, Microsoft s Forza Horizon 3, Square Enix s Nier: Automata, and Take-Two s Grand Theft Auto V. For the Switch, it had Konami s Super Bomberman R, Nintendo s 1-2-Switch, and Sega s Sonic Forces Bonus Edition. Games at the $29.99 price point included Activision Blizzard s Destiny 2 and Overwatch: Game of the Year Edition, Bandai Namco s Project CARS 2, EA s Battlefield 1 Revolution, FIFA 18, and Madden NFL 18, Take-Two s NBA 2K18 and WWE 2K18, and Ubisoft s Just Dance 2018. Games at the $34.99 price point included EA s Need for Speed Payback and The Sims 4, Microsoft s Forza Motorsport 7, and Ubisoft s Assassin s Creed Origins and South Park: The Fractured but Whole. It had Activision Blizzard s Call of Duty: WWII for $39.99. For the Switch, it had Nintendo s The Legend of Zelda: Breath of the Wild Explorer's Edition and Super Mario Odyssey at their MSRPs of $59.99. Last year, Best Buy had a number of games for under $20, including Activision Blizzard s Call of Duty: Ghosts for $5, and Ubisoft s Far Cry Primal and a trio of catalog Sony titles for $15. Page 3

Games at the $20 price point included Bethesda Softworks Fallout 4, EA s Mirror s Edge Catalyst and Star Wars Battlefront, and Ubisoft s Tom Clancy s Rainbow Six Siege. Games at the $25 price point included Bethesda Softworks The Elder Scrolls V: Skyrim Special Edition and Ubisoft s Just Dance 2017 and Tom Clancy s The Division. Games at the $30 price point included Activision Blizzard s Destiny - The Collection, EA s Battlefield 1, FIFA 17, and Madden NFL 17, Microsoft s Gears of War 4, and Take-Two s BioShock: The Collection, Grand Theft Auto V, Mafia III, NBA 2K17, WWE 2K17, and XCOM 2. Games at the $35 price point included Activision Blizzard s Overwatch Origins Edition and EA s Titanfall 2. For $40, gamers could get a Starter Pack for Activision Blizzard s Skylanders Imaginators or Warner Bros. Lego Dimensions. It had Activision Blizzard s Guitar Hero Live Supreme Party Edition and Guitar Hero Live for $50 and $40, respectively. Best Buy had Activision Blizzard s Call of Duty: Infinite Warfare Legacy Edition, which includes Modern Warfare Remastered, for $60, a $20 discount. It also had buy two and get one free for all pre-owned games. GameStop - Hardware GameStop offered an Xbox One S with a 500GB hard drive for $189.99, a $90 discount, with other bundles for the Xbox One S with a 500GB hard drive at $229.99. It also offered all Xbox One S consoles with 1TB hard drives, including bundles, at $299.99, a $50 discount. It offered one of those bundles with Warner Bros. Middle-earth: Shadow of War. For the PS4, it had a 1TB model for $199.99, a $100 discount, with a $50 gift card. It also had the PlayStation 4 Pro with a 1TB hard drive at $349.99, a $50 discount. It had Sony s PlayStation VR Gran Turismo Sport Bundle for $299.99, a $100 discount. The $100 discount was available for all PlayStation VR bundles, with prices starting at $199.99. It had the Switch at $299. It had the 2DS with The Legend of Zelda: Ocarina of Time 3D for $79.99. GameStop offered two Xbox One wired controllers at $24.99 each, a discount of $15. It also had two Xbox One controllers at $54.99 each, representing discounts of $10 and $15. It had multiple PS4 controllers at $38 each. In its pre-owned business, GameStop offered an Xbox 360 for free after a mail-in rebate, among other deals. Last year, GameStop offered $50 off of any Xbox One bundle, resulting in a starting price of $250. It also offered the slim PS4 bundle with Sony s Uncharted 4: A Thief s End for $250, a discount of $50, with the gamer s choice of Sony s The Last of Us Remastered or Sony s Ratchet & Clank. It offered the wireless PS4 controller for $40 and the wireless Xbox One controller for $50. It also had the New Nintendo 3DS Super Mario for $100. GameStop - Software Games at the $10 price point included EA Sports UFC 2, GameTrust s Has-Been Heroes, and Sony s The Last of Us Remastered. Games at the $14 price point included Warner Bros. Injustice 2. Games at the $14.99 price point included Psyonix s Rocket League for the PS4 and the Xbox One, and Telltale Games Marvel's Guardians of the Galaxy: The Telltale Series and The Walking Dead: A New Frontier. Games at the $15 price point included Bethesda Softworks Dishonored: Death of the Outsider and Wolfenstein: The Two Pack, Take-Two s Borderlands: The Handsome Collection, and THQ Nordic s MX vs. ATV: Supercross Encore - 2017 Official Track Edition. Games at the $19.99 price point included Bethesda Softworks Dishonored 2 and Prey, Capcom s Resident Evil 7: Biohazard, Microsoft s Halo Wars 2, Square Enix s Final Fantasy XV, Ubisoft s For Honor, and Warner Bros. Lego Dimensions Starter Packs and Lego Worlds. For the Switch, it had Telltale Games Batman: The Telltale Series Page 4

