mrpayroll

http://www.reuters.com/newsArticle.j...log/GetContent

Fri July 25, 2003 03:25 PM ET
By Ben Berkowitz
LOS ANGELES (Reuters) - If video game publishers agree on one thing it is this: consumers need cheaper platforms in order to start buying more as the $30-billion industry heads toward its make-or-break holiday season.

Three of the largest video game publishers reported quarterly earnings this week, their first since a round of partial game console price cuts in May, and for the most part they said the same thing: not enough, cut more.

That pressure on the three console makers -- Sony Corp. , Microsoft Corp. and Nintendo Co. Ltd. -- amounts to a challenge to accept deeper losses on game hardware in return for profits later as lucrative software sales rise.

That may be a risky strategy but the alternative looks even worse since the most recent data shows sales of the PlayStation 2, Xbox and GameCube down by more than a third compared with last year, a trend that if sustained could make Christmas bleak for hardware and software makers.

In May, most industry observers had expected Sony and Microsoft to cut the prices of their rival PlayStation 2 and Xbox consoles to $149 from $199, and Nintendo to cut the price of its trailing GameCube to $99 from $149, during the industry trade show E3.

Instead, Sony cut the price of the PS2 to $179 and introduced a new version with more features at the old $199 price. Microsoft responded with its own cut to $179. Nintendo stood firm at $149.

Since then, the three have given no indications that they intend to budge from the new prices, despite the calls from their partners in game publishing.

"We continue to anticipate a hardware price cut this fall in order for the console manufacturers to achieve their forecasted hardware sales," THQ Inc. Chief Executive Brian Farrell said on Thursday.

Executives of Activision Inc. said on Tuesday that a price cut was needed.

"In the event there's no price cut or there's no promotional equivalent by the holiday season, then we will have to revisit our hardware projections," President Ron Doornink said on a conference call.

Retailers said the cuts by Sony and Microsoft provided almost no boost to sales. That marked a contrast to a year earlier, when Sony and Microsoft took $100 price cuts and Nintendo took a $50 cut and hardware sales boomed.

Even Microsoft conceded last week that the $20 cut on the Xbox had had little effect.

SPECULATION GROWS

Retailers are starting to speculate that another cut may be in the offing.

"We hear that one, or possibly two manufacturers, are thinking about the price cuts for the fourth quarter. We think the cuts would be good for penetration of the software -- new and used," John Antioco, Blockbuster Inc.'s chairman and chief executive officer told Reuters.

Movie rental chain Blockbuster is one of the leading U.S. retailers of video game hardware and software.

But the game industry's leader, publisher Electronic Arts Inc., said it was not clear yet if console makers were considering a fall price cut or if they would instead choose a strategy, as Nintendo has done, of maintaining the hardware price and bundling in games for free.

"Those are the options available and so far they have not given us a clear indication of which way that's going to work," Chief Financial Officer Warren Jenson said on a call.

Financial analysts who follow the industry, for their part, think a cut by September to $149 for the Xbox and PS2 and $99 for Game Cube price was increasingly likely.

Those beliefs were reinforced after June sales data from market researchers NPDFunworld showed year-over-year declines in hardware sales of anywhere from 36 percent to 42 percent, due to the tough comparison to last June, when consumers were buying up consoles in a frenzy after the price cuts.

"We believe that the rate of sell-through suggests that a platform price cut this fall is increasingly likely as the hardware companies try to achieve targeted year-end installed bases," Harris Nesbitt Gerard analyst Edward Williams wrote in a note Monday.


Hopefully they do lower the prices in the very near future.

Chris

belboz

Summer always sucks for the game industry. Last year was an exception, not the rule. So, of course, year ago numbers are going to be much higher.

What you have here is a bunch of game company executives who are trying to shift the blame for having missed their targets from their own unrealistic forecasts by using the excuse that the console manufacturers didn't cut their prices enough.

And I'm not really surprise that the cuts haven't generated much in the way of a boost in sales. At $200 they were already readily affordable to anyone who really wanted one. To bring in new casual buyers it has to be priced low enough to become an impulse buy. The psychological price barrier for that would be $100. Unfortunately, I don't see any of the console makers making that deep a cut.

Jtnguyen12

So, ANother price cut comming this fall ??

Maybe, it's time to pickup PS2 !!!

TheMadMonk

As an owner of all 3 consoles, I think they should cut the prices of new games instead! I'll only pay $50 for a new game if it is a must-have title that I can't wait for. That amounts to about, at most, 2 games per year I am willing to pay that much for. I am content to pick up most games after they hit the bargain prices; and I find I tend to enjoy games more, the less I spend on them.

IC_Freeze

still waiting for the magic number of $99 or less for all three

sniper308

I agree... they need to cut game costs to sell more. I'm not dropping $50 on a game. I can wait. Just picked up Max Payne for X-Box for $11 new and I am having a blast with it, but it would not have been worth $50 to me.

I also enjoy games the less I spend on them. Man if I were to pay $50 for a game, it would really have to be phenomenal when I was playing it.

