Video game industry has turned corner: EA

NEW YORK Thu Nov 29, 2007 4:36pm EST

Visitors play at a Playstation exhibition stand at the Games Convention 2007 fair in the eastern German city of Leipzig August 23, 2007. Sony Corp's PlayStation 3 game console is now priced at the right level to meet the company's fiscal-year sales target of 11 million units, said John Riccitiello, chief executive officer of video game maker Electronic Arts <ERTS.O>. REUTERS/Hannibal Hanschke (GERMANY)

Visitors play at a Playstation exhibition stand at the Games Convention 2007 fair in the eastern German city of Leipzig August 23, 2007. Sony Corp's PlayStation 3 game console is now priced at the right level to meet the company's fiscal-year sales target of 11 million units, said John Riccitiello, chief executive officer of video game maker Electronic Arts <ERTS.O>.

Credit: Reuters/Hannibal Hanschke (GERMANY)

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NEW YORK (Reuters) - The video game industry has turned a corner after a lengthy hardware transition, with new console purchases expected to reach 200 million units in five to six years, the head of Electronic Arts Inc ERTS.O said on Thursday.

"It's been the longest, hardest transition in the history of the industry," EA Chief Executive John Riccitiello told the Reuters Media Summit in New York.

"Last Friday marked one of those points where you can say something's changed," he said. "Around the world, based on the data I've got, it was pretty clear that the transition is now over.

Key to that was Sony Corp's (6758.T) recent price cut for its PlayStation 3, which should ensure the struggling console hits the company's fiscal-year sales target of 11 million units, Riccitiello said.

Since its launch a little more than a year ago, sales of Sony's PS3 have lagged those of Nintendo Co Ltd's 7974.OS Wii and Microsoft Corp's (MSFT.O) Xbox 360.

But in a sign of changing fortunes for the PS3, U.S. sales jumped in the weeks following a mid-October price cut and launch of a lower-priced version. Sony said this week that PS3 sales on "Black Friday," the day after Thanksgiving that is a big U.S. shopping event, more than tripled from a year before.

"It looked like it might have been a two-horse race, but it's clearly a three-horse race," Riccitiello said of Sony's revitalized sales. "I think from this point, pleasantly for me, it's sort of fat city in the game industry."

Separately on Thursday, Microsoft said it had sold more than 310,000 Xbox 360 units during the week of Thanksgiving, nearly as many as it sold in the whole month of October.

Riccitiello suggested all of the console makers would cut prices next year, on their way to selling more than 200 million units by about 2012 or 2013.

That is about 18 percent higher than total sales in the last console cycle, which started in 2000 with the launch of Sony's PlayStation 2.

EA expected to increase its market share for the Wii, which has been dominated by games from Nintendo rather than outside publishers. EA now had about 14 percent of Wii software sales, versus more than 20 percent for the Xbox 360 and PS3.

"The Wii is a challenge for all of us ... partly because of the strength of Nintendo and partly because it's a more casual game experience that most game companies aren't as comfortable building for as they are for the Xbox 360 or PlayStation 3," Riccitiello said.

One game that would boost EA on the Wii is "Rock Band," which went on sale for the Xbox 360 and PS3 last week, and is due to come out for the Wii next year.

"Hundreds of thousands (of copies) sold through over the Thanksgiving weekend. Literally every box we made," Riccitiello said. EA distributes "Rock Band" for MTV Networks, a unit of Viacom VIAb.N. The $170 game is challenging Activision Inc's (ATVI.O) "Guitar Hero 3", which racked up $115 million in sales in its first week.

Riccitiello, who engineered a deal last month to buy two independent game studios for up to $855 million, said most consolidation in the industry had already taken place, but there was potential in fast-growing areas such as subscriptions and advertising.

"Is it ripe or has it already been picked? I would argue that it's been largely picked," Riccitiello said. "That doesn't mean it's done. I think there will be more consolidation to come. But let's just say a lot has already happened."

EA shares fell 0.6 percent to $56.95 in late afternoon trading on Nasdaq.

(Click here to see Reuters MediaFile blog)

(Editing by Jeffrey Benkoe and Braden Reddall)

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