and Ubisoft s Rayman Legends Definitive Edition. Games at the $20 price point included Bandai Namco s Dragon Ball Xenoverse 2, Bethesda Softworks The Elder Scrolls V: Skyrim Special Edition, Microsoft s Rise of the Tomb Raider, Sony s Everybody s Golf, Horizon Zero Dawn, Knack II, Uncharted: The Lost Legacy, and Uncharted 4: A Thief s End, Square Enix s Final Fantasy XIV: Stormblood, Kingdom Hearts 1.5 + 2.5 Remix, Kingdom Hearts HD 2.8 Final Chapter Prologue, and World of Final Fantasy, Take-Two s BioShock: The Collection, Ubisoft s Tom Clancy s Rainbow Six Siege, and Warner Bros. Lego City Undercover. Games at the $24.99 price point included Bethesda Softworks The Elder Scrolls Online: Morrowind and Square Enix s Final Fantasy XIV: Online Starter Edition. For the Switch, it had Bandai Namco s Dragon Ball Xenoverse 2. Games at the $25 price point included Bandai Namco s Tekken 7, Bethesda Softworks The Evil Within 2 and Wolfenstein II: The New Colossus, CD Projekt s The Witcher III: Wild Hunt Complete Edition (distributed by Warner Bros.), Codemasters Dirt 4, Square Enix s Dragon Quest Heroes II and Nier: Automata, and Warner Bros. Middle-earth: Shadow of War. Games at the $27 price point included Activision Blizzard s Destiny 2 (with a free figurine), EA s FIFA 18 and Madden NFL 18 (with the Madden Ultimate Team Starter Pack), and Take-Two s NBA 2K18. Games at the $29.99 price point included EA s The Sims 4, Microsoft s Forza Horizon 3, Sega s Sonic Forces (including for the Switch), and Square Enix s Final Fantasy XII: The Zodiac Age. For the Switch, it had Konami s Super Bomberman R. Games at the $30 price point included Activision Blizzard s Overwatch: Game of the Year Edition, Atlus USA s Persona 5, Bandai Namco s Project CARS 2, Bethesda Softworks Fallout 4: Game of the Year Edition, Codemasters F1 2017 Special Edition, Konami s Pro Evolution Soccer 2018, Sega s Yakuza 0, Take-Two s Grand Theft Auto V, and Warner. Bros The Lego Ninjago Movie Videogame. Games at the $34.99 price point included Activision Blizzard s Call of Duty: Infinite Warfare Legacy Edition and Crash Bandicoot N. Sane Game & Sock Bundle Pack. Games at the $39.99 price point included Activision Blizzard s Guitar Hero Live Ultimate Party 2 Pack Bundle, Capcom s Marvel vs. Capcom: Infinite, EA s Need for Speed Payback and NHL 18, Microsoft s Forza Motorsport 7, Take-Two s WWE 2K18, and Ubisoft s Just Dance 2018 (including for the Switch) and South Park: The Fractured but Whole. It also had Nintendo s 3DS titles Pokémon Ultra Moon and Pokémon Ultra Sun at their MSRPs. It had Activision Blizzard s Call of Duty: WWII at $49.99. For the Switch, it had Nintendo s The Legend of Zelda: Breath of the Wild Explorer's Edition and Super Mario Odyssey at their MSRPs of $59.99. At $69.99, it had Ubisoft s Assassin s Creed Origins with its season pass, a $30 discount. In its pre-owned business, GameStop had multiple games at $10 (or three for $20), $15 (or three for $30), $20 (or three for $40), and $30 (or three for $60). It also had buy two get one free on all pre-owned products, a deal that was offered last year as well. Last year, GameStop had discounts for multiple Blizzard PC games, as well as for Take-Two s Sid Meier s Civilization VI. Games at the $10 price point included EA s Star Wars Battlefront, Sony s The Last of Us Remastered, Take-Two s Battleborn, and Warner Bros. Batman: Arkham Knight and Mad Max. Games at the $20 price point included Bethesda Softworks Doom, Square Enix s Just Cause 3, Ubisoft s Tom Clancy s Rainbow Six Siege, and Warner Bros. Mortal Kombat XL. Games at the $25 price point included Ubisoft s Far Cry Primal. Games at the $30 price point included Bethesda Softworks The Elder Scrolls Online Gold Edition and The Elder Scrolls V: Skyrim Special Edition, Take-Two s XCOM 2, and Warner Bros. Batman: Return to Arkham and The Witcher III: Wild Hunt Complete Edition. Games at the $35 price point included Activision Blizzard s Destiny - The Collection and Overwatch Origins Edition, Microsoft s Gears of War 4, and Take-Two s Grand Theft Auto V. Games at Page 5

