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[sonycowboy]

August 17, 2004 09:50 AM US Eastern Timezone

Game Industry Pins Q4 Hopes on Hardware Price Drop, Survey Finds; CEOs Interviewed Expect Big Franchises to Lead Software Sales

OAKLAND, Calif.--(BUSINESS WIRE)--Aug. 17, 2004--Heading into fall, industry CEOs say a price cut in fourth quarter on the Sony PlayStation(R) 2 and Microsoft(R) Xbox hardware is key to strong performance of the overall video game market for 2004, according to interviews done by International Data Group (IDG) Entertainment.

In the software area, executives predict the big video game franchises will continue to lead game sales. Electronic Arts is expected to be the big winner, with its sports franchises, but sequels of other licensed titles will be popular with hard core gamers: Doom III, Halo 2, Half-Life 2, Metal Gear Solid 3, The Matrix Online and Grand Theft Auto: San Andreas.

IDG Entertainment, a game industry powerhouse that includes GamePro magazine, which works closely with retail analyst firm NPD Data Group and industry analyst firm IDC, interviewed more than 50 publishers, developers, retailers, market analysts and investment bankers for the company's 2004 Industry White Paper on the current state and future outlook for video games.

Game industry executives interviewed repeatedly commented that lower pricing for consumers on either or both of the two popular platforms, held firm in 2003, would do much to stimulate the market, jump starting sales of hardware, accessories and software for the year.

"The console segment is at mid cycle, awaiting details on next generation systems expected in 2005," said Wes Nihei, editor-in-chief and vice president, IDG Entertainment. "Everyone is hoping for price cuts on hardware - and say the health of the industry is tied to both Microsoft and Sony giving in this year."

Other predictions from the report include:

-- In the handheld area, only Sony's PSP has a chance of stimulating competition with Nintendo. How much PSP will cost and how much content it will have are the key questions

-- Next Generation consoles will hit in 2006 and be focused less on the importance of graphical capability and more on functionality and other features of each console

-- Interest in direct distribution of games to the casual gamer is hot. Comcast and Yahoo are offering game services, powered by Exent, and Infinium is expected to offer a streaming service to a receiver in the living room stack in November

-- The window for full price $49 releases is shrinking. Used game sales is one of the reasons

-- With gaming more global than ever before, the industry will continue to focus efforts on developing overseas markets. China, with its gigantic population and PC-based culture, is regarded as having huge opportunity for growth

Industry executives expressed concern over the lack of new Intellectual Property (IP) or original games as a critical factor in the long-term health of the industry.

"Independent developers are getting squeezed out of the market by the rising cost of development, distribution and marketing," said Nihei. "The shrinking retail hole has made profit difficult for all but the biggest hits. This has reduced the number of independent development studios and caused many developers to increasingly seek buyouts or relationships with more established publishers."

Skyrocketing costs have affected even the big publishers, causing some to pare down the number of titles being put out, industry executives said. IDG's Annual White Paper is geared to helping its customers get a handle on major trends.

IDG Entertainment's 2004 Industry White Paper ($249.95) is available for preview or purchase at http://www.idgentertainment.com.

 

[PhatSaqs]

-- Interest in direct distribution of games to the casual gamer is hot. Comcast and Yahoo are offering game services, powered by Exent, and Infinium is expected to offer a streaming service to a receiver in the living room stack in November

-- The window for full price $49 releases is shrinking. Used game sales is one of the reasons

Interesting...

 

[Deku Tree]

Do you really think Sony and/or MS are going to do a price drop this holiday?

 

[sonycowboy]

Do you really think Sony and/or MS are going to do a price drop this holiday?

Nope!

Publisher have begged every year for the past 3 years now. Hasn't worked.

 

[P90]

-- The window for full price $49 releases is shrinking. Used game sales is one of the reasons

I see it as the GH effect, more than used games. Except for a few games (New Zelda, Halo2, and MP:E), I'm waiting for the $19.99 treatment for the rest of the games I will be buying. I have been doing that for over a year now.

I'm not sure if the $19.99 effect is the best for the software houses or helps the hardware manufacturers (unless you are dominate. Time is finite. People buy games for one system and don't have the time or money to buy games for another system). Even then, the long term effect (and graphic whorism) may be gaming's DDT.

 

[pilonv1]

-- The window for full price $49 releases is shrinking. Used game sales is one of the reasons

It's not only used game sales. Why buy a full price title when you know it's going to be $20 six months later? That's the behaviour these platinum/greatest hits line is breeding. Add into it games that bomb and end up at $20 after a month, and who is going to buy a full price new release game? The only difference is with online titles where everyone picks it up at release, but for offline games, the experience is the same 6 months later and $30 cheaper.

Industry executives expressed concern over the lack of new Intellectual Property (IP) or original games as a critical factor in the long-term health of the industry.

"Independent developers are getting squeezed out of the market by the rising cost of development, distribution and marketing," said Nihei. "The shrinking retail hole has made profit difficult for all but the biggest hits. This has reduced the number of independent development studios and caused many developers to increasingly seek buyouts or relationships with more established publishers."

Nothing new here. Yet no one does anything about it.

Skyrocketing costs have affected even the big publishers, causing some to pare down the number of titles being put out, industry executives said.

That would help, there's an absurd number of games out this year that are virtually identical.

 

[Link316]

I blame used game sales, at least with GH/PT games, gaming companies are still getting a sale on them, but with used games they don't make a dime on them and a sale of a used game also takes away sales from the actual game, problem is EB and Gamestop keeps pushing them onto consumers cause used games have much higher profit margins than new ones

 

[IJoel]

I really doubt any price drops. There's really no motivation right now for either MS or Sony to drop prices. Nintendo perhaps will need to do so, but MS and Sony seem to be doing very good with current sales. This isn't even taken in consideration the great amount of big hits coming this fall.

 

[Seth C]

I blame used game sales, at least with GH/PT games, gaming companies are still getting a sale on them, but with used games they don't make a dime on them and a sale of a used game also takes away sales from the actual game, problem is EB and Gamestop keeps pushing them onto consumers cause used games have much higher profit margins than new ones

And the blame for used game sales go right back to the publishers. How much do the retailers make on game console sales? 1%? .5%? And on new game sales? 5-10% maybe? Where are they supposed to turn a profit?

 

[Link316]

retailers make 20-25% off the sale of a new game, that's a bigger cut than some developers get, problem is with used games they're the only one getting any profit of it while the publishers and developers stop seeing any return on their work, this might seem great if you work at EB or Gamestop, but if you look at the bigger picture its harming the industry especially the smaller publishers and developers, anyway I wouldn't care as much about EB and Gamestop selling used games if they didn't try to hawk them off as new ones all the time