EARLY DEMAND COULD BE STRONG FOR NEXT CONSOLES, ACTIVISION SAYS

Kotick said he “would be very surprised if you didn’t see in the first 12 months unprecedented unit volumes on the next generation of hardware.” He also said if he “were making the calls and I was Sony or Microsoft I would be selling the hardware at a $100 higher retail price because I think they can command the premium.” At the least, he said, interest in the next Sony console shouldn’t be any less than seen on PS2.

Guessing there will be more change in consoles during the next cycle than took place the past 20 years, Kotick said “the real-time rendering capabilities of the next-generation hardware [and] the graphics capabilities are beyond what I think the consumer is expecting.” He said the industry was “really getting to the point where you're approaching film or television quality in imagery… Up until now, as good as a PlayStation 2 or an Xbox [game] looks, to a lot of consumers it still looks like bad UHF television.” But Kotick said the significant boost in technology during the next cycle will “bring more consumers” into the market. He also said the current consoles “really haven’t taken advantage of the audio capabilities” that exist. That, too, should change next cycle, he said. Online gaming and wireless connectivity boost the social experience of videogame playing and attract more consumers, he said. Kotick said the next cycle will also enable publishers for the first time to sell consumers new game levels and a variety of other products and services without traditional retailers.

Kotick vowed that Activision would be “one of the early entrants with many next-generation titles across all the new next-generation platforms.” But he offered no specifics on what launch titles Activision will offer. After experimenting with higher pricing on select games, Kotick said “we intend to price our products on the next-generation [systems] at higher wholesale prices than we have in the past.” Although he didn’t provide specifics, games are expected to be considerably more expensive to develop for the next consoles.

Despite his bullishness on the upcoming consoles, Kotick said Activision planned to support the current-generation consoles longer than it did in the last console transition. Like at least some rivals, he admitted “we exited the platforms a little too quickly” last time. He told the conference that by not making a Spider-Man game based on the film for the legacy PlayStation console, “we probably left a million and a half units on the table.” Kotick said that for a “very modest” investment, it made sense to make versions of games for older consoles that still had a large customer base.

Although the industry had never been able to attract many consumers older than 11 to handheld gaming systems, Kotick said Sony’s upcoming PSP could change that. He noted 18-34 year old consumers made up 1/2 the console gaming market.

Offering a considerably more conservative forecast for the next console cycle Tues. was Midway Games CEO David Zucker. He said his company was being careful to not make too much of an investment in games for the new systems initially. Although many game industry observers might think the best time to ship games for a new console is at the launch, Zucker said the best time is actually one year after launch because there was a “very low installed base as [the systems] ramp up,” so less software was purchased.

Of game rentals, Zucker also warned that “having too much quantity in the rental channel may adversely impact sales” of games, especially those that were story-driven and could be played relatively quickly. On the PSP front, Zucker predicted that business would be “significant” and the “only question is how significant.”

Like his rivals, Zucker said he didn’t expect to see additional console price cuts in the U.S. this year. Asked when we might see $99 pricing on PS2 and Xbox, he said “I don’t know,” although he expected to see price cuts next year.