the $40 price point included EA s Battlefield 1, FIFA 17, Madden NFL 17, NHL 17, and Titanfall 2, Konami s Pro Evolution Soccer 2017, and Take-Two s BioShock: The Collection, Mafia III, NBA 2K17, and WWE 2K17. Gamers could get a Starter Pack for Activision Blizzard s Skylanders Imaginators or Warner Bros. Lego Dimensions for $45 or $40, respectively. It had Activision Blizzard s Guitar Hero Live Supreme Party Edition for $50. GameStop had Activision Blizzard s Call of Duty: Infinite Warfare Legacy Edition, which includes Modern Warfare Remastered, for $60, a $20 discount. In its pre-owned business, GameStop offered three games for $20 or $30. It also had buy two get one free on all pre-owned products, a deal that was offered in 2015 as well. Target - Hardware Target offered an Xbox One S with a 500GB hard drive for $189.99, a $90 discount, with a $25 gift card. For the PS4, it had a 1TB model for $199.99, a $100 discount. It had the Switch at its MSRP of $299.99. It had the 2DS with The Legend of Zelda: Ocarina of Time 3D for $79.99. It had Xbox One and PS4 controllers for $39.99 each, representing a discount of $20. Last year, Target offered $50 off of any Xbox One S bundle plus a $40 gift card. PS4 and Xbox One controllers had starting prices of $40. It also offered the slim PS4 bundle with Sony s Uncharted 4: A Thief s End for $250, a discount of $50. Target - Software Games at the $15 price point included Bethesda Softworks The Elder Scrolls V: Skyrim Special Edition, Capcom s Resident Evil 7: Biohazard, Microsoft s Forza Horizon 3, Square Enix s Final Fantasy XV, and Ubisoft s For Honor and Watch Dogs 2. For the Switch, it had Warner Bros. Lego Worlds. For the 3DS, games at the $24.99 price point included Nintendo s Kirby: Planet Robobot, Pokémon Alpha Sapphire, Pokémon Omega Ruby, Super Mario Maker for Nintendo 3DS, Super Smash Bros., and Yoshi's Woolly World. Games at the $25 price point included Activision Blizzard s Call of Duty: Infinite Warfare and Crash Bandicoot N. Sane Trilogy, Take- Two s Grand Theft Auto V, Ubisoft s Just Dance 2018 (Wii) and Tom Clancy s Ghost Recon Wildlands, and Warner. Bros Injustice 2 and The Lego Ninjago Movie Videogame. Games at the $29.99 price point included Activision Blizzard s Destiny 2 and Overwatch: Origins Edition, Bethesda Softworks The Evil Within 2 and Wolfenstein II: The New Colossus, EA s FIFA 18 and Madden NFL 18, Take-Two s NBA 2K18, Ubisoft s South Park: The Fractured but Whole, and Warner Bros. Middle-earth: Shadow of War. For the Switch, it had Ubisoft s Just Dance 2018. Games at the $35 price point included EA s Need for Speed Payback, NHL 18, and The Sims 4, Take-Two s WWE 2K18, and Ubisoft s Assassin s Creed Origins. It had Activision Blizzard s Call of Duty: WWII for $45. Target also offered 50% off of items for Warner Bros. Lego Dimensions including the Starter Packs, implying a price of $30. Last year, games at the $8 price point included EA s Titanfall and Ubisoft s Assassin s Creed Syndicate, Assassin s Creed Unity, and Watch Dogs. Games at the $15 price point included Bethesda Softworks Fallout 4, Sony s Ratchet & Clank, and Ubisoft s Far Cry Primal and Tom Clancy s Rainbow Six Siege. Games at the $25 price point included Bethesda Softworks Doom, Nintendo s Kirby: Planet Robobot, Pokémon Alpha Sapphire, Pokémon X, and Super Smash Bros., Take-Two s Battleborn, and Ubisoft s Just Dance 2017 and Tom Clancy s The Division. Games at the $30 price point included Activision Blizzard s Destiny - The Collection, Bethesda Softworks The Elder Scrolls V: Skyrim Special Edition, EA s FIFA 17 and Madden NFL Page 6

17, Microsoft s Gears of War 4, and Take-Two s Grand Theft Auto V, Mafia III, and NBA 2K17. Games at the $35 price point included Activision Blizzard s Overwatch Origins Edition, EA s Battlefield 1, NHL 17, and Titanfall 2, Nintendo s Super Mario Maker, Take-Two s WWE 2K17, and Warner Bros. Lego Star Wars: The Force Awakens. For $40, gamers could get a Starter Pack for Activision Blizzard s Skylanders Imaginators or Warner Bros. Lego Dimensions, or Activision Blizzard s Guitar Hero Live. Target had Activision Blizzard s Call of Duty: Infinite Warfare Legacy Edition, which includes Modern Warfare Remastered, for $60, a $20 discount. Walmart - Hardware Walmart offered an Xbox One S with a 500GB hard drive for $189. It had $50 off of any Xbox One S console. It also offered the Xbox One X at $499. For the PS4, it had a 1TB model for $199, a $100 discount. It also had Sony s PlayStation VR Gran Turismo Sport Bundle for $299, a $100 discount. It had the Switch at $299. It had the 2DS with The Legend of Zelda: Ocarina of Time 3D for $79. It had Xbox One and PS4 controllers at $39 each, for discounts of roughly $21. For the Switch, it had the wired controller for $17, a discount of roughly $8. Last year, Walmart offered $50 off