The long-anticipated price cut on Sony’s PlayStation 3 video game console might have come just in the nick of time, as industry sales continue to wilt in the heat of summer. Both game hardware and software sales have been flagging, but console price cuts typically spur game sales.

Sony took the PS3’s price to $299 from $399, and the company sounded bullish on its prospects for the holiday selling season.

“With this price move, we’re extremely confident,” said Jack Tretton, CEO of Sony Computer Entertainment America, in a interview. “I don’t think there’s anything more that we could realistically ask for in terms of putting us in a position to be successful this holiday, I really feel like everything’s lined up for us.”

Sony’s PS3 has languished in third place in U.S. home console sales, trailing Nintendo’s Wii and Microsoft’s Xbox 360, both of which carry lower price tags. While many analysts say the PS3 is the most  technologically advanced and powerful of the three systems, the $400 price tag in the depths of a recession was a tough sell. U.S. video game equipment and software sales fell 29 percent in July. Activision’s CEO even threatened to stop making games for the PS3, due to high costs and poor sales.

But Tretton said the home console cycle lasts for 10 years, making for a long race. “We’ve kind of kept out guard up and kept our powder dry and now we’re coming out with both fists swinging. We feel like we’ve weathered some significant competitive blows and now we’re great position to land a knock-out punch.”

“I think our competitors have had success in the case of Wii with the innovation and social aspect of the game play, but that seems to be wearing a little bit thin right now, and Microsoft seemingly pulled out all the stops last year, stripping down their machine and hitting that $199 price point on their base device.”

“If you follow this industry and follow where retail sales are generated it’s much like the football season, everything before holiday is pre-season and the numbers really don’t count. But when your get into the fall that’s when the majority of the sales are done, and we really wanted to time this announcement to take advantage of the fall selling season.”

The traditional art of drawing could see a renaissance helped by the boom in touch-screen mobile phones following the launch of Apple’s iPhone in 2007, says British artist Derrick Welsh.

“The touch has tipped, and drawing messaging is where touch leads,” said Welsh.

It could also create the next money-spinner for mobile operators, for whom text messages are still the key data revenue generator in 2009.

To promote drawing on phones, Welsh — whose mobile paintings have been downloaded some 500,000 times from Nokia’s mobile-sharing service Mosh — is planning a drawing tour across Britain, to visit art venues, universities, schools and nightclubs.

“Fine art drawing and painting are drenched in tradition, but all children draw — as with the transformation that is happening to the rules of photography, the overwhelming majority of people who now take photographs no longer consider themselves photographers,” Welsh said.

“One day maybe the use of drawing will change as children grow up with drawing as an instant communication option.”

So far there is little that’s “instant” in drawn messages — they have to be downloaded through an Internet browser on the phone or sent as multimedia messages (MMS) from one phone to another.

“Currently, nobody trusts the networks as everyone knows a horror story or two to put them off being adventurous on the web from a mobile, and parts of the world don’t have it,” Welsh said.

A few years ago MMSs were expected to be the next big thing for mobile operators, but they have gained only a limited following among consumers due to technical glitches and some phones like the iPhone do not even support them.

Welsh, who has used Nokia’s Mosh service to study people’s interest in drawings on cellphones, says a simplified way of communicating through drawings was needed, and the potential could be surprising.

“A favorite story I heard while talking to many people was of a grandmother in Japan, who had all the usual methods to communicate with her grandchildren and she chose fax, because she could draw and then receive pictures from them,” said Welsh.

In addition to touch screen devices Welsh himself uses different technologies for his drawing, pictures in the posting are made with a Nintendo’s Wii remote control, which has been linked with Nokia’s N95 8GB phone.

From the bearish forecast department: Screen Digest, a media research firm, issued an outlook today predicting a 5 percent decline in online advertising in 2009. Folks, we’re not talking about newspapers or network television or radio here. We’re talking about the Web.

Screen Digest put out the forecast in response to the IAB’s recent report on 2008, which showed Web advertising rose 10 percent. But the number that turned heads over at Screen Digest was IAB’s fourth quarter figure, which put online growth at a mere 2.6 percent.

