Gamasutra’s report on the OTX Gameplan Insight research shows that, for at least two titles, Xbox 360 owners are planning to invest in the PS3 versions of holiday sequels more so than the other way around. Both Assassin’s Creed II and Modern Warfare 2 are seeing a shift in platform choice that favours the PS3, according to OTX.

Why defect? Gamasutra’s report doesn’t speculate on that, but one might assume the reasons are two-fold. In the case of Modern Warfare 2, the option to play the game’s multiplayer portions without the need for an Xbox Live Gold account may be a factor.

The other may simply be the expanded PS3 console ownership following the system’s recent price drop. Both titles appear to be feature equal, but the allure of buying games for the new console you just invested in, well, that might be enough to make the switch. Any other theories?

Analysis: Xbox 360 Gamers Defecting To PS3 For Holiday Sequels? [Gamasutra]

Net income, Bloomberg reports, will possibly fall 11 percent to US$2.7, marking the first drop since March 2004.

Wii sales have been on the slide with global sales dipping for the first time during the quarter ending June 30. Last month, Wii sales in the U.S. dropped 33 percent — conversely, Sony saw PS3 sales double.

With the strong yen, Morgan Stanley analysts are raising their Nintendo currency-related losses to 37 billion yen from 23 billion yen.

Has the blue ocean started to bleed red?

Nintendo May Forecast First Profit Drop in Six Years (Update2) [Bloomberg]

What analysts and strategists are calling “unsubstantiated chatter” had a profound effect on EA stock today, rising 8.1% to $US20.01 during Nasdaq trading this afternoon.

“There’s talk that Microsoft might be interested in acquiring Electronic Arts. It’s unsubstantiated chatter, but it’s out there,” said Frederic Ruffy, an options strategist at WhatsTrading.com in New York.

And sometimes being out there is more than enough. Microsoft shares also rose during the day, gaining 1.1% to $US26.05, despite analysts claiming that such a move makes no sense whatsoever.

But Trip Chowdhry, an analyst at Global Equities Research, said Electronic Arts was not on Microsoft’s “radar screen” based on his industry contacts. “Our contacts just don’t see Microsoft buying Electronic Arts, no synergies whatsoever, and also not Microsoft’s corporate primary focus right now,” Chowdhry wrote in an e-mailed note.

A quick glance about the internet finds that analysts largely agree — this doesn’t seem like a likely move. Still, we’ve reached out to Microsoft and EA alike, and will update the story once we receive any response.

Electronic Arts stock up on takeover talk-traders [Reuters - Thanks David!]

The day after Activision pushed back sci-fi first person shooter Singularity, Sterne Agee analyst Arvind Bhatia believes that the signs that StarCraft II will be ultimately be a 2010 title, according to a report from the Wall Street Journal.

We’ve already braced ourselves for the bad news, considering Dustin Browder, the game’s lead designer, told us the developer needs four to six months of public beta exposure to get the game in tip-top shape. Still a possibility, as Blizzard released StarCraft: Brood War at the end of November 1998, but looking less and less likely as the days progress.

Blizzard has never officially dated the game, only saying the highly anticipated StarCraft sequel would be released when the game “meets our standards and the expectations of our players.” And those expectations are, well, kinda high.

Activision Seen Delaying Two Big Games [WSJ]

The solution to the illegal copying of video games perhaps isn’t a law enforcement task force or volley of lawsuits, but the legitimisation of the act itself.

Last week news broke that The Pirate Bay, one of the largest websites in the world dedicated to the illegal downloading of video games, was being purchased by a business group in Sweden with plans on turning the site into a purely legal operation.

Global Gaming Factory X doesn’t plan on stopping the downloading of video games, but rather hopes to make enough money to pay the publishers for those downloads.

“We would like to introduce models which entail that content providers and copyright owners get paid for content that is downloaded via the site, ” Hans Pandeya, CEO Global Gaming Factory, said in a prepared statement. “The Pirate Bay is a site that is among the top 100 most visited Internet sites in the world. However, in order to live on, The Pirate Bay requires a new business model, which satisfies the requirements and needs of all parties, content providers, broadband operators, end users, and the judiciary.”

The news comes just months after a nine-day trial against Stockholm-based Pirate Bay found four guilty of making copyright content available. The four were sentenced to a year in prison each and were fined more than $US3 million.

While heralded by the Entertainment Software Association, the ruling and even the possible closure of The Pirate Bay would likely have little lasting impact on piracy. That’s because it doesn’t address the people pirating games, just those making it easier to do so.