of any Xbox One bundle, resulting in a starting price of $249. It had the Xbox One S bundle with Microsoft s Minecraft and a bonus controller for $279. Walmart offered the slim PS4 bundle with Sony s Uncharted 4: A Thief s End for $249, a discount of roughly $50, with a $30 gift card. PS4 and Xbox One controllers had starting prices of $39. It also had a Forza Horizon 2 Xbox 360 bundle for $129, a $50 discount. It had the New Nintendo 3DS Super Mario for $99. Walmart - Software Walmart offered multiple catalog titles at the $9 price point, including old-gen titles. Games at the $12 price point included Activision Blizzard s Call of Duty: Advanced Warfare and Deadpool, Bethesda Softworks Dishonored 2, EA s Need for Speed and Titanfall 2, Square Enix s Just Cause 3, Take-Two s Mafia III, Ubisoft s Watch Dogs 2, and Warner Bros. Mortal Kombat X. Games at the $19 price point included Activision Blizzard s Call of Duty: Black Ops III, Bandai Namco s Tekken 7, Bethesda Softworks The Elder Scrolls V: Skyrim Special Edition, Microsoft s Forza Horizon 3, Sony s Horizon Zero Dawn, Knack II, and MLB The Show 17, Take-Two s Grand Theft Auto V (old-gen), Telltale Games Minecraft: Story Mode, Ubisoft s Just Dance 2018 (Wii), Tom Clancy s Ghost Recon Wildlands, and Tom Clancy s Rainbow Six Siege, and Warner Bros. Injustice 2. For the Switch, it had Bandai Namco s Dragon Ball Xenoverse 2 and Ubisoft s Rayman Legends Definitive Edition. Games at the $29 price point included Activision Blizzard s Crash Bandicoot N. Sane Trilogy, Destiny 2, and Overwatch: Game of the Year Edition, Bethesda Softworks The Evil Within 2, EA s Battlefield 1 Revolution, FIFA 18, Madden NFL 18, and Need for Speed Payback, Microsoft s Forza Motorsport 7, Sony s Uncharted: The Lost Legacy, Take-Two s Grand Theft Auto V (new-gen), NBA 2K18, and WWE 2K18, Ubisoft s Assassin s Creed Origins and South Park: The Fractured but Whole, and Warner Bros. Middle-earth: Shadow of War. For the Switch, it had Nintendo s 1-2-Switch and Ubisoft s Mario + Rabbids Kingdom Battle. For the 3DS, it had Nintendo s Pokémon Sun and Super Mario Maker for Nintendo 3DS. It offered Activision Blizzard s Call of Duty: WWII for $43. At the $59 price point, it had Activision Blizzard s Call of Duty Combo Pack, a Walmart exclusive, which includes Call of Duty: WWII and Call of Duty: Page 7

Infinite Warfare Special Edition. At the $49 price point it offered Nintendo s The Legend of Zelda: Breath of the Wild Special Edition. Last year, games at the $8 price point included EA s Battlefield Hardline and Ubisoft s Assassin s Creed Syndicate. Games at the $15 price point included Bethesda Softworks Doom, EA s Star Wars Battlefront, and Ubisoft s Far Cry Primal and Tom Clancy s Rainbow Six Siege. Games at the $25 price point included Bethesda Softworks Fallout 4 and The Elder Scrolls V: Skyrim Special Edition, Take-Two s Grand Theft Auto V, and Ubisoft s Just Dance 2017 and Tom Clancy s The Division. Games at the $27 price point included EA s Battlefield 1, FIFA 17, Madden NFL 17, and Titanfall 2, and Take-Two s NBA 2K17 and WWE 2K17. Games at the $35 price point included Activision Blizzard s Destiny - The Collection and Overwatch Origins Edition, EA s NHL 17, Microsoft s Gears of War 4, and Take-Two s BioShock: The Collection and Mafia III. For $39, gamers could get a Starter Pack for Activision Blizzard s Skylanders Imaginators or Warner Bros. Lego Dimensions. It had Activision Blizzard s Guitar Hero Live Supreme Party Edition two pack for $49. It had Activision Blizzard s Call of Duty: Infinite Warfare Legacy Edition, which includes Modern Warfare Remastered, for $57, a $23 discount. Consumer Electronics Discounts Fitbit.com Through November 27, Fitbit.com is offering $50 off basic Charge 2, Alta HR, and Blaze models. The special edition of each is offered at full price. All other Fitbit products, including the Ionic, are offered at full price on its website. GoPro.com Through November 27, GoPro.com is offering $200 off the Karma Drone if purchased along with the HERO6 Black. There are no discounts offered otherwise for HERO6 or HERO5 products. Best Buy Fitbit Best Buy offered the Alta HR and Charge 2 at $100, a $50 discount. Inventory levels across fitness trackers were low in most stores we checked, with the Blaze sold out in multiple stores. Ionic inventory levels were moderate to low in the stores we checked. Last year, Best Buy offered the Alta at $100, a $30 discount, the Blaze at $150, a $50 discount, and the Charge 2 at $130, a $20 discount. GoPro GoPro products were not on sale at Best Buy this year. At one store we checked, HERO6 were completely sold out by mid-day, while there were low inventory levels at other stores. HERO5 inventory was more plentiful in the stores we checked, indicating to us that GoPro may have to reduce price on HERO5 to work through inventory this holiday. Last year, Best Buy offered the HERO5 Black at its MSRP of $400 with a 64GB memory card and a $35 gift card. It offered a HERO4 Session bundle with a handler and a head strap for $180, a $70 discount. Page 8

