During the Deutsche Bank Securities Technology Conference in San Francisco, Activision CEO Bobby Kotick explained how the company gets consumers to pay loads more for a Guitar Hero game, than the initial $50 price tag.
“In the last cycle of videogames you spent $50 on a game, played it and took it back to the shop for credit,” he told attendees. “Today, we’ll you a $100. You might add a microphone or drums, you might buy two or three expansions packs, different types of music. Over the life of your ownership you’ll probably buy around 25 additional song packs in digital downloads. So, what used to be a $50 sale is a $500 sale today.
“And the best of all margins – the 25 percent operating margin business – has the potential as we can see with World of Warcraft to be a 50 percent operating margin business. What used to be a low 20s return on invested capital business is now growing to a plus 40 percent return on invested capital business.”
Wow. Just wow.
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