Michael Hickey - The Benchmark Co. LLC
Hey, guys, thanks for taking my questions. Great quarter. Blake, you gave 25 million units growth for, I think, calendar year 2016. I'm curious if your assumptions, if you were expecting ease of new consoles this year, any price cuts of existing hardware? Or maybe any other sort of key considerations to that estimate? And then, I realize obviously you can't announce any new hardware plans from your partners, but there has been sort of wide speculation that you have a mid-cycle upgrade coming. And I was curious if you could sort of shape for us why a mid-cycle upgrade could be positive for the industry. And also if there is any potential development expense to developing games in 4K. Thanks guys.
Blake J. Jorgensen - Chief Financial Officer & Executive Vice President
I can't tell you a lot about what Microsoft or Sony or other console makers plans are. I think we've all seen some of the discounting that's been going on in the industry both through the holidays and post holidays. And there is continued aggressive bundling across the industry. And I think all of that acts to continue to drive people into consoles. I think the other thing that's important to remember is there are very few Gen 3 titles being still made. Most of the new titles that we're talking about as well as the industry is talking about are Gen 4-only, and that is a – will clearly start to push people to ultimately buy a new console if they've resisted, because they've had a choice to play a game on either Gen 4 [sic, presumably means Gen 3] or Gen 4.
In terms of any mid-cycle upgrades, once again I can't predict. But what I can tell you is that what was heard I think publicly from the console makers is they're realizing that the compatibility issue across consoles is an important consumer issue. And as Microsoft has shown, they've tried to do with some backward compatibility on to older titles and new titles. I think that's going to be an important part of what a mid-cycle might look like if there is one, which removes a lot of the risk associated with what we've seen historically with console cycles. We don't spend a lot of time worrying about it, because we feel like our ability to develop for whatever new technology comes, the risk of that's been minimized because we've moved towards one single engine, Frostbite. And we're able to port that to whatever platform or point that to whatever platform is evolving or is upgraded.
In addition, our business model is so much more diverse now than it has been historically, that the notion of a console cycle becomes somewhat irrelevant in our ability to generate strong earnings and cash flow. So we'll all be interested to see where Microsoft and Sony come out if they do something at E3 or sometime in the year to come, but we're excited about the continued growth in the business and not afraid of a cycle change if that was to occur.