Turtle Beach Turtle Beach headsets were sold out at the Best Buy stores we checked in the Boston area, which to us is unsurprising given the high level of video game console purchases we saw. Last year, Best Buy offered the Ear Force XO One wired headset for $40, a $40 discount, with savings of up to $50 on select Turtle Beach headsets. Target Fitbit Target offered the Alta HR and Charge 2 at $100, a $50 discount. There was no discount offered for the Ionic or Blaze. Inventory levels were moderate for each product. Last year, Target offered the Alta at $100, a $30 discount, the Charge 2 at $130, a $20 discount, and the Charge HR at $90, a $40 discount. GoPro The HERO5 Session bundle, on sale for $250, a $90 discount, was sold out, while HERO5 Black inventory was moderate. The HERO6 Black was offered at its MSRP of $500 with a $50 Target gift card, similar to what Target offered on the HERO5 last year. Last year, Target offered the HERO5 Black at its MSRP of $400 with a $60 gift card. It offered a HERO4 Session bundle with a handler and a 16GB memory card for $180, a $70 discount, with a $20 gift card. Walmart Fitbit Walmart offered the Blaze for $200, a $50 discount. The store we visited was sold out of most Fitbit inventory, including Blaze, Alta, and Charge 2. Last year, Walmart offered the Alta at $99, a $30 discount, the Charge 2 at $129, a $20 discount, and the Flex 2 at $69, a $30 discount. GoPro The HERO5 Black, HERO5 Session, and HERO Session were all sold out at the Walmart we checked, with no discounts being offered. There were no HERO6 models offered. Last year, Walmart offered a HERO4 Session bundle with a handler and a 16GB memory card for $179, a roughly $70 discount. Page 9

TV Discounts As it does every year, Best Buy had various Black Friday doorbuster TV deals. In the stores we visited in the Los Angeles, Boston, and Atlanta regions on Black Friday, TVs were the top selling items. The TV discounts most prominently displayed in the stores we checked included Insignia Roku TV 21 LED TV 720P for $129.99, Insignia Roku TV 49 LED TV 1080p for $319.99, and Sony Bravia 50 4K HDR Ultra HD for $699.99. Exiting the store, we saw far more TVs in the 50+ inch range and under-$1,000 price range. Overall store inventory levels were significantly higher than the prior year, according to staff. Our checks indicated that stores were busier than last year, with crowds and long lines lasting well into the evening at the Best Buy locations we checked. Best Buy and Amazon Online Comparisons Relative to last year, Amazon and Best Buy s online discounting around Black Friday appeared to occur over roughly the same period, while this year s selection of deals appeared to skew more towards higher definition, higher resolution, wider, and higher priced televisions. Amazon s Black Friday Deals Store opened on November 1 both this year and last year, with sporadic discounting set to occur through December 22, which is also in-line. The top advertised deals however, as highlighted in Amazon s annual Black Friday press release, included both a greater number of televisions (nine this year, versus six last year) along with a greater mix of 4K televisions (seven this year, versus three last year). Also notable was the lack of a claim of lowest prices on any specific television brands this year, versus last year s claim applicable to select Samsung, Sony, and LG models. Our online basket analysis (figures 5 6 on pages 12 13) suggests that Best Buy offered lower pricing among the same selection of televisions online. Best Buy s Black Friday deals began at the same time as last year (with doorbusters available beginning at 5pm on Thanksgiving), and this year also included offers such as free delivery on all televisions larger than 51-inches, and 24-month financing on home theater purchases $799 and up. In terms of the depth of discounting and mix, Best Buy s discounts similarly appeared to skew towards higher definition, higher resolution, wider, and higher priced televisions. Figure 1: Average Pricing Among Top 50 Best-Selling TV s, by Size and Resolution Size (inches) BEST BUY ONLINE AMAZON U.S. As of: 11/24/2017 As of: 11/24/2017 Resolution Resolution 4K 1080p 720p 4K 1080p 720p 75 2,000 75 1,998 70 1,100 70 1,198 65 1,212 65 1,194 55 601 400 55 717 50 352 265 50 478 428 49 365 303 49 584 350 43 303 265 43 410 299 40 328 40 448 260 32 225 133 32 228 144 24 24 133 Note: Average Pricing refers to the average price for a given TV format among the top 50 listed bestselling TV s on Amazon and Best Buy s websites, respectively. Sources: BestBuy.com, Amazon.com, and Wedbush Securities. Size (inches) Page 10

