Next Generation Console Pricing

Posted by jgaudiosi :: Emerging Business Models

Xbox360packagingThere continues to be a lot of talk online about whether or not Microsoft will cut the price of its Xbox 360 this fall to counter Sony. If anything, any price reduction plans were killed off at E3 when Sony announced its $500 and $600 PlayStation 3 pricing. Xbox 360, which currently sells for $300 or $400 became an instant bargain. Although Nintendo's Wii will be released for under $250, that console won't compete head-to-head with Xbox 360 like PS3 will.

The same type of shortages that have plagued every console launch, including Microsoft's Xbox 360 last fall, will surely limit the supply of both PS3 and Wii this fall. That's yet another reason that Microsoft does not have to worry about any price drop until next year. The only next generation console that will be readily available at retail this Christmas will be Xbox 360. Consumers will end up buying that console because of its availability and because of the strong line-up of killer app games like "Gears of War" that will be exclusive to it.

Things will change in 2007, when Sony will surely lower its high-priced PS3 to a more attractive price. Die hard gamers will pay top dollar, as long as there are games they must have for a system, but the rest of the world won't. It's then that Microsoft will likely drop its Xbox 360 price point.

Nintendo Wii won't be as direct a competitor to Microsoft in many ways. In addition to Nintendo's tradition of targeting younger gamers, the lower price of that console means that many households will pick up a Wii and an Xbox 360. In fact, gamers can purchase both of these systems for the price of a PS3.

Microsoft is clearly in the driver's seat with its Xbox 360. Despite the strong brand name of PlayStation 3, price point will be a differentiating factor until Sony reduces the price of its hardware. PS3 is launching at twice the price of a PS2. And there's not the huge calling for a new DVD format from the gaming or consumer audience out there. The Blu-Ray Disc technology should help over the long haul, but out of the gate, only the die hard loyalists will flock to this new system.


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