Analyst Predicts Slow Adoption of Digital Distribution, Extended Console Cycle

By Nick Breckon, Jun 30, 2009 1:01pm PDT In a research note circulated today, Wedbush Morgan analyst Michael Pachter predicts that the current console cycle will not expire until 2013 at the earliest--and when the new games come, they will still be wrapped in a box.

Pachter's paints a picture where "ancillary revenues" drawn from digital distribution and console updates--such as a possible high-definition Wii, as well as Sony and Microsoft's motion controllers--will naturally delay the release of newer hardware.

But while Pachter sees an uptake in digital distribution, he expects a slow revolution, with downloads representing "less than 50 per cent of total game sales in ten years' time." The case of Grand Theft Auto IV's first digital expansion "The Lost and Damned" provides the basis for his hypothesis.

"After a tepid embrace of its first downloadable episode, Take-Two decided to offer the first and second episodes in a combined physical package, with the two episodes allowing full game play without the purchase of the original GTA IV game disc," wrote Pachter.

"This model reinforces our belief that packaged goods will capture the majority of game purchases for the next ten years," he wrote, while adding that consumers will "never fully abandon physical media."

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