Figure 2: Percent Change in Average Pricing, by Size and Resolution, Among Top 50 Best-Selling TV s Size (inches) BEST BUY ONLINE AMAZON U.S. As of: 11/24/2017 and 11/16/2017 As of: 11/24/2017 and 11/16/2017 Resolution Resolution 4K 1080p 720p 4K 1080p 720p 75-13% 75-2% 70 70 65-18% 65-5% 55-11% -20% 55 12% 50-14% -5% 50 0% -4% 49-34% -7% 49 12% 0% 43-8% -3% 43 10% -3% 40-18% 40-1% -5% 32-5% -7% 32-11% -1% 24 24 8% Size (inches) Note: Percent Change refers to the percentage change in average price for a given TV format among the top 50 listed best-selling TV s on Amazon and Best Buy s websites, respectively, comparing Black Friday online pricing on November 24, 2017, to pre-black Friday online pricing on November 16, 2017. Sources: BestBuy.com, Amazon.com, and Wedbush Securities. Among the top 50 best-selling televisions online, Black Friday discounts appeared deeper relative to the prior week on Best Buy, reflecting earlier, sporadic discounting across Amazon televisions that began on 11/14. Discounting also appeared deeper across higher definition and wider format televisions, creating more value for customers at the high end, likely benefitting ASP s overall. Figure 3: SKU Mix by Size and Resolution, Among Top 50 Best-Selling TV s Size (inches) BEST BUY ONLINE AMAZON U.S. As of: 11/24/2017 As of: 11/24/2017 Resolution Resolution 4K 1080p 720p 4K 1080p 720p 75 1 0 0 75 3 0 0 70 2 0 0 70 1 0 0 65 4 0 0 65 6 0 0 55 9 2 0 55 9 0 0 50 4 2 0 50 1 1 0 49 2 3 0 49 5 1 0 43 3 2 0 43 4 2 0 40 1 0 0 40 2 2 0 32 0 2 6 32 0 1 6 24 0 0 0 24 0 0 2 Size (inches) Note: Darker shading indicates higher counts. Sources: BestBuy.com, Amazon.com, and Wedbush Securities. Page 11

Figure 4: Change in SKU Mix by Size and Resolution, Among Top 50 Best-Selling TV s Size (inches) BEST BUY ONLINE AMAZON U.S. As of: 11/24/2017 and 11/16/2017 As of: 11/24/2017 and 11/16/2017 Resolution Resolution 4K 1080p 720p 4K 1080p 720p 75 75 +1 70 +2 70 +1 65-1 65 55 +1 +1 55 +1 50 +1-1 50 49-1 +1 49 +1 43 +1-1 43 +1 40-1 40-1 32-1 32 +2 24-1 -2 24-1 Note: Change in SKU Mix refers to the change in the number of a given television format included among the top 50 listed best-selling TV s on Amazon and Best Buy s websites, respectively, comparing Black Friday online SKU mix on November 24, 2017, to pre-black Friday online SKU mix on November 16, 2017.. Sources: BestBuy.com, Amazon.com, and Wedbush Securities. The mix of televisions among the top 50 best-selling televisions appeared to shift towards higher resolution and wider format televisions, suggesting that customers responded well to the greater dollar-value discounting among those formats. The mix shift from last week to Black Friday suggests that ASP s in the television category may have seen a meaningful boost. Size (inches) Figure 5: Online Basket Analysis Among the Same Selection of High Definition Televisions Across Amazon and Best Buy Best Buy 11/23/2017 11/24/2017 11/25/2017 11/26/2017 Total basket price $7,168 $7,168 $7,168 $7,690 Total discount -5% -6% -6% 0% Average discount -10% -10% -10% -4% Daily % change - total 0% 0% 7% Daily % change - average 0% 0% 17% Amazon 11/23/2017 11/24/2017 11/25/2017 11/26/2017 Total basket price $7,555 $7,632 $7,601 $7,677 Daily % change - total 1% 0% 1% Daily % change - average 2% 0% 3% Note: Total discount above refers the total basket price of Best Buy televisions relative to the same basket of televisions available on Amazon. Sources: BestBuy.com, Amazon.com, and Wedbush Securities. Page 12

