There's nothing like a double. Whether it is the value of a stock or a set of sales figures, doubles are, as Golem from Lord of the Rings would hiss, precious.
This time, I'd like to talk about an example of the latter. Sony (NYSE: SNE) reported that for the first seven days following the reduction of the selling price for the PlayStation 2 unit, sales increased 216%. Wow! For the two weeks following that period, sales were up 141%... see previous exclamatory palindrome.
It's basic economic supply/demand curves... and if Kevin Costner were an economist, he'd probably say something along the lines of "If you cut the price, they will buy it." And who would dare argue with the guy who gave us Waterworld? Microsoft (Nasdaq: MSFT) sure as heck wouldn't. That company had initiated its own cheaper price for the Xbox in an effort to goose its installed user base.
Much has been made of the theory that price reductions stimulate the impulse to buy in the "casual gamer." I won't argue that reality, but I believe there is another beneficial dynamic at work as well: Those who already own one system will now own two... and those who already own two will take on a third. However, people who own competing systems probably tend to make at least one of them essentially obsolete as far as they are concerned (i.e., cease adding software to that specific library).
The software makers have a great opportunity with the expansion of the game-unit universe. Activision (Nasdaq: ATVI), Electronic Arts (Nasdaq: ERTS), THQ (Nasdaq: THQI), and Take-Two Interactive (Nasdaq: TTWO) should see increased sales for their biggest franchises. In particular, let's hope that Take-Two can take advantage of the bigger user base come the fourth quarter, when it releases the next chapter in the Grand Theft Auto legacy, as its latest report was rather dismal.
And about the idea that a certain amount of households with one or two systems will suddenly own two or three once the mindshare matrix is aware of the price cuts, I'd have to wonder if slightly "tweaking" each version of a franchise would provide an impetus for a multisystem home to purchase the same basic software for each individual game unit. As an example, what if Spider-Man 2 for the PlayStation format contained a making-of documentary, and Spider-Man 2 for the Xbox contained an exclusive promotional music video associated with the film, plus its own unique mini-game? Would collectors be piqued to open their wallets?
The software publishers aren't the only parties happy about all the new PlayStation adopters; retailers such as Wal-Mart (NYSE: WMT) and Electronics Boutique are also tickled pink. And I'll finish with this: Should Nintendo act revolutionary and drop the price for its GameCube?
Activision and Electronic Arts have both been recommended in
Motley Fool Stock Advisor
. Sign up for six months with a money-back guarantee.
Fool contributor Steven Mallas owns none of the stocks mentioned.
Terms & Conditions
RSS Headlines
Fool UK