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EA Predicts Price Cuts Will Drive Software Sales

| 13 Mar 2009 14:46
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Electronic Arts Chief Financial Officer Eric Brown says the unprecedented length of the current console cycle means that while the majority of software sales growth is yet to come, it won't be driven by technology.

Speaking at the Wedbush Morgan Securities conference, Brown said that two of the three consoles currently on the market - the Xbox 360 and PlayStation 3, obviously - have hit the technological wall. "There's just no broadly-available consumer viewing technology beyond HD," he said. "You have to be a PC technophile with an ultra high resolution monitor to get past that." The Wii, on the other hand, has made it clear that such high-end hardware muscle isn't absolutely necessary for a console to achieve mainstream success

As a result, growth will be driven by other factors, including continued online innovation and, even more importantly, by future price cuts to game hardware, which he predicted will push software sales well beyond what's been seen so far. Using the original PlayStation as an example, Brown noted that only three percent of the software sold for the console was purchased when the system was available at its original price of $299, while almost half - 44 percent of "total lifetime units" - were sold once the price of the console dropped to $99 or less.

The PlayStation 2 experienced a similar phenomenon: While it managed 21 percent of its software sales at the launch price of $299, 45 percent came after the unit had reached $149 or less, an amount which is still growing. In the current generation of hardware, meanwhile, the Xbox 360 and PlayStation 3 had "rough parity" in the first half of 2008 but in the second half of the year the Xbox 360 enjoyed a "40-plus percent sales advantage... potentially as a result" of Microsoft's mid-year decision to reduce the price.

"The point here is that we've seen one major price drop thus far in this console cycle," Brown said. "We feel that we have a long ways to go, and a lot more of the unit sales will occur at the lower price points."

Source: Gamasutra

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