Figure 6: Online TV Basket Components and Comparisons, November 23 November 26, 2017 BEST BUY ONLINE TV BASKET 11/23/2017 11/24/2017 11/25/2017 11/26/2017 Brand Size Resolution Connectivity Price Price Price Price Samsung 75 4K Smart $1,700 $1,700 $1,700 $1,900 Sony 75 4K Smart $2,000 $2,000 $2,000 $2,000 Samsung 55 4K Smart $498 $498 $498 $500 Sony 55 4K Smart $800 $800 $800 $800 LG 55 4K Smart $500 $500 $500 $500 Sharp 50 4K Smart $180 $180 $180 $500 Samsung 50 1080p Smart $450 $450 $450 $450 Sony 48 1080p Smart $430 $430 $430 $430 LG 49 1080p Smart $350 $350 $350 $350 Samsung 32 720p Smart $160 $160 $160 $160 LG 24 720p $100 $100 $100 $100 AMAZON U.S. TV BASKET 11/23/2017 11/24/2017 11/25/2017 11/26/2017 Brand Size Resolution Connectivity Price Price Price Price Samsung 75 4K Smart $1,699 $1,699 $1,699 $1,699 Sony 75 4K Smart $1,998 $1,998 $1,998 $1,998 Samsung 55 4K Smart $550 $550 $550 $589 Sony 55 4K Smart $798 $798 $798 $798 LG 55 4K Smart $527 $578 $595 $595 Sharp 50 4K Smart $399 $450 $450 $450 Samsung 50 1080p Smart $448 $428 $380 $378 Sony 48 1080p Smart $447 $447 $427 $427 LG 49 1080p Smart $405 $399 $399 $410 Samsung 32 720p Smart $168 $168 $168 $168 LG 24 720p $117 $117 $137 $165 Sources: BestBuy.com, Amazon.com, and Wedbush Securities. Among the same basket of televisions available online, Best Buy appeared to offer better pricing relative to Amazon between Thanksgiving and Sunday, November 26. While pricing remained roughly consistent on both sites between Thanksgiving and Saturday, November 25, pricing appeared to increase modestly on Sunday, November 26, reducing the difference between the two baskets. It remains to be seen how basket pricing will be impacted by Cyber Monday, but we will continue to monitor both sites throughout the Holiday period. Page 13

Risks to the Attainment of Our Price Targets and Ratings: Entertainment: Retail Risks include changes to the macroeconomic outlook, variability in new product or game release timing, the effects of competition from other consumer electronics and big-box retailers, changes in consumer shopping preferences, product supply constraints, and changes in consumer demand for the products offered. Analyst Certification We, Michael Pachter, Alicia Reese, Nick McKay and Matthew Breda, certify that the views expressed in this report accurately reflect our personal opinions and that we have not and will not, directly or indirectly, receive compensation or other payments in connection with our specific recommendations or views contained in this report. Mentioned Companies Company Rating Price Target Nintendo NEUTRAL 46,610.00 34,000.00 Amazon.com OUTPERFORM $1,186.00 $1,285.00 Activision Blizzard OUTPERFORM $66.03 $75.00 Best Buy UNDERPERFORM $57.00 $32.00 Electronic Arts OUTPERFORM $107.94 $136.00 Fitbit NEUTRAL $6.71 $6.50 GameStop OUTPERFORM $17.42 $25.00 GoPro NEUTRAL $8.58 $10.50 Turtle Beach Corp. OUTPERFORM $0.57 $1.50 Take-Two Interactive Software NEUTRAL $117.88 $95.00 Ubisoft Entertainment OUTPERFORM 68.73 75.00 Investment Rating System: OUTPERFORM: Expect the total return of the stock to outperform relative to the median total return of the analyst's (or the analyst's team) coverage universe over the next 6-12 months. NEUTRAL: Expect the total return of the stock to perform in-line with the median total return of the analyst's (or the analyst's team) coverage universe over the next 6-12 months. UNDERPERFORM: Expect the total return of the stock to underperform relative to the median total return of the analyst's (or the analyst's team) coverage universe of the next 6-12 months. The Investment Ratings are based on the expected performance of a stock (based on anticipated total return to price target) relative to the other stocks in the analyst's coverage universe (or the analyst's team coverage).* Rating distribution (as of November 27, 2017) Investment Banking Relationships (as of November 27, 2017) OUTPERFORM: 54.32% OUTPERFORM: 11.26% NEUTRAL: 43.88% NEUTRAL: 3.28% UNDERPERFORM: 1.80% UNDERPERFORM: 0.00% The Distribution of Ratings is required by FINRA rules; however, WS' stock ratings of Outperform, Neutral, and Underperform most closely conform to Buy, Hold, and Sell, respectively. Please note, however, the definitions are not the same as WS' stock ratings are on a relative basis. The analysts responsible for preparing research reports do not receive compensation based on specific investment banking activity. The analysts receive compensation that is based upon various factors including WS' total revenues, a portion of which are generated by WS' investment banking activities. Company Specific Disclosures 1. WS makes a market in the securities of Nintendo, Amazon.com, Activision Blizzard, Best Buy, Electronic Arts, Fitbit, GameStop, GoPro, Turtle Beach Corp., Take-Two Interactive Software and Ubisoft Entertainment. Price Charts Page 14