Billy Pidgeon, an analyst with Game Changer Research, feels that piracy can only really be dealt with by some meeting of the minds.

“I hate to hear the industry talking about how they have to crush piracy, throwing down the gauntlet,” Pidgeon said. “The last thing the industry wants to do is alienate their customer base.”

People saying that they deserve to take a game for free, Pidgeon adds, is just as absurd.

That’s why Pidgeon was so delighted to hear Electronic Arts’ reaction to news of their game, The Sims 3, being pirated.

Three weeks before the game was released for sale, it showed up on pirate sites.

John Riccitiello, the head of EA, told Kotaku that they were initially very nervous about the leaked title.

But because the game relies so heavily on online play, something EA can control, gamers who grabbed an early, free version of the title didn’t get the full experience, only a taste.

In the end, Riccitiello said, EA decided to think of it as the publisher putting out a really good demo of the game, instead worrying over lost sales.

“That’s great, I love to hear them talk like that,” Pidgeon said of EA’s take on the issue. “Super distribution (like piracy networks) can be turned into an advantage. It’s not necessarily lost sales.”

In other words, when you can’t beat them, use them.

Well Played is a weekly opinion column about the big news of the week in the gaming industry and its bigger impact on things to come. Feel free to join in the discussion.

In a 210-page annual report about the state of the gaming industry that begins with him thanking Kotaku and other websites for “keeping us on our toes and always asking us to think about the industry in real-time,” Wedbush Morgan Securities analyst Michael Pachter sized up the used games industry.

And then Pachter argued why used games aren’t the danger game publishers suspect them to be.

On the size of the phenomenon, he stated:

The number of games traded annually is striking; we estimate the overall used game market to be $US2 billion in the U.S., with an average ticket of around $US20 per used game. This means that an estimated 100 million units of used games are traded in each year, representing around 1/3 of all games sold annually.

A third — or a quarter if the 270-million games sold annually in the U.S. also cited by Pachter doesn’t include used games — of games sold annually in the U.S. are used? That is a striking figure, either way you look at it. Kotaku contacted GameStop and the game sales-tracking NPD group for corroboration, but neither replied by press time. The $US2 billion figure was reported earlier this year by the Wall Street Journal, citing another analyst.

If that market is so big, why shouldn’t publishers, who derive no profits from the sale of used games, be shaken by it?

His analysis:

we think that used game sales benefit new game sales by providing currency to gamers with less disposable income, thereby enabling the purchase of additional games. The vast majority of used games are not traded in until the original new game purchaser has finished playing, typically well beyond the window for a fullretail priced new game sale. Thus, while there may be some limited substitution of used game purchases when GameStop employees “push” used merchandise upon consumers lined up to buy new games, the vast majority of used game purchases occur more than two months after a new game is released. Other than the potential impact at holiday (when new game lives are extended beyond the typical two month sell-through pattern), used game sales just don’t impact new game purchases very much…. To the extent that there is a substitution effect, we estimate that fewer than 5% of new game sales are impacted

Pachter’s analysis echoes what GameStop reps have told me about a view of the sale of used games furthering the purchase of new games, rather than cutting into such sales. As Pachter notes, many publishers have been acting as if the threat is real, bundling their games with map-pack codes and other add-ons that add value for the first purchasers of a given game disc.

Pachter argues that the ability for gamers to sell their newly-bought games back to GameStop and other retailers for store credit is one of the factors limiting consumer interest in downloadable games. Used games keep them coming into stores and keep the trafficking in new game purchases. Consumers, he writes, perceive less value in the purchase of a digital game that they can never sell back.

[PIC]

Earlier this week the makers of post-apocalyptic video game hit Fallout 3 bought the developers behind famed shooter Doom putting two of the most reapected talent pools in the industry under one umbrella.  

The result, analysts and Zenimax says, will be studios that can spend more time on the creative process and less cutting deals with outside publishers. It also will mean the blending of the technological prowess and creative artistry of two of the most respected game makers in the industry.

The deal, though, is likely the sign of the times says Billy Pidgeon.

“Those stuck between small independent studios and mega publishers are very vulnerable,” he said. “A good strategy is to look at where a developer can win.”

That means focusing more on niches and, when necessary, buddying up with another niche developer. In the case of id Software and Bethesda, the two are each masters of a certain type of game: first-person shooters and role-playing games respectively.

