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Analyst:  CoD5  Discount Could Mean Lower 2009 Prices
Analyst: CoD5 Discount Could Mean Lower 2009 Prices
December 23, 2008 | By Leigh Alexander

December 23, 2008 | By Leigh Alexander
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Analysts note Activision's discounting one of its holiday blockbusters, Call of Duty: World at War ten dollars to $49. Could this be the beginning of a discounting trend for 2009?

"While the move may be part of an annual promotion, we believe a $10 discount on one of the industryís top holiday releases highlights the risk of lower software pricing moving into the new year," says Lazard Capital Markets' Colin Sebastian.

CoD5's price cut follows similar reductions on most Guitar Hero: World Tour SKUs, notes Sebastian -- and it's not just Activision, says Sebastian, who's observing "broader price cuts" from Ubisoft and Electronic Arts.

Sebastian, as well as many of his fellow estimates, shaved a bit more off of their estimates for Activision's fourth quarter.

"Although we previously lowered our estimates on December 8 due to slower than expected Guitar Hero sell-through, we believe that more promotional pricing as well as ongoing concerns over the music genre justify further adjustments," he says.

However, while almost all game publishers are seeing estimate reductions from analysts, Activision isn't taking quite the same level of impact, analysts say.

"Despite the lowered estimates, the overall strength in Activisionís core business and continued growth of Blizzardís business give us great confidence in our... 2009 estimate," added Wedbush Morgan analyst Michael Pachter, who also slightly lowered expectations for Activision today.


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Comments


Frank Smith
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$50 shouldn't be a discount, it should be the normal price. The $60 price on games is the reason I stayed away from current video consoles, opting for PC instead. I'll pay $50 for a really good game, but $60 isn't even an option for me, after all its just entertainment. Plus I could go buy three $20 titles that may be older but just a fun.

Marko Djordjevic
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While you're right about the cost, even PC games are overpriced. You are essentially paying for a CD and plastic, not exactly worth 50 dollars considering you now play most games sans CD. I would say even PC games should drop in price, especially if offered via download services, eg. Steam.

Jason Seabaugh
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You're not paying for a CD and plastic! You're paying for the years of talent and hard work that went into creating what is burned into the CD. I'll admit, prices are getting steep but I stay away from PC games because of the system requirments that would have me dropping hundreds of dollars to upgrade just to get a game to run decently. I prefer a $60 game on a $500 console to a $50 game on a desktop that cost me thousands to keep current.

Frank Smith
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You both right and wrong, you don't pay for a CD you pay for the content. And desktops don't cost thousands to keep current, even a moderately priced machine stays current for a couple of years and most medium settings on a PC are better than console graphics, not to mention PC gameplay is almost always better than consoles. Also PC games drop in price much, much faster than console games.

Mike Lopez
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The industry needs to move towards 100% Downloadable Content distribution and cut out the grubby brick and mortar distributors who take home half the retail price. This would allow publsihers and private developers to set a retail price at $30-40. It will also stop the Wallmarts of the world from censoring content.

Alan Rimkeit
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Paying $60 is why I buy most of my games used. I would buy them new if they were $40, but $60? No way, that is just to much for any game. $50 is more reasonable but still not low enough.

David Tarris
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If $60 is unreasonable for 20+ hours of content when you pay $20 for a 2 hour movie and $15 for a 1 hour album, then buy old and used games, but don't go whining that it's "unfair" and that you're "paying for plastic". It makes me question whether or not you people have anything to do with making games when you want the price dropped by such amounts. After all, something to the tune of a mere 10% of games even make a profit these days, so since games are a clearly inelastic product, how would lowering the price do anything to help grow the industry and our take-home pays?

Frank Smith
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The fact that you think games are inelastic is not a good reason to justify racking up the prices on games from $50, which it used to be, to $60. I bet that most consumers don't calculate hours to dollars for the value of a game, or any other entertainment. Yeah you pay $20 for a movie, but whats the quality of an hour of movie viewing against an hour of game play. The paying for plastic crowd clearly doesn't understand media and they'll search for retail value. Digital distribution as an exclusive probably won't be a good thing because games will lose any "value" to those consumers. I'd rather sell my games at $40 or $50 and sell a few more copies than fewer. If it comes to me making the same amount of money I'd rather more people have access to my game.

Adam Bishop
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Anyone who buys a CD for $15 and only listens to it once is insane. CDs I buy easily get listened to a dozen, two dozen times over the course of a couple years, so if you want to look at it like that, most of the CDs I've bought have given me entertainment for under $1 an hour.



Also, while I don't know what price point exactly would yield the greatest profit, sometimes lower prices do boost sales. People didn't buy very many movies when VHS was the norm because they were too expensive. DVDs, on the other hand, provide basically the same service, cost less, and sell far more copies. In that case, lower prices boosted sales and revenues. I don't know the sales figures, but the best case study to look at would probably be DS sales. DS games are much less expensive than 360 or PS3 games, so do they sell more copies?

Leah Raeder
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@ Jason Sealbaugh:



"I prefer a $60 game on a $500 console to a $50 game on a desktop that cost me thousands to keep current."



This is a gross exaggeration that has become more inaccurate every year. Consumer PC hardware prices are still steadily decreasing while console prices are on the rise. At some point they will meet, and that point is not far off, considering that you can currently assemble a decent gaming machine for a cost similar to that of a PS3.



Then, factor in that the only upgrade a gamer needs to make over the course of a PC's 1 to 3-year+ lifespan is a video card; that most games do NOT require the latest and greatest hardware to run well, especially multiplayer games; and that a computer is a multi-purpose tool that can do much more than simply play games and movies like consoles--then the price difference between a PC and a console doesn't look so great anymore.


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