Game makers pause, reload: Are price cuts next?

A customer plays a game on a Nintendo Wii at Best  (photo credit: ap)
A customer plays a game on a Nintendo Wii at Best
(photo credit: ap)
Kathleen Byrnes and Justin Choi, a married coupleattending medical school at Tulane University, say $40 is just too muchto fork over for a Nintendo Wii game they might not enjoy. They haven'tbought one since last fall, when they picked up "Star Wars: The ForceUnleashed."
Since then? "Nothing really interesting came out," said Byrnes, 23.
Their reluctance helps explain why this is a rough summer forthe video-game business. More people than ever are playing the games,but it's been a while since a blockbuster title arrived. Consumers arewatching their money more closely in the recession and managing toresist games that can cost as much as $60.
The trends came into play last month as Sony Corp. and NintendoCo. each reported console sales are dropping. Sony posted a loss forthe April-June quarter, while Nintendo Co. revealed a large drop in itsprofit.
The Microsoft Corp. division that makes the Xbox 360 said last month it lost money in the last quarter too.
"The health of the industry is terrible," said Wedbush Morgan analyst Michael Pachter.
For gamers, at least, there's some good news: Console prices will probably come down.
Sony's PlayStation 3, the costliest of the bunch, still sellsfor $400. Nintendo hasn't lowered the $250 tag on the Wii since its2006 launch - an extreme rarity for an industry that relies on regularprice cuts to broaden its audience.
Despite the bad earnings results, Sony and Nintendo bothreaffirmed their forecasts for the year. And Pachter thinks eachcompany "has no prayer" of meeting the target without cutting prices tolure buyers. In Nintendo's case, that might mean keeping the Wii at$250 but throwing in more free games.
At first, it didn't seem the recession would be big trouble forthe video-game business, which has managed to expand its audience inrecent years and become a mainstream form of entertainment. By manyestimates, the video-game industry is now larger than the musicbusiness.
Sony, Nintendo and Microsoft, as well as software publisherslike Electronic Arts Inc. and retailers like GameStop Corp., havepitched video games as cheap entertainment. Players can get many morehours in front of a TV screen from a $60 video game than from a $25DVD.
But people squeezed by the economy may not have even that tospend. Many have turned to online games that are cheaper or free. Evenloyal, "hard-core" gamers are being more selective instead of lining upto buy every new release, and many are trading used games amongthemselves.
They're also waiting for bigger, better titles coming later inthe year - in the holiday season, when video-game companies often rollout their biggest blockbusters. With many players now expectingsomething close to movie quality in their games, these titles can takeyears and tens of millions of dollars to develop.
When the spring of 2008 brought massive hits like "Grand TheftAuto IV" and the exercise game "Wii Fit," that was an exception. "GrandTheft Auto IV" raked in more than $500 million in its first week instores.
Last year's big spring would have made for tough comparisonsthis year even in normal circumstances. But by industry standards, thefirst half of 2009 has been unusually slow when it comes to top-flightgame launches. Combine that with the recession, and you get one chillysummer.
Ben Nielsen, a 29-year-old architectural designer in Portland,Oregon, usually buys three or four games a year. This year he's gottenonly one: "Mirror's Edge" for the Xbox 360. And that's only because itwas on sale, at $30.
He also has a Wii, but for that system, Nielsen said he hasn'tseen "anything compelling enough to buy, especially considering the paycut we took at my firm earlier this year."
Byrnes and Choi might spring for the $50 "Wii Sports Resort," arecently launched follow-up to the "Wii Sports" game that comes withthe Wii and buoyed its popularity. "Wii Sports Resort" also comes withan accessory that attaches to the Wii's controller to make it moresensitive.
In general, though, they remain cautious. They own seven gamesfor their Wii, and say they were disappointed with about half of them.
"With that kind of a track record," said Choi, who is 25, "we are not about to take more chances on future titles."