EA's Brown: Longer Console Cycle, More Price Cuts Ahead
The current console cycle will be longer than in previous years, says Electronic Arts CFO Eric Brown -- which means the highest-growth period for software sales still lies ahead following further price cuts.
Speaking at the Wedbush Morgan Securities conference in comments listened in on by Gamasutra, EA's Brown noted that with two out of three platforms currently capable of rendering graphics in full high definition at 60 frames per second, there's just not much further they can go at the current stage of tech.
"I myself am not quite sure where we go from here," said Brown. "There's just no broadly-available consumer viewing technology beyond HD. You have to be a PC technophile with an ultra high resolution monitor to get past that."
At the same time, the success of the Wii's innovative controls has demonstrated that graphical sophistication and high-powered processors are increasingly less relevant to the success of a hardware platform, said Brown.
The online capabilities of the PlayStation 3 and Xbox 360 and the increasing innovations in digital distribution also mean there's plenty of room for continuing growth on these hardware platforms, Brown added.
He also referenced the previous cycle to explain the model for his projections. The PlayStation 1 sold only 3 percent of its total lifetime software units at its launch price of $299, said Brown.
"You can see that once the price point moved to $99 or less, that's when buying really started to move -- about 44 percent of total lifetime units."
Although the PlayStation 2 had greater penetration of 21 percent at the $299 launch price point, it too saw the majority of its software sales after greater price reductions -- at $149 and below, 45 percent of its lifetime units were sold.
"Ten years later, PlayStation 2 is still being sold today in the marketplace," Brown added.
In the current cycle, Wii's $249 launch price was initially the lowest, but last September, Microsoft's Xbox 360 Arcade SKU reduction brought its price to $199 while Wii remained the same.
"We look at the data and what we can see is that that actually had a pretty interesting catalyzing effect on their unit sales," said Brown. "In the first half of calendar 08, there was rough parity between PlayStation 3 and Xbox 360. Second half of the year, [there is a] 40-plus percent sales advantage to Xbox versus PS3, potentially as a result of that price drop."
"The point here is that we've seen one major price drop thus far in this console cycle; 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."
Concluded Brown: "History holds more [hardware] units translates, times tie ratio, to more software units and software dollars for third-party publishers. Those are the key takeaways in terms of where we see this console cycle at this point in time."