“It is possible to narrow to a niche and then dominate in that space, so you can compete better,” he said. “A lot of people are going to be disappointed that id didn’t remain independent, but it’s tough to be independent and these mini-consolidations are better than, say, being swallowed up by Ubisoft.”

Pidgeon says he thinks this is just the first of what will be more of these mini-consolidations, developers buddying up so they can publish their own games instead of having to pay a chunk of their profits to larger companies to get their games out.

Michael Pachter agrees, saying that he wouldn’t be surprised if Zenimax were to purchase or team up with other leading developers like Gears of War creator Epic Games and Left 4 Dead developers Valve.

“For Valve and Epic to stay independent maybe they ought to roll up together,” Pachter said. “If Zenimax brought in Epic and Valve then suddenly you would have a powerhouse.”

The impetus for these consolidations, he says, is that increasingly the larger publishers are less interesting in promoting and publishing games that are created and owned by other developers.

“Publishers have abandoned third-party developers and everything is moving in-house,” he said.

The desire for the creative talent behind an endeavor to own the product of their work isn’t limited to games. In 1919, Charlie Chaplain, Douglass Fairbanks, Mary Pickford and D.W. Griffith, tired of earning money for big movie studios, consolidated their talents to form their own studio: United Artists.

“Bethesda and id getting together is like United Artists getting together,” Pachter said. “They got together because they were tired of being employees. They decided they want to own the IP.”

“That’s what Zenimax is doing. Bethesda and id are independent developers and the fact that they are going to stay independent is good.”

The idea of Zenimax buying up or partnering with other talented developers isn’t just a theory, it’s one of the reasons the company raised $US300 million in 2007.

“We continue to have discussions with a variety of third-party publishers which make the kind of games we like and has the kind of folks we do business with,” said Pete Hines, a spokesman for Bethesda Software. “We’ve heard from a lot of people from every quarter since this news came out.”

That’s how the deal with id Software started, as a friendly conversation between Zenimax Ceo Robert Altman and id president Todd Hollenshead.

“They were talking about what we could do together,” Hines said. “And the more they talked the more they realised that if we got together the whole would be better than the sum of its parts.”

It would also allow id to get away from the biggest problem they have, being a small cog in a much larger publisher’s machine.

“Now they get to be a whole part of the process and the know the publisher will be fully behind them,” Hines said.

Under the new arrangement id Software will remain mostly untouched and be allowed to do what they do best: Make solid games. But the deal will give id Software the ability to expand their stable of developers, said Hines, who had just returned from a trip to id Software’s Texas studio.

Already the company is preparing to ramp up their studio from two development teams to three, he said. That means there’s a better chance that they will be able to keep the development of their four key game franchises— Doom, Quake, Rage and Wolfenstein— all in-house and rely less on outside development studios.

There’s also quite a bit of excitement around the idea of Carmack, widely known as a skilled programmer, helping Bethesda tackle some of the issues they’ve run into in game development. That could mean everything from helping Bethesda create iPhone games and Bethesda helping id on downloadable content for their games to the two solving more technical issues together.

“We also hope from a creative standpoint,” Hines said, “that (the two studios) can do more together.”

Edge Online reports that Nintendo has already sold 20 million units — 50 million worldwide — and plans to sell another 26 million this fiscal year.

Noting that a price cut is not an “almighty weapon,” Nintendo president Satoru Iwata said recently that the company plans to address a slowdown of Wii sales by introducing strong new software rather than reducing the cost of its hardware.

But Pachter says a price drop is highly likely. In a research note, the analyst said, “Wii supply has finally exceeded demand, so we expect hardware sales to show year-over-year decreases for the first half of 2009. In order to hit its full-year Wii shipment forecast, we expect Nintendo to cut the price of the Wii before [the] holiday, likely to $US199.99.”

Despite his hard line on the PSPgo and subsequent apology, Pachter is still regarded as the guy who knows from games and marketing strategies. Besides the Wii prediction, he’s also calling price cuts for the PlayStation 3 and Xbox 360 over the next year:

“In the second half of the year, we expect Sony to cut price for the PS3, and if the cut is deep enough, we expect Microsoft to respond (either with bundles or with a price cut of its own, even as Microsoft just introduced a Xbox 360 Elite bundle with free games Halo 3 and Fable II).”

Analyst Expects Wii Price Cut This Year [Edge Online]

That analyst is Wedbush Morgan’s Michael Pachter, who commented on the most recent episode of GameTrailers’ Bonus Round that “$249 is too much. Period.” Pachter agreed with host Geoff Keighley that Sony is “ripping off the consumer” at that price point, claiming that the PSPgo costs less to make than the already profitable PSP-3000.