Here’s what Screen Digest says:

Following the fourth quarter 2008 tipping-point, Screen Digest has revised its 2009-2010 forecasts for online advertising in the US. We now predict that all categories and subcategories except video will decline in 2009. Banner advertising (-8.8 per cent) will not be fully compensated by the double digit growth of online video, so that the Display category will be down 3.6 per cent. Search will shrink by two per cent and non-Display categories such as Classifieds will experience double digit falls. Overall, the total internet advertising market will shrink by five per cent (-4.8) in 2009 and only stabilize (+0.4 per cent) in 2010.

Still, some perspective… Screen Digest figures that even with a slump in Web advertising, it will still fare better than the broader market. It seen total US advertising spending down in double-digits this year, and some areas (like local TV) dropping by up to 20 percent.

Keep an eye on:

• Boston Globe employees reacted with a mix of resignation and anger on learning of the pay and benefit cuts and the lost job security that The New York Times Company wants them to accept as the price of keeping the money-losing Globe in business (NY Times)
• Nintendo Co Ltd said sales of its Wii game console have lost some steam in Japan, but it aims to boost demand again by launching a new version of its blockbuster “Wii Sports” software in June (Reuters)
• Three months after Democratic Presidential contender Barack Obama took the White House, Fox News is beating its rival cable news networks, General Electric Co’s MSNBC and Time Warner Inc’s CNN in the ratings game (Reuters)

(Photo: Reuters)

Twitter is now free for all, but it may not be for much longer. According to co-founder Biz Stone, the micro-blogging site plans to offer commercial accounts for businesses to pay a fee to receive an enhanced version of Twitter starting some time this year.

The move is part of Twitter’s accelerated plan to start seeking revenue in 2009, despite the economic downturn and cutbacks in advertising spending online. The company recently closed a round of venture capital financing pegged at $35 million by media reports, following two earlier funding rounds totaling $20 million. The recent round valued Twitter at $255 million, according to The Wall Street Journal.

Stone says:

We think there will be opportunities to provide services to commercial entities that help them get even more value out of Twitter. If these services are valuable to companies, we think they may want to pay for them.

We have lots of time for experimentation with regard to revenue generation, so we’ll probably be trying a few different things this year.

Last year, the company turned down a $500 million acquisition offer by Facebook, sources have told Reuters. And some observers think Google might have its eye on Twitter.

Now plenty of people have found fun ways to use Twitter’s 140-character text messages, but this one caught our eye: Researchers at New York University have come up with a way to let thirsty plants Twitter for water. The device called Botanicalls is made of soil-moisture sensors connected to a circuit board. It determines whether moisture levels are too low, or too high, and then transmits a wireless signal to Twitter. Tweets can be personalized to suit the owner, or the type of plant, co-creator Kate Hartman told Reuters.

There’s always a basic “I’m thirsty, could you please water me” message. But they also accelerate in terms of need, so there’s an urgent message: “I’m desperately thirsty, please water me.

Intrigued? Check out Hartman’s ‘Pothos‘ plant, which has more than 2,500 followers.

Keep an eye on:

• NBC and its partners are close to naming a new chief executive for the Weather Channel: Bill Bolster, a former chief executive at CNBC (New York Times)
• Over 90 percent of British iPhone users access mobile media, including websites, e-mails, social networks and games, far higher than users of other mobile phones, research showed (Reuters)
• Nintendo has shipped more than 50 million units of its Wii game console since its launch three years ago (Reuters)
• iTunes will roll out its variable pricing scheme for hit singles and selected classics on April 7. Apple previously said songs will be priced at 69 cents, 99 cents and $1.29 (Los Angeles Times)

(Screengrab taken March 26, 2009)

U.S. shoppers are still spending in a big way — they are just not buying cars, plane tickets, clothing, etc. But they are buying video games.

While most media segments try to maintain stability during today’s economic turmoil, the video game industry keeps on growing, with U.S. video game hardware and software sales up 10 percent last month according to NPD, fueled by record sales of Nintendo’s Wii console and DS hand-held system.

