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The price is right, but is the strategy on target
Now that Visual Concepts and ESPN Videogames have confirmed that ESPN NBA 2K5 will retail for $19.99, GameDAILYBiz decided to take a look at the company's latest strategy.
What was the impetus for selling these sports titles (starting with ESPN NFL 2K5) at such a low price? How has the plan worked so far and will it continue? To find out more, we spoke with ESPN Videogames' Matt Atwood and analyst Michael Pachter from Wedbush Morgan Securities.
Budget Price, Big Budget Games
Pachter says that ESPN "is going to try to market the games at little or no profit, probably thin profit, and gain share." He continued, "They're trying to win over customers, either converts from EA Sports games or new people who would like to play sports games but don't want to pay $50; then their intention is to slowly increase the price of the game."
According to Atwood, the new strategy was not a reaction by ESPN Videogames to EA Sports. "The goal here is to know us and appreciate our quality, said Atwood." "Our games review very well. NBA has been number one rated for the last two years, so we're confident in our product." Atwood insists that NBA is "not a budget game at a budget price," but rather "a critically acclaimed game that we are putting more resources than we ever have into development and marketing."
Nevertheless, we asked if ESPN was worried that NBA 2K5 or their other sports titles might be viewed as budget titles by less informed casual gamers. To offset this perception, Atwood says ESPN is counting on word of mouth as well as "heavy" marketing. "If the quality is there...People will tell people because it's such a great value."
Pachter agrees. "If Ralph Lauren is 50 bucks and Gap is 20 bucks -- you know what? -- you think about it before you buy the Ralph Lauren brand. Why pay 50 bucks for a brand name when ours is just as good?"
Franchise Mode
Atwood sees the strategy as a long-term one, and thus far ESPN Videogames is "very pleased" with the results of ESPN NFL 2K5, despite the fact that EA's Madden NFL 2005 is still the number one seller at the higher price of $49.99. "It's been a great year for us."
Pachter points out that "the effects on EA aren't going to be felt in the first million units...it's the last million units where they're vulnerable because the purchaser of those last million units is not the hardcore gamer -- it's mom."
Pachter believes that ESPN actually has an advantage because there's only so much you can do with team sports. "There are very few opportunities in videogames to compete on price," but because sports games are so similar, price could be the difference maker.
What about EA?
There's also the issue of brand-name recognition. Pachter reminded us that the ESPN name shouldn't be taken lightly, and that it could actually have more of an impact on the success of the non-football games because those titles aren't up against the Madden brand.
So will EA Sports eventually have to cut the price of Madden? Pachter said, "I think they have to; If I were there I would do so."
As for Take-Two Interactive's involvement in this strategy, we asked Atwood how ESPN feels about their contributions. "Take 2 has been a great partner, a phenomenal partner," said Atwood. "They have such great connections in distribution, so the relationship with them has definitely been to our advanatge."
Interestingly, Pachter believes that "Take 2 revived the whole franchise," and could even wind up owning these sports franchises, whenever the ESPN license comes up for renewal. "Ultimately, I think that Take 2 will look at acquiring the studio."
ESPN NBA 2K5 ships on October 5 for the Xbox and PlayStation 2.
Electronic Arts could not be reached for comment on this story.
The price is right, but is the strategy on target
Now that Visual Concepts and ESPN Videogames have confirmed that ESPN NBA 2K5 will retail for $19.99, GameDAILYBiz decided to take a look at the company's latest strategy.
What was the impetus for selling these sports titles (starting with ESPN NFL 2K5) at such a low price? How has the plan worked so far and will it continue? To find out more, we spoke with ESPN Videogames' Matt Atwood and analyst Michael Pachter from Wedbush Morgan Securities.
Budget Price, Big Budget Games
Pachter says that ESPN "is going to try to market the games at little or no profit, probably thin profit, and gain share." He continued, "They're trying to win over customers, either converts from EA Sports games or new people who would like to play sports games but don't want to pay $50; then their intention is to slowly increase the price of the game."
According to Atwood, the new strategy was not a reaction by ESPN Videogames to EA Sports. "The goal here is to know us and appreciate our quality, said Atwood." "Our games review very well. NBA has been number one rated for the last two years, so we're confident in our product." Atwood insists that NBA is "not a budget game at a budget price," but rather "a critically acclaimed game that we are putting more resources than we ever have into development and marketing."
Nevertheless, we asked if ESPN was worried that NBA 2K5 or their other sports titles might be viewed as budget titles by less informed casual gamers. To offset this perception, Atwood says ESPN is counting on word of mouth as well as "heavy" marketing. "If the quality is there...People will tell people because it's such a great value."
Pachter agrees. "If Ralph Lauren is 50 bucks and Gap is 20 bucks -- you know what? -- you think about it before you buy the Ralph Lauren brand. Why pay 50 bucks for a brand name when ours is just as good?"
Franchise Mode
Atwood sees the strategy as a long-term one, and thus far ESPN Videogames is "very pleased" with the results of ESPN NFL 2K5, despite the fact that EA's Madden NFL 2005 is still the number one seller at the higher price of $49.99. "It's been a great year for us."
Pachter points out that "the effects on EA aren't going to be felt in the first million units...it's the last million units where they're vulnerable because the purchaser of those last million units is not the hardcore gamer -- it's mom."
Pachter believes that ESPN actually has an advantage because there's only so much you can do with team sports. "There are very few opportunities in videogames to compete on price," but because sports games are so similar, price could be the difference maker.
What about EA?
There's also the issue of brand-name recognition. Pachter reminded us that the ESPN name shouldn't be taken lightly, and that it could actually have more of an impact on the success of the non-football games because those titles aren't up against the Madden brand.
So will EA Sports eventually have to cut the price of Madden? Pachter said, "I think they have to; If I were there I would do so."
As for Take-Two Interactive's involvement in this strategy, we asked Atwood how ESPN feels about their contributions. "Take 2 has been a great partner, a phenomenal partner," said Atwood. "They have such great connections in distribution, so the relationship with them has definitely been to our advanatge."
Interestingly, Pachter believes that "Take 2 revived the whole franchise," and could even wind up owning these sports franchises, whenever the ESPN license comes up for renewal. "Ultimately, I think that Take 2 will look at acquiring the studio."
ESPN NBA 2K5 ships on October 5 for the Xbox and PlayStation 2.
Electronic Arts could not be reached for comment on this story.