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GameStop: PS3 Sales Have Doubled on Price Cut; GTA IV Delay Beneficial
GameStop executives are fairly bullish on PS3 now that the sales pace has doubled following the price cut. They expect PS3 to continue to sell well with titles like Heavenly Sword and Lair on the way. GameStop also thinks the GTA slip will be beneficial over the long run. Also discussed: PSP sales, 360 sales, Wii shortages and more.
In a conference call to discuss the company's record second quarter earnings, GameStop's Richard Fontaine (Chairman and CEO), Daniel DeMatteo (Vice Chairman and COO) and David Carlson (Executive VP and CFO) commented on a number of issues reflecting their strong business.
In terms of hardware sales, DeMatteo noted that the price reduction on PS3 has doubled their unit sales from the prior sales rate and that "this sell-through has continued for weeks now." Moreover, the retailer is bullish on the sales pace continuing thanks to Heavenly Sword and Lair, which DeMatteo said "will sell well and we believe drive PS3 sales even further."
The theme of the call was clearly that price cuts do indeed make a difference. Although the price drop on the Xbox 360 was relatively minor, DeMatteo said that sales for all three SKUs nearly doubled. In addition, PSP hardware sales have increased almost 50 percent from last year's second quarter due to the price reduction, he said. "This has caused such demand for the PSP that supply has not caught up," he explained. "We expect that will abate in September with introduction of several new PSP SKUs."
On the slippage of GTA IV into next year, GameStop is not worried in the least. DeMatteo said that they were initially "disappointed" but "the back half is shaping up very nicely with titles that will fill the void."
"Halo 3 for the 360 will reach an all-time high in reservations at GameStop and we expect that it will break all sales records here," he continued. "We expect Madden (all formats) to beat last year's numbers and we are off to a good start. Guitar Hero III will be one of the quarter's best, and Legend of Zelda: Phantom Hourglass will be the best selling DS title... We really believe that the games coming out in the third and fourth quarter will make up the majority of any missed GTA sales. Games like Call of Duty, Mass Effect, Assassin's Creed will probably pick up because of the slip... strength of Wii and DS will pick up some of the [missed sales] as well."
If anything, the delay to GTA IV is probably a good thing for GameStop in the long run, said Fontaine. He noted that there is a "high overlap" between 360 users who would want both Halo 3 and GTA IV, so the retailer was concerned that with the price points for both games around $120 it would be difficult for gamers to come up with both games. "By spreading these out I actually think it's beneficial to us in the long run," he said.
Carlson added that reservations for GTA IV "were meeting our expectations... but our expectations might have been lower than the industry's because of the lower installed bases. Some people thought it might have done as many as the last GTA but that couldn't have happened with the install bases we're looking at."
Fontaine and DeMatteo also both praised the Wii for growing the audience, brining in more females and attracting people with "non-game games." DeMatteo said the console "continues to sell out almost immediately after being received in stores. Supply still can't match demand an unbelievable nine months after launch."
And while Fontaine said that GameStop "continues to see a broad acceptance of the $59.99 price point on 360 and PS3 titles, which reflect amazing price elasticity," he noted that "seven years after its introduction PS2 is still selling very well as the value machine in its field and the software continues to do extremely well."
Interestingly, Fontaine also made it a point to talk about the sales of Madden on GameCube. "As an amazing aside, last week we sold almost 6,000 copies of Madden 08 on Cube; GameStop may have been the only company in the U.S. to have even purchased it for that platform – not that we're expecting a comeback of the Cube but it does indicate trailing systems still have a following and over time the only retailer likely to carry the software for these systems will be GameStop," he said.
by James Brightman
GameStop executives are fairly bullish on PS3 now that the sales pace has doubled following the price cut. They expect PS3 to continue to sell well with titles like Heavenly Sword and Lair on the way. GameStop also thinks the GTA slip will be beneficial over the long run. Also discussed: PSP sales, 360 sales, Wii shortages and more.
In a conference call to discuss the company's record second quarter earnings, GameStop's Richard Fontaine (Chairman and CEO), Daniel DeMatteo (Vice Chairman and COO) and David Carlson (Executive VP and CFO) commented on a number of issues reflecting their strong business.
In terms of hardware sales, DeMatteo noted that the price reduction on PS3 has doubled their unit sales from the prior sales rate and that "this sell-through has continued for weeks now." Moreover, the retailer is bullish on the sales pace continuing thanks to Heavenly Sword and Lair, which DeMatteo said "will sell well and we believe drive PS3 sales even further."
The theme of the call was clearly that price cuts do indeed make a difference. Although the price drop on the Xbox 360 was relatively minor, DeMatteo said that sales for all three SKUs nearly doubled. In addition, PSP hardware sales have increased almost 50 percent from last year's second quarter due to the price reduction, he said. "This has caused such demand for the PSP that supply has not caught up," he explained. "We expect that will abate in September with introduction of several new PSP SKUs."
On the slippage of GTA IV into next year, GameStop is not worried in the least. DeMatteo said that they were initially "disappointed" but "the back half is shaping up very nicely with titles that will fill the void."
"Halo 3 for the 360 will reach an all-time high in reservations at GameStop and we expect that it will break all sales records here," he continued. "We expect Madden (all formats) to beat last year's numbers and we are off to a good start. Guitar Hero III will be one of the quarter's best, and Legend of Zelda: Phantom Hourglass will be the best selling DS title... We really believe that the games coming out in the third and fourth quarter will make up the majority of any missed GTA sales. Games like Call of Duty, Mass Effect, Assassin's Creed will probably pick up because of the slip... strength of Wii and DS will pick up some of the [missed sales] as well."
If anything, the delay to GTA IV is probably a good thing for GameStop in the long run, said Fontaine. He noted that there is a "high overlap" between 360 users who would want both Halo 3 and GTA IV, so the retailer was concerned that with the price points for both games around $120 it would be difficult for gamers to come up with both games. "By spreading these out I actually think it's beneficial to us in the long run," he said.
Carlson added that reservations for GTA IV "were meeting our expectations... but our expectations might have been lower than the industry's because of the lower installed bases. Some people thought it might have done as many as the last GTA but that couldn't have happened with the install bases we're looking at."
Fontaine and DeMatteo also both praised the Wii for growing the audience, brining in more females and attracting people with "non-game games." DeMatteo said the console "continues to sell out almost immediately after being received in stores. Supply still can't match demand an unbelievable nine months after launch."
And while Fontaine said that GameStop "continues to see a broad acceptance of the $59.99 price point on 360 and PS3 titles, which reflect amazing price elasticity," he noted that "seven years after its introduction PS2 is still selling very well as the value machine in its field and the software continues to do extremely well."
Interestingly, Fontaine also made it a point to talk about the sales of Madden on GameCube. "As an amazing aside, last week we sold almost 6,000 copies of Madden 08 on Cube; GameStop may have been the only company in the U.S. to have even purchased it for that platform – not that we're expecting a comeback of the Cube but it does indicate trailing systems still have a following and over time the only retailer likely to carry the software for these systems will be GameStop," he said.
by James Brightman