Nintendo’s Wii console sold over 2 million units in November, up from over 800,000 in the previous month.

A separate reports suggests that hard times may favor video games, adults will “turn to
staying in with video games rather than going out on the spend.”

(Reuters)

Keep an eye on:

• DreamWorks Animation launches characters like Shrek and the penguins from “Madagascar” into new lines of business, hoping to grow consistently even during a recession that already is slowing DVD sales. (Los Angeles Times)
• Time Warner names CEO Jeff Bewkes as chairman; Richard Parsons to step down on Dec. 31 (PaidContent)
• CBS Interactive reorganization details (PaidContent)
• Howard Stern contemplates re-signing with Sirius XM (Orbitcast)

(Photo: Reuters)

How do entertainment retailers come up with the prices they charge? Why is a movie theater ticket $10, a music CD $15, a rental DVD $3-$5 and a top video game $60?

We asked Strauss Zelnick, executive chairman of game publisher Take-Two. He says it’s simple math, based upon the value of that experience.

Prices are determined by the marketplace — if folks stopped buying stuff, prices would fall, etc. (Think gasoline). Balance that with cost. A game like Halo or Grand Theft Auto takes years to develop and costs as much to make as a Hollywood film.

Here’s Zelnick in his own words:

The reason the consumer is willing to pay $60 for front-line product is because they are going to get 20-plus hours of game play out of that product.

I’m a big believer that there is an equation for the pricing of front-line entertainment products, which is: The hours of expected consumption times the value per hour, plus the catalog value.

The price per hour is pretty stable across media. For example, a motion picture: You have two hours of experience in the theater, a very high-quality experience, zero catalog value. So what’s that worth? I guess about $5 an hour (on a per capita basis). If you apply that to a video rental, also zero catalog value, there’s multiple people watching typically, it’s a lower quality experience, that’s how you get a video rental of three bucks. Recorded music, you will listen to the album (up to 10 times — or hours — on average). The same equation applies.

There’s more:

What’s driving that front-line price point is the perceived quality of the experience, times the number of hours you are going to have that, so that the price per quality hour of the experience, times the hours, plus catalog value. And I understand why that number would be, for the sake of argument, $60, versus for sake of argument, $15 for an album, versus $3 for a video rental, versus 10 to see a front line movie.
They are not so far off.

So it’s not that we came up with that price point out of the blue. If we came up with it out of the blue, we wouldn’t be selling anything at that price point.

For the record, the industry walks the walk. Take-Two’s Grand Theft Auto has sold more than 10 million units in less than a year. And other huge industry sellers such as Metal Gear Solid, Fable, Halo, Madden NFL, Rock Band and Guitar Hero? Most have sold more than a million copies — at $60 a pop, or more.

I admit that I’ve bought $5 DVDs, cheered, and watched them only once. I’ve also paid $60 for games, grumbled about it, and played them for months. Now I’m thinking about buying Rock Band 2 ($189) or Guitar Hero: World Tour (also $189) for the holidays. (grumble grumble grumble)

So what do you think? Are video games fairly priced?

(Photos: Screenshot from Amazon.com; Zelnick, Reuters)

Microsoft's videogame chief Shane Kim came by our New York office this morning for the Reuters Media Summit and shared his thoughts on XBox 360 sales ("cautiously optimistic") and the outlook for the gaming industry amid the economic doom-and-gloom ("Who knows, maybe flat performance will be considered a remarkable achievement").

He also gazed into his crystal ball and served up some insights on the trends shaping the gaming business.

Consolidation is going to continue, he thinks, especially among the smaller videogame publishers as they search for hit games while keeping costs in check.

"There are a number of mid-tier publishers behind the Electronic Arts and Ubisofts and Activisions of the world who are struggling."

Another exciting trend for Kim is the return to videogame content developed by small creative teams, which he thinks could reduce the industry's dependence on sequels of hit games.

"That would be a good thing... because one of the challenges the industry has had, in my opinion, over the last five to 10 years is a growing reliance on sequels and licensed properties as opposed to those new creative hits. If we can find those nuggets that start smaller and can grow into big hits, that's a great thing."

