Will Gamers Take a Hike?
Activision (ATVI) CEO Bobby Kotick is determined to raise prices on video games. But analysts and investors question whether consumers will play along.
Expanding on comments he had made previously, Kotick said this week that his company plans to boost the wholesale prices $10 per unit on top-line title games for next-generation consoles, such as Microsoft's (MSFT) upcoming Xbox 360 -- those titles sell for roughly $50.
The price hike is a key part of Activision's strategy of boosting operating margins during the next console cycle.
Kotick apparently is not alone in seeking more dough from consumers. A survey of Xbox 360 titles available for preorder on Web stores such as GameStop and Amazon.com indicates that other software publishers including Electronic Arts (ERTS) and Take-Two Interactive (TTWO) are also going to try to increase prices for next-generation games.In the near term, the plan may pay off, some analysts say. If consumers running out to buy an Xbox 360 on day one aren't intimidated by the $700 price that retailers are charging for the mandatory bundles, they likely aren't going to balk at an added $10 for individual games. "We've said we're to going sell those products at higher price points until ... the market forces us to sell them at lower price points, which we don't think is likely," Kotick said in a presentation at the Banc of America conference in San Francisco on Monday. "We don't really think that there's a lot of price sensitivity on the part of the consumer, if you're delivering value," the CEO said. Despite Kotick's bravado, many analysts doubt that the price hike will stick -- with the exception of truly extraordinary games. Pressures ranging from high hardware costs to less-expensive titles to increasing competition are likely to keep prices in check for most games, they say.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV