Here’s How Consoles Should Be Priced For The Holidays

Console prices are a hot topic right now. So let’s take an objective look at just what the sweet spot should be for each player in the market.

We’ve seen Sony finally announce the PS3 Slim and a price drop for the whole PS3 range. Understandably so, it needs the boost it will surely receive from a lower price point, as outside of Japan it’s the weakest performer of the three current generation consoles.

But how should Microsoft and even Nintendo react to that?

The Wii has slowed this year, as the industry as a whole has slowed. Even so, it’s still comfortably outselling the competition. And some of that competition – such as the Xbox 360 Arcade – is priced considerably cheaper than the Wii.

Microsoft appear to be phasing out the 60GB Pro console. But will that leave the 120GB Elite or is there another, higher-specced version on the way? In Britain today, we hear word that Microsoft is raising the price of the Arcade to combat a weak Pound/Euro exchange rate.

Regarding the handheld market, there’s the DSi shifting truckloads across the globe despite a premium over the hugely successful DS Lite. Yet analysts are predicting a price drop for it already.

And what of the PSPgo? It’s allegedly over-priced in the US, but Sony can’t yet confirm how it might be priced here in Australia.

Looking at all these factors coming into the still hugely important holiday season this year, here’s how I reckon Microsoft, Nintendo and Sony should be positioning their hardware in Australia.

Sony has already shown its hand. We know the PS3 will be $499 from Monday, and the Slim drops on September 3. Sony simply had to put pressure on the 360 by coming in under the price of the Elite. They needed to hit $499… and they did. A $200 drop is big enough to convert those who had been previously tempted, but hadn’t committed. It’s OK if they’re still the most expensive console, as the PS3 clearly provides the most out-of-the-box, but $500 is a psychological barrier they need to get under. Sony got this one right.
The PSP is an interesting one because while hardware seems to be doing OK, PSP software has lagged way behind. Sony needs the PSPgo to succeed in order to combat piracy, but getting retail support for a system that essentially cuts them out of the loop is a hard sell. How Sony balances the need to give retail a wider margin on the PSPgo hardware, while at the same time pricing it attractively compared to the existing PSP will be telling. If the PSP stays at $300, the PSPgo really can’t be more than $349… but I suspect it’ll be $399.

It’s hard to know whether the apparent phasing out of the Pro console was always planned or if it’s a response to the PS3 Slim. Either way, Microsoft knows it needs to maintain its price advantage over Sony’s console. With the Slim at $499, the premium Xbox must be no more than $399 and probably also sport a bigger hard drive than even the Elite carries at present. Getting a number on the box bigger than the Slim’s 120GB is an advantage not to be under-estimated.
The question then for Microsoft is how low can the Arcade go? It’s already $100 cheaper than the Wii, but are those two machines actually competing for market share? A lot depends on how worried Microsoft is about a $500 PS3 and how much they’ve driven down the 360’s manufacturing costs. I’d be surprised if they can get it to $199 this year, but expect to see even more aggressive bundling at $249 than we’ve seen even during the recent toy catalogue period.

The Wii won’t budge in response to any price drops coming from Sony or Microsoft. Nintendo aren’t interested in playing that game. Why should they? The Wii continues to outsell the other two combined. And for as long as people still want Wii Sports, Wii Fit, Mario Kart and now Wii Sports Resort, they’ll continue to be willing to pay $399 for the pleasure.
Sales have slowed, however. But I’d expect bundles before price drops. A New Super Mario Bros. bundle with extra Wiimotes for $399 looks like a good Christmas gift.
Similarly, I wouldn’t expect much movement on the handheld front. DSi has stormed out of the gate, selling faster than even the DS Lite. Remarkably, the DS Lite is still selling as well. Again, Nintendo won’t pay any attention to what Sony does in this space. I expect them to maintain parity, perhaps push more bundled software on both versions, and hold on any price drops until next year.

So, here’s my prediction…

PS3: $499 (Slim console, no bundled software)
PSP: $299 (bundled with family-friendly software)
PSPgo: $399 (bundled with at least one download-only game)
Xbox 360: $249 (no hard drive, plus bundled family-friendly games)
Xbox 360: $399 (200+GB hard drive, plus at least one M-rated game)
Wii: $399 (New Super Mario Bros. bundle)
DS Lite: $199 (bundled with a range of games)
DSi: $299 (bundled with a range of games)

I’m keen to hear your thoughts. Do you see any flaws in my predictions? Who do you think has the most attractive proposition? And would any of these deals persuade you to buy a new console?



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