He did wonder how smaller creative shops could find funding for their pitches, given that dollars could be hard to come by these days. But at the same time, it's an opportunity for bigger publishers, he said, since nothing rocks the gaming world like a hit game.

(Photo: Reuters)

Wouldn’t you like to be Reggie Fils-Aime right now. Things probably couldn’t be better for the President of Nintendo of America — largely the face behind the popular “Wii” phenomenon — despite the global economic troubles.

While other executives speaking at the BMO Capital Markets Interactive Entertainment Conference today sprinkled words of concern into their otherwise upbeat addresses, Fils-Aime plainly and confidently said Nintendo is doing just fine, thank you very much.

Reuters talked to Fils-Aime about Wii availability, the DS handheld game, the future of ‘packaged’ games versus online games, and price cuts.

Reuters: Many of the executive speaking at the conference said they were cautiously optimistic about the video game industry during the holiday season. What’s your view?

Fils-Aime: If I look at this from an industry perspective, I think ‘cautiously optimistic’ is quite appropriate. If I look at it from a Nintendo perspective, i would say ‘very optimistic’. We have very strong products in the marketplace — both hardware and software. The Wii console continues to sell out, (and) on the DS side, we are at almost 20 percent growth year on year, on a record year in 2007. We have had very strong software growth, both console and handheld. And we have just launched Wii music (and) we are about to launch Animal Crossing. So we need to execute and continue delivering strong value and strong entertainment choices for the consumer, and if we do that we should have a robust holiday season.

During your presentation, you mentioned that the Wii had a “monster month” in October. Does that continue into November and December?

We certainly hope so. When I talk about a monster month it’s based on our own internal data for monthly sales in October. Later on Today the NPD (a research firm) data will come out — I am certain that it will reinforce the type of month we’ve had. It very well may be that for the month of October, our sell through on Wii may have been the best ever holiday sell through for the month of October on any console in American history. That’s what gives us the belief that if we simply execute we should have a strong holiday season.

That brings to mind the question of availability. Will your products be available this holiday season? Will there be long lines and sold out stores like there was last year?

We certainly hope not. Our goal is to have every consumer who wants a Wii console or a DS to be able find it during the holiday. We have increased by 50 percent the amount of product that is coming into the us, Canada, Latin America. We hope that that is enough product. But even with the strong sales that we have seen in October and so far in November, we are still suffering out of stocks. My message to the consumer is, if you see a Wii and you are interested in a Wii this holiday, buy it as quickly as you can.

Earlier in the conference there was a healthy panel discussion that contemplated the end of the line for “packaged” video games, and the advent of online gaming. Is that the future?

What nintendo has seen is a large installed base with strong innovatinve highly entertaining products sold at the right price. We can sell high volumes of software for very long periods of time. On the DS we have seen tat with Brain Age”, “Brain Age 2″, “Mario Kart”, new “Super Mario Bros”. For the Wii console we are seeing that for Wii fit, with Mario Kart. So we believe that there can be this concept of evergreen titles as long as the proposition is right.

Given that, one wonders if you ever need to develop a new console. How long does this generation last? Are there any plansto develop a new console soon?

We believe the role of a new console, a new system, is to bring great new entertainment ideas to life. We launched (the Wii and DS) those systems when we had great ideas that would benefit either from a touch screen or from a Wii remote. We will consider the launch of new consoles when we have got great new entertaining ideas that can only be done with a new console. As we sit here today the Wii console has a long run ahead of it, (the DS too). At some point we will launch the DSi here in the Americas. So as we look at the near term for us its all about maximizing the opportunity with the (Wii and DS).

Some suggest there will never be a next generation of consoles, due to the imminent rise of online gaming. Do you buy that idea?

I don’t buy some of the core propositions. We have seen with our own systems that the consumer wants an experience that today is better delivered via packaged content. There can be add-ons and additional content but the sheer amount of entertainment enjoyment — 50, 60 hours - is pretty difficult to provide through an Internet connection. So I believe that certainly in the near-term the current approach of packaged software with some additional online play that works from a community standpoint and a content creation standpoint is probably the model.

