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Will Gamers Take a Hike?

Activision (ATVI - Get Report) 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 - Get Report) 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 - Get Report) 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.

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