By Troy Wolverton
TheStreet.com Senior Writer
1/20/2006 5:28 PM EST
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Some of Electronic Arts' (ERTS:Nasdaq - commentary - research - Cramer's Take) top games have just gotten a lot cheaper.
The retail prices of titles such as Madden NFL '06, NBA Live '06 and Need For Speed: Most Wanted have fallen by $10 to $20 this week, according to a report issued Thursday by Banc of America analyst Gary Cooper.
The price cuts, which only affected games made for current-generation consoles such as Sony's (SNE:NYSE ADR - commentary - research - Cramer's Take) PlayStation 2 and Microsoft's (MSFT:Nasdaq - commentary - research - Cramer's Take) original Xbox, are a reaction to weak video-game sales in recent months and likely will be the start of a trend, he said.
"We expect more price cuts to come from other publishers and believe very few new current-gen [eration] releases will be able to charge a premium price," said Cooper, whose firm has done investment banking for EA and rival Activision (ATVI:Nasdaq - commentary - research - Cramer's Take) in the last year.
EA doesn't set the retail price of its games; instead, those are set by individual retailers, noted company spokeswoman Tammy Schachter, who declined to comment on the company's recent wholesale pricing decisions or whether the soft game market inspired price cuts.
"Price reductions occur in the normal course of our business -- over the life of a title, price will come down," she said. "It isn't unusual for us."
According to Cooper's research, EA cut wholesale prices on 48 titles or game versions. Under this count, if EA dropped the prices on both the Xbox and PlayStation 2 versions of Madden -- which it did, according to Cooper -- the action would count as two separate price cuts.
The steepest drop Cooper reported was on the latest version of EA's World War II fighting game, Medal of Honor: European Assault. The retail price of the Xbox, PlayStation 2 and Nintendo GameCube versions of that game dropped from $39.99 to just $19.99, Cooper reported.
The cuts apparently don't affect games made for the latest-generation Xbox 360. Indeed, while GameStop's (GME:NYSE - commentary - research - Cramer's Take) Web site and Amazon.com (AMZN:Nasdaq - commentary - research - Cramer's Take), for example, are charging just $29.99 and $26.95, respectively, for Madden for the PlayStation 2, they're both still asking $59.99 for the Xbox 360 version of the game.
EA's price cuts were preceded by similar moves by Activision, Cooper said. "We believe other publishers will follow in the footsteps of industry leader EA," he said.
In the midst of a transition to new game system technology, the video-game industry struggled through a subpar holiday season. Both EA and Activision warned last month that their results would not meet Wall Street's expectations or their prior guidance. According to NPD, sales in December -- the most important month of the year for the industry -- fell about 4%.