Now that Microsoft just cut prices on the Xbox, you are the only console maker to not cut prices. Will you?

The consumer is voting with their wallet and their pocketbooks that the Wii and the DS represent fantastic values. So far this year, month in and month out, the Wii and DS have been number one and number two selling systems for the month. That suggest our value equation is finely tuned at this point.

So no price cuts?

There is no need for price cuts on our systems today.

(Photo: Reuters)

When the going gets tough, the tough play dress up.

Women-focused cable channel Lifetime Network on Monday expanded its push into gaming by buying Korean casual gaming site, Roiworld.com, the No. 1 teen dress up site in Korea.

Terms were undisclosed, but the company says its move to tap into the female gaming audience, particularly where they use avatars to dress up,  is paying big and younger dividends.

While Lifetime’s traditional TV audience has tended  to skew to more mature women,  the network is trying to broaden its audience to include more younger viewers and its Web dress-up properties are drawing women, largely aged 30 and below. Roiworld.com will bring more than 1,000 additional fashion and style games to the Lifetime Games portfolio, which it claims is a  top 25 online destination among casual gaming sites.

The ”Dress Up” category lets users dress up an avatar, combining user-generated content, social networking and virtual world experiences through fashion. The new Roiworld.com is currently set to launch in the U.S. in early 2009.  The Korean version of Roiworld.com had 2.8 million monthly unique visitors and 117 million monthly page views during the month of September.

With the popularity of the Nintendo Wii console and DS handheld system, game publishers are also turning their attention to girls, with the holidays promising to feature a heavy lineup of games for girls. Some of the biggest include THQ’s “All Star Cheer Squad”, Electronic Arts’ “Littlest Pet Shop”, Disney Interactive’s “High School Musical 3″ and Ubisoft’s “Imagine” series. Womens’ TV and gaming also intersected last week when game publisher Electronic Arts appointed Geraldine Laybourne, founder of womens network Oxygen Media, to its board of directors.

These days, it’s not just Wal-Mart that’s beating the cost savings drum in its marketing. Indeed, in this climate of costly gas and food, job insecurity and falling home prices, you can’t beat cheap on Madison Avenue.

The next to jump on the value bandwagon are McDonald’s and Burger King, according to Adweek.  The trade magazine says that McDonald’s will roll out five new ads starting on September 1. One of them declares, “Fresh flavor with change to spare. I do love the sound of a tasty deal.”

Rival Burger King is also launching a campaign this fall that plays up cost savings. The ads, created by Crispin Porter + Bogusky, are built around “the King putting money back into consumers’ wallets,” Adweek reports.

And don’t overlook Starbucks — the coffee chain famous for pricey lattes. Even the Seattle-based chain is using discounts and promotions to help bring in consumers. As a Reuters story points out…

Starbucks employees handed out free product coupons when the new Vivanno smoothies were launched in July. The company’s current “Treat Receipt” promotion offers $2 cold drinks in the afternoon to people who bring in the receipt from the purchase of their morning coffee.

The chain is beefing up its Starbucks Card Reward program. Starbucks Card users, who enjoy freebies such as two hours of daily Wi-Fi, already have received special discounts and limited-time free products during introduction periods.

The cost-savings messages likely haven’t played out yet. In fact, you should expect more such marketing from retailers and restaurants in the coming months, particularly with the approach of the holiday season.  

Keep an eye on: 

• Microsoft has agreed to buy Greenfield Online, owner of European price comparison website ciao.com, for about $486 million (Reuters)  
• The iPhone 3G has sold like crazy, yet has created all sorts of public relations problems for AT&T (NY Times)
• The cable industry has introduced an experimental political channel that gives advertisers a uniform way to buy time and measure the number of people watching (NY Times)
• Nintendo Co boosted its annual profit outlook by 23 percent on white-hot demand for its Wii video game console and DS portable player (Reuters)

(Photo: Reuters)