PlayStation, Xbox and GameCube Game Price Cuts

by Thomas on June 15, 2002 @ 3:27 p.m. PDT

THQ Inc. Chief Executive Brian Farrell said on Friday cuts in the price of PlayStation, Xbox and GameCube consoles have spurred sales of its video games, and should keep demand vibrant throughout the year. "For product that was on shelf as of May 1 ... there has been about a 20 percent lift," Farrell said in an interview with Reuters. THQ's games include "Tetris," "Red Faction" and titles related to characters from the "Nickelodeon" television network and World Wrestling Entertainment Inc.

In May, Microsoft Corp. (NasdaqNM:MSFT - News) slashed its Xbox to $199 from $299 just after an identical reduction by Sony Corp. (NYSE:SNE - News) for its dominant PlayStation 2 platform. Nintendo Co. Ltd. (7974.OS) followed by cutting its GameCube console to $149 from $199.

Farrell, of Calabasas Hills, California-based THQ, sees the growth as a catalyst for strength later this year, when solid demand and lower hardware and software prices are expected to further fuel the interactive gaming industry's optimism.

"This is the slowest seasonal time, but what (the cuts) will really do is set the stage for the fall selling season," he said. "To be up 20 percent in May and June is great, but if we are up 20 percent in September through November, that is the exciting part."

THQ, maker of games ranging from "Sonic Advance" for Nintendo's Game Boy handheld device to "Red Faction" for consoles, is banking on new wave of interest in the machines, as a wider range of buyers plug into gaming.

"This is just the first round (of cuts) -- they will go $149 and $99," he said. "There is a life cycle downward, and what that does is bring in the new purchaser -- the more price-conscious one, the mass-market purchaser."

GROWTH SEEN IN "MASS MARKET" DEMAND

Those consumers, who are more likely to casually buy a character-driven title at a Wal-Mart rather than wait on line at a retail software store for a hot game, will choose familiar themes such as Wrestling or "SpongeBob SquarePants," he said.

"While we have (a broad line), the real heart of our product lineup is our whole Nickelodeon lineup, and the new deal with Disney and Pixar that we have," he said. "All that stuff is targeted at the mass market."

In May, THQ signed a pact with the game arm of The Walt Disney Co. (NYSE:DIS - News) and with Pixar Animation Studios Inc. (NasdaqNM:PIXR - News) to publish games based on their next three films, which are set for release in summer 2003, the 2004 holiday season and the 2005 holidays, respectively.

Farrell also repeated his view that the company's revenues would grow by 35 percent this year, to over $510 million. The company has previously forecast per share profits for the year at $1.22 to $1.29.

The projected growth -- phenomenal at any time, much less when the sluggish global economy has forced many companies to drastically reduce their expectations -- holds true for several players in the gaming industry.

Experts attribute the industry's stamina to attractive, moderately priced products, and the expansion of its audience, as early gamers -- many now parents -- play games alongside their children. The growth in activities in the home spurred by terrorism concerns, also called "cocooning," is cited as well.

"The holiday season is going to be significantly better this year ... particularly now that the price cuts have come," he said. "I really think the video game industry is always going to be somewhat insulated against economics just because of the price points we are dealing at."

In the first quarter of this year, THQ's biggest platform was Game Boy Advance at 35.7 percent of revenue, followed by Xbox at 21.1 percent and PlayStation 2 at 12.1 percent. The three platforms, as well as Nintendo's GameCube, have started what analysts believe will be a five-year growth cycle of unprecedented size for the game industry.

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