In rather extensive document to be found at the US Securities and Exchange commission, Activision has detailed to stockholders its worries about the rising costs of the next generation – and believes that it will take a sizeable hit in profits.
“If we are unable to sustain premium pricing on current-generation titles, our operating results will suffer,” the publisher stated in the SEC filing
“If we are unable to continue to charge the same prices we have historically charged for current-generation titles for Microsoft’s Xbox 360, Sony’s PS3 and Nintendo’s Wii, as well as for next-generation consoles, whether due to competitive pressure, because retailers elect to price these products at a lower price or otherwise, we may experience a negative effect on our margins and operating results.
“Further, we make provisions for price migration and channel protection based upon certain assumed lowest prices and if competitive pressures force us to lower our prices below those levels, we may experience a negative effect on our margins and operating results.”
Now you might expect that this is all just a ploy by the company to push for higher game prices – but Activision seems to be acutely aware that the games market will only stand for inflated prices to a certain degree – and will crumble after that point.
So, like the other Mega-Publisher, they’ll be looking to monetise their games and services through the joyous future of microtransactions, and a push for dispensing with the middle-man by way of digital distribution.
“If we fail to successfully manage our new product development, or if we fail to anticipate the issues associated with that development, our business may suffer,” Activision continued.
“Our business model is evolving and we believe that our growth will depend upon our ability to successfully develop and sell new types of products, including free-to-play games which are monetized through in-game microtransactions rather than an up-front fee, and to otherwise expand the methods by which we reach our consumers, including via digital distribution.
“Developing new products and distribution channels will require substantial up-front expenditures. If such products or distribution channels do not achieve expected market acceptance or generate sufficient revenues upon introduction, whether because of competition or otherwise, we may not be able to recover the substantial development and marketing costs associated with those products and distribution channels.
“In addition, expanding our business model will add complexity to our business and require us to effectively adapt our business and management processes to address the unique challenges and different requirements of any new areas in which we operate, which we may not be able to do, for lack of institutional expertise or otherwise. If any of these occur, our revenues, margins and profitability could decline.”
With EA and Activision both looking to microtransactions to save them, expect a lot more DLC, paid-for in-game cheats and aesthetic guff in the future.
Last Updated: February 28, 2013