Report: Execs counting on console price drop

A new study by International Data Group (IDG) Entertainment finds game industry CEOs anxious for Sony and Microsoft to drop the prices of their PlayStation 2 and Xbox consoles to stimulate sales this holiday season. Execs also commented on the arrival of Sony's PSP, as well as next-generation console hardware, and what it will mean for the business.

IDG Entertainment's 2004 Industry White Paper is the 12th annual industry report from the publishing and research group, whose other major industry properties include GamePro magazine and the annual Macworld computer expo. The study, which is produced primarily for the use of other industry executives, is based on interviews with more than 50 publishers, developers, retailers, market analysts, and investment bankers.

In the report, many of the industry executives interviewed commented that they would like to see lower retail price points on the PS2 and/or the Xbox, saying it would "jump-start" sales of not only the hardware and related accessories, but also software.

"Everyone is hoping for price cuts on hardware," said Wes Nihei, editor-in-chief and vice president of IDG Entertainment, "and [is saying that] the health of the industry is tied to both Microsoft and Sony giving in this year [and lowering prices]."

The study also pointed out executives' concern over the market's move away from original properties to licensed games, predicting that only a few major hits will rack up big sales this holiday season. "Independent developers are getting squeezed out of the market by the rising cost of development, distribution, and marketing," said Nihei. "The shrinking retail hole has made profit difficult for all but the biggest hits."

Interviewees went on to sound off on a variety of subjects. Most commented that only the Sony PSP has a chance of competing with Nintendo's Game Boy Advance but that questions of price and game library still make the PSP less than a sure thing. Execs seem to be in agreement that the next generation of video game hardware will hit in 2006, noting that the focus will be more on the functionality and features of each console and less on improvements in graphical quality.

Execs also noted the negative impact of the increasing popularity of sales of used games, pointing out that this has led to a shrinking of the "window" in which brand-new games can be sold at the full price of $49.99. The money-making opportunities of the future, says the report, are in direct online distribution of games and in a more serious approach to growing global markets like China.