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Games, Not the HD Technology, Will Drive Next-Gen Sales

12 Oct, 2006 By: John Gaudiosi

Next-generation video game sales will be driven by games, not HD DVD or Blu-ray Disc technology or online capabilities, according to a new report market research firm Interpret, “Interpreting the New Media Landscape.”

“Our opinion is that at this point, consumers haven't shown a significant amount of demand for the new DVD platforms,” said Michael Dowling, CEO of from Los Angeles-based Interpret. “There doesn't seem to be as discernable a difference as there was between VHS and DVD. And the difference hasn't been effectively communicated to consumers. Once this has been done, then we'll see whether that demand increases.”

Dowling said that video game consoles such as PlayStation 3, which comes equipped with Blu-ray Disc technology, and Xbox 360, which has an external HD DVD drive shipping in November for $200, can play a roll in the success of next-generation optical-disc penetration.

“PS3 and Xbox 360 may have an opportunity with the broader consumer who can get an HD DVD or Blu-ray technology for a couple hundred dollars cheaper,” Dowling said. “Out of the gate, the consumers who buy HD DVD or Blu-ray aren't price-motivated, and they want the best system. So they won't buy the video game systems for next-gen DVD.”

Dowling said one of the things that stood out in this report was the significant usage of new media platforms. Even in June, before YouTube.com had really taken off, consumers were downloading content to PC, iPods, PlayStation Portables and other portable media players. Dowling believes Microsoft has an opportunity to cash in on this market with its Zune player.

“The size of the screen doesn't have an impact,” Dowling said. “If you look at all alternative platforms, PC is the one that outstrips them all. But next are the portable digital video players such as PSP, Zune, iPod and then the cell phone, which is a lot lower. You're seeing tremendous demand to proliferate on all platforms, including gaming content.”

Even Apple is starting to offer downloadable video game content through iTunes for iPod. Although there isn't a deep library yet, Dowling said, there is a huge demand for games on these platforms.

The study also explored the impact of free advertising-based games on growing gaming brands. A game company could double or triple the amount of users to a game franchise if it was offered for free with advertising, Dowling said.

“It's a huge leap for game publishers to make, but what we see from consumers is that they have a much stronger appetite for content if they can get it for free,” Dowling said. “Brands that are known will benefit the most. There are people who have heard of The Sims who aren't willing to pay $40 or $50 to play it, but they would try it for free ad-supported.”

The report was derived from a sample of 2,000 interviews Interpret conducted online, weighted to 2004 Census data of 13- to 54-year-olds in the United States. In addition, researchers ran a parallel random-digit-dial telephone study as a back-up to ensure the report better reflected the U.S. population.

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