Josh H

Console sales are going to be down. There haven't been many killer releases this summer (really just KOTR on X-box) and we're nearing the half way point of this generation as the new consoles will likely come out in 2005 at the latest, so most gamers (especially hardcore gamers) already have all the consoles they plan on buying this generation.

That said, I'd love to see a price drop. I'm waiting for the X-box to drop to $99 to pick one up for KOTR and a couple other games.

gcribbs

Sony did drop game prices awhile ago for first party games down to $39.99.

based on slow sales I would not be surprised to see one of them drop causing all to drop before Xmas.

goLUCKY

If the Gamecube drops to $100, will they drop the price of the GBA too?

Deftones

very, very doubtful. GBA's still sell phenomenally. There's no reason to drop the price whey they pretty much outsell the home console units.

Gizmo

Only one I see dropping is PS2 because they are still priced at $200 new (Yes, the blue box PS2 is $179, but that is a clearence price to get rid of the old hardware. The 'new' system which has the network adapter is the standard pack).

sniper308

I personally think $39 is about the right price for newly released console games. Of course, then you'd still use the $5 off at Best Buy on top of that

I do think that package pricing is a good idea around the holidays (for parents picking up consoles for kids who want the kid to be able to take it out of the box and have a decent game to play right away), and I like the way Nintendo did it with a choice of multiple good titles depending on your taste in gaming.

Price drops on the other hand would probably compel more gamers who already have a console or two to pick up another one.

Draven

Game consoles should be priced in the $149 to $200 range.

I'm all for a cheaper system, but in the world of home electronics, something that does what a video game system does is already a hell of a bargain.

And I don't get the "hardware sales are down" thing. Most anyone who wants a system has a system now. It's not like you have to buy multiple versions or anything. There should be a point where hardware sales level off.

Maybe these whiny developers should make better games, rather than blaming the system's price point.

mr.snowmizer

The market isn't even close to saturated.

And for those that buy a machine past the midway point of a generation's lifespan, it's all about the initial price, not more quality games being available.

menaz

I think Gamecube should have had a price drop along with the other consoles. I know I would have bought one. $150 just seems too much for a system that only has a couple of games I want to play, one of which hasnt even been released yet (Metal Gear). Thats how I feel about the GC, but I know theres a lot more people that feel the same way about the other consoles.

atlantamoi

I just bought an Xbox and haven't paid more than $20 for any of the dozen or so games I own (including Halo). As someone who can afford to buy games at $50, I won't do it. If games were more in line with the price of a new DVD then I'd purchase them upon release. Until that day, I scour Ebay.

Groucho

Well, I agree that it's the games that need to go down in price...not the consoles, which are already ridiculously cheap.

boredsilly

I agree with all that said that its the price of the software, not the hardware, that is hurting sales.

I liked how ps1 games were priced anywhere from $25 to $45 bucks for a new game. Not to many games strike a chord with me, to get me to the point of not being able to put them down so $50 bucks seems a bit much. Not to mention a lot of $50 games are shorter than 10 hours! Very few games, if any, should be priced higher than $40. But $50 is better than the SNES days. Anyone remeber how much Killer Instinct or Donkey Kong Country was priced at launch? Ouch!

mwj

I think the price cuts are coming on the hardware side, but software will remain priced where it's at currently, because that's where all the profit is made. None of the big three can can risk lowering the initial software price without risking even bigger losses. The next round of console hardware is going to be really interesting because Sony will not have the huge lead time it enjoyed with Playstation 2.

Revoltor

Technically the "cube" is 100 dollars already. That free 50 dollar game/gameboy player thing kinda evens it out.

I think 150-175 is the perfect jump on price for a console. Paying 200 for a PS2 last year was well worth the dough. I've seen many a movie and played many a game on it.

Of course it also helps to buy used or sub 30 dollar games only

Josh H

Well, what "ridiculously cheap" equates to varies from person to person.

I have maybe $100-150 bucks disposable income a month, so $150-200 is a good chunk of change for me. Even more so when I'm lucky if I have time to play 5 hours a week.

Plus, even at the current prices ($150, $179, $179) it's $508 to own all three and be able to play all the great games.

Also, what a console's worth will vary by the games available. Someone that doesn't like games with cartoony graphics probably thinks $150 is too much for a Gamecube. I'd love to get an X-box for KOTR, but $179 is too much to play that and Halo and Panzer Dragoon (the only other exclusives that interest me at the moment).

Joshic

the problem, like so many have already stated, is that games are too expensive. $179 for a system that plays games and doubles as a dvd player? heck, $179 is how much you pay for just a video card on a computer.

$179 is really cheap for all you get. but $50 is really expensive considering how crappy a lot of games are. I think the starting price for all games should be $40, and if they feel like raising it to $50 for AAA titles, that's fine by me. that's what usually happens with PC games.

Josh H

The DVD playback on consoles currently sucks, so they really can only double as a player for those who either don't know any better, or don't care about high quality playback.

Aghama

Console makers don't want you to own all three.

Josh H

I'm aware of that.

I was just stating that even after the price drops it's still costly to be able to play all the games that interest you--hardly "riduculously cheap" by my tight budget anyway.