Wedbush disclosure price charts are updated within the first fifteen days of each new calendar quarter per FINRA regulations. Price charts for companies intiated upon in the current quarter, and rating and target price changes occurring in the current quarter, will not be displayed until the following quarter. Additional information on recommended securities is available on request. Disclosure information regarding historical ratings and price targets is available at http:///researchdisclosure/ DisclosureQ217.pdf *WS changed its rating system from (Strong Buy/ Buy/ Hold/ Sell) to (Outperform/ Neutral/ Underperform) on July 14, 2009. Please access the attached hyperlink for WS' Coverage Universe: http:///services/cmg/equities-division/research/ equity-research Applicable disclosure information is also available upon request by contacting Leslie Lippai in the Research Department at (212) 833-1375, by email to leslie.lippai@wedbush.com, or the Business Conduct Department (213) 688-8090. You may also submit a written request to the following: Business Conduct Department, 1000 Wilshire Blvd., Los Angeles, CA 90017. OTHER DISCLOSURES The information herein is based on sources that we consider reliable, but its accuracy is not guaranteed. The information contaned herein is not a representation by this corporation, nor is any recommendation made herein based on any privileged information. This information is not intended to be nor should it be relied upon as a complete record or analysis: neither is it an offer nor a solicitation of an offer to sell or buy any security mentioned herein. This firm, Wedbush Securities, its officers, employees, and members of their families, or any one or more of them, and its discretionary and advisory accounts, may have a position in any security discussed herein or in related securities and may make, from time to time, purchases or sales thereof in the open market or otherwise. The information and expressions of opinion contained herein are subject to change without further notice. The herein mentioned securities may be sold to or bougt from customers on a principal basis by this firm. Additional information with respect to the information contained herein may be obtained upon request. Page 15

Equity Research HEALTHCARE RETAIL AND CONSUMER Biotechnology Footwear & Apparel David Nierengarten, Ph.D. (415) 274-6862 david.nierengarten@wedbush.com Christopher Svezia (212) 938-9922 christopher.svezia@wedbush.com Biotechnology Hardlines Retail Robert Driscoll (415) 274-6863 robert.driscoll@wedbush.com Seth Basham (212) 938-9954 seth.basham@wedbush.com Emerging Pharmaceuticals Homebuilders/Building Products Liana Moussatos, Ph.D. (415) 263-6626 liana.moussatos@wedbush.com Jay McCanless (212) 833-1381 jay.mccanless@wedbush.com Medical Devices Leisure Tao Levy (212) 938-9948 tao.levy@wedbush.com James Hardiman (212) 833-1362 james.hardiman@wedbush.com TMT Restaurants Nick Setyan (213) 688-4519 nick.setyan@wedbush.com Payments/IT Services Moshe Katri (212) 938-9947 moshe.katri@wedbush.com FINANCIAL INSTITUTIONS GROUP Digital Media Financial Infrastructure & Real Estate Finance Michael Pachter (213) 688-4474 michael.pachter@wedbush.com Jason Weaver (212) 833-1383 jason.weaver@wedbush.com Digital Media Mid-Cap Banks Nick McKay (213) 688-4343 nick.mckay@wedbush.com David Chiaverini (212) 938-9934 david.chiaverini@wedbush.com Internet: E-commerce Regional Banks Aaron Turner (213) 688-4429 aaron.turner@wedbush.com Peter Winter (212) 938-9942 peter.winter@wedbush.com Enterprise Software Specialty Finance Steve Koenig (415) 274-6801 steve.koenig@wedbush.com Henry Coffey (212) 833-1382 henry.coffey@wedbush.com Jesse Bigelow Director of Research jesse.bigelow@wedbush.com (212) 259-6581 RESEARCH MANAGEMENT Strecker Backe Associate, Equity Research strecker.backe@wedbush.com (212) 833-1367 EQUITY CO-HEADS Kirsten Fraunces Ian Winer kirsten.fraunces@wedbush.com ian.winer@wedbush.com (213) 688-4404 (213) 688-4471 CORPORATE ACCESS Anita Minassian Phylicia Kirven VP, Corporate Access AVP, Corporate Access wedbush.conferences@wedbush.com equitymarketing@wedbush.com (213) 688-4404 (213) 688-4455 TRADING Consumer Financials Jack Collins (415) 274-6816 jack.collins@wedbush.com Rob Cohen (212) 938-9952 rob.cohen@wedbush.com Healthcare TMT Sahak Manualian (213) 688-4533 sahak.manuelian@wedbush.com Joel Kulina (212) 938-2056 joel.kulina@wedbush.com WEDBUSH OFFICES LOS ANGELES NEW YORK SAN FRANCISCO 1000 Wilshire Boulevard 142 W 57th Street 2 Embarcadero Center, Suite 600 Los Angeles, CA 90017 New York, NY 10019 San Francisco, CA 94111 (213) 688-8000 (212) 938-9920 (415) 273-7300 BOSTON CHICAGO 265 Franklin Street 141 W. Jackson Boulevard, Suite 1710A Boston, MA 02110 Chicago, IL 60604 (617) 832-3700 (312) 786-1930 Page 16