Publisher Activision has warned shareholders that the shift in console generations and an increased focus on free-to-play could endanger returns.
If we fail to successfully manage our new product development, or if we fail to anticipate the issues associated with that development, our business may suffer,” Activision said in an SEC filing, as reported by VG247.
Our business model is evolving and we believe that our growth will depend upon our ability to successfully develop and sell new types of products, including free-to-play games which are monetized through in-game microtransactions rather than an up-front fee, and to otherwise expand the methods by which we reach our consumers, including via digital distribution.
Developing new products and distribution channels will require substantial up-front expenditures. If such products or distribution channels do not achieve expected market acceptance or generate sufficient revenues upon introduction, whether because of competition or otherwise, we may not be able to recover the substantial development and marketing costs associated with those products and distribution channels.”
Activision is also concerned that as the next-gen nears, sustaining full RRP on current-gen releases will become increasingly challenging.
If we are unable to continue to charge the same prices we have historically charged for current-generation titles for Microsoft's Xbox 360, Sony's PS3 and Nintendo's Wii, as well as for next-generation consoles, whether due to competitive pressure, because retailers elect to price these products at a lower price or otherwise, we may experience a negative effect on our margins and operating results,” it added.
Further, we make provisions for price migration and channel protection based upon certain assumed lowest prices and if competitive pressures force us to lower our prices below those levels, we may experience a negative effect on our margins and operating results.”