We talked to Pachter today to get more of his thoughts on the device and its asking price.

He says that Sony execs “made it clear that the PSP Go pricing strategy was intended to compete with the iPod Touch.”

“I don’t disagree with them that the comparison is favourable from a technology perspective, so I can’t fault their logic,” Pachter said. “However, the iPod Touch has a ridiculously loyal fan base, tremendous brand awareness, gigantic advertising support, a touch screen, an app store, and a LOT of music.”

But the PSP is not an iPod Touch. It’s a game device, Pachter admits.

“The PSP Go has a better gaming architecture and better games, but lacks many of the features that the iPod Touch has,” he said via e-mail. “In my view, its price should be compared to the PSP 3000, which does pretty much all the same things and is $US80 cheaper.”

Pachter said during his Bonus Round screen time that pricing the new PSP at a price above the Xbox 360 Arcade and at the Wii’s price point was reflective of the handheld costing too much.

“I just am not going to pull punches and say that the price of the PSP Go is justified, since I don’t think it will work at that level,” the analyst said. “If it cost them $US80 more, I would not have answered Keighley the same way. However, I think it costs the same or less to produce, so the increase in price means an increase in profit at the expense of the consumer. I think that Apple rips off consumers as well (look at THEIR profits), but wasn’t asked that question.”

Sony’s John Koller has said over the past week that the device will carry a higher profit margin for retailers, a tactic I assumed was reflective of the higher suggested retail price. But Pachter disagreed.

“I don’t think it has anything to do with retail, and truly think that Sony is right to charge what the market will bear,” Pachter said. “The fact is that Sony has been subsidizing the cost of the PS3 since launch, so to say that they are ‘ripping off’ consumers now is not really fair, and if I could retract the statement, I would do so.”

But the Wedbush Morgan analyst believes the product will sell, even at that price.

“I think that they genuinely believe that the market will support this price point, I just happen to disagree. It’s hard to believe that Sony is giving much away to GameStop, perhaps they are allowing a 15% margin instead of the more typical 6 – 10%, but most of the “profit” on the device will go into Sony’s coffers.”

There are many ways that star game reviewer and Giant Bomb honcho Jeff Gerstmann and star model Heidi Klum are unalike. One of those, may be their ability to impact the sales of games.

Klum may have the edge there.

Celebrities, EEDAR games research analyst Jesse Divnich wrote in a report issued this morning, are trumping reviewers.

“Using celebrities in a mass-market media campaign is certainly one of the most effective ways to create the perception of being a must-own title,” he said. “In fact, the Guitar Hero/Rock Band war is a perfect example of how Guitar Hero was ultimately able to gain mass-market acceptance through celebrity endorsements and advertisement even though editorial reviews indicated that Rock Band was a better product.”

Rock Band has had the better reviews. But it is Guitar Hero that has had Heidi Klum, Kobe Bryant, Alex Rodriguez and other celebrities dancing in their underwear on TV in order to convince the world how good Activision’s rhythm game is. They mattered more, in EEDAR’s analysis, than did the game’s reviews.

Take that, Jeff Gerstman, Kotaku and every other person or institution reviewing games.

“In this new gaming market,” Divnich wrote, “when targeting a mass-audience, it is not always the best products that succeed, but often what the consumers believe is the best product. ”

Divnich’s analysis was part of his preview for this Thursday’s release of NPD game sales for the month of April. That month saw the release of Rhythm Heaven for the Nintendo DS, a game that was promoted with a commercial featuring Beyonce Knowles. The EEDAR analyst believes that the game’s sales will be shown later this week to be “nothing short of amazing” due to Nintendo’s use of a celebrity to support it, moreso than because the game is exceptionally good.

For as long as video games have been around, celebrities have been enlisted infrequently to hawk them. Games have been treated like movies, allowing the content to hype itself.

But the prospect that Divnich raises is that maybe games should be hyped as products, like soda or cars. Instead of the occasional celebrity endorsement based on the celebrity’s inclusion in the game — see Mike Tyson’s commercial for Mike Tyson’s Punch-Out — perhaps gaming is entering an era of celebrity pitch-people telling the masses what to play. If so, Nintendo and Activision, which have enlisted stars from Nicole Kidman and Mr. T to Ozzy Osbourne and Liv Tyler, appear to be leading that revolution.

OK. So which celebrities should have been pushing Prince of Persia and Chinatown Wars to help those games out?