 |
|
 |

| |
Analyst: CoD5 Discount Could Mean Lower 2009 Prices
by Leigh Alexander
|
|
| |
|
December 23, 2008
|
| |
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 industry’s 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 Activision’s core business and continued growth of Blizzard’s business give us great confidence in our... 2009 estimate," added Wedbush Morgan analyst Michael Pachter, who also slightly lowered expectations for Activision today.
|
| |
|
|
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?
"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.