EA: Console Prices Not Falling Fast Enough
Electronic Arts’ chief financial officer Eric Brown recently spoke on the video game industry’s present condition. Brown is concerned with the slow rate of console price reductions, and believes manufacturers have a long way to go compared to the previous generation.
"I think pricing has not come down as much as we would have expected at this point in the cycle compared to the last," said Brown while speaking at the Goldman Sachs Technology and Internet Conference in San Francisco.
He emphasized two instrumental console price breaks from this past holiday season to illustrate his point. Wal-Mart offered $50 gift cards for free with purchase of a Wii, which greatly benefited Nintendo’s sales. Also, Sony’s enjoyed an 84 percent sales increase year-over-year for the quarter thanks to the PS3’s price being trimmed to $299.
"We do have a long way to go with respect to pricing. Last cycle, approximately 48 percent of PlayStation 2 units were sold at a price point of $149 or less. Clearly at $299 we're nowhere near that price point."
Responding to a question about the expected life cycle of the current console generation, Brown said the jump to new hardware won’t benefit consumers as much because there won’t be as much of a graphical upgrade.
"It's a possibility that we don't see a sharp and distinct console transition like we've seen in the past,” he continued. “Today, we have two of the three consoles operating at full, high-definition and are running games at 60 frames a second.
"If you have a multi-billion capital investment to develop the next generation hardware, the question I would ask is, 'If you were to produce that, what would you display it on?' There's really nothing in terms of broadly available consumer viewing technology other than 1080p televisions."
Elaborating on his predictions of a longer console life cycle, Brown noted DLC, new motion control technology, and online multiplayer developments as key reasons this generation will be extended.
If this console generation truly isn’t going to be ending any time soon, can you see Microsoft, Sony, and Nintendo surviving with their current console prices? What do you think all three systems will cost in the next two years?