Next-Gen Pricing Still A Hot Issue

GamesIndustry.biz has two articles taking a look at next-gen pricing, both from Microsoft's point of view. Xbox VP Peter Moore says that next-generation pricing is actually going to be an excellent value for the money. From the article: "...he predicted that many games may be offered in limited edition bundles, similar to the already announced Perfect Dark Zero bundle, which costs an additional $10 but adds a significant amount of bonus content to the title, and that premium downloads costing 'maybe another $5' will also be a key strategy for publishers." Additionally, the Xbox marketing folks are already planning price reductions for the 360. From that article: "'We will wind up cost-reducing the product every year,' Todd Holmdahl, corporate vice president of the Xbox product group, told Reuters. It's estimated that the 360 costs approximately $100 less per unit to manufacture than Sony's PS3, giving Microsoft more scope for price cuts."

Comments

Because They Are Too Expensive

[MBCook]

I expect Nintendo to release at $250 and clean up.

That said, let's look at the fact. According to IGN the NES launched for (an adjusted) $351.91. For that price you got two games (Mario and Duck Hunt), the console, two controllers, and a light gun (you even got R.O.B. if you bought one of the earliest ones in the US).

The XBox 360 is launching at $399 (for the REAL version, not the "XBox three-shitty" as Penny Arcade has termed the cheaper one. For that price you get the console, one controller, a headset, and a one year subscription to live. If you assume that live costs $50 a year, that means that the same price as the NES (adjusted), you get.. two fewer games, one less controller, and no lightgun.

The Sega Genesis which cost $389.67 at launch (again, adjusted) came with two controllers and Sonic. Again, you got two controllers and a game.

The N64 cost $242.75 at launch. So for what the XBox 360 will cost you could have bought the N64, Mario ($60 lets say), Pilotwings ($60 lets say), and a controller ($30 lets say). Two games, two controllers for that price.

Now let's look at the GameCube. $210 at launch leaves us with an extra $190 (three games) before we hit the price of the XBox 360 without a game. Add the price of a game to the 360 ($60-70) and you could buy two controllers for the 'cube, or a controller and a memory card.

Now MS is doing better than the NeoGeo ($1040), the 3DO ($920), and the Atari VCS ($810). But with the exception of the Atari (the first real home system), the other two FAILED in the marketplace (largely due to high price).

The NeoGeo had games costing upwards of $200 at the time. Sure they were arcade PERFECT, but most people didn't buy $200 games. I hope MS is smarter than that. They will probably only charge $80 for their games.

Re:Because They Are Too Expensive

[Irish_Samurai]

If people would hold off a second, they wouldn't have to pay the "early adoption tax."

If console sales are really sluggish in the beginning, MS will lower the price to get the install base. The whole business model depends on it. If people don't buy the system, they don't get license fees, and they don't make money. Third party developers do not make games for systems with no installed user base. This is a leason every console maker knows full and well by now.

This is just as much the fault of the consumer accepting the ridiculous pricing because they cannot exhibit self control as it is of the console makers who inflate the price in an attempt to offset the pre-known losses they're going to incur.

Re:Because They Are Too Expensive

[Keith Russell]

You need to make up your mind. Here, you're complaining that Microsoft doesn't provide any bundled games, and that you have to buy one to "uncripple" your $400 purchase. But in this post, you complain about how retailer bundles include games you don't want. Goes to show that you can't please all of the people all of the time.

A few more points:

• Those big $1000 4-games-and-extra-accessories bundles are from the retailer, not Microsoft. In fact, I'm not sure Microsoft can do anything about it without running afoul of price-fixing laws. (Besides, those bundles are a scam that makes it look like there's a shortage, when you'll be able to walk into any random Target and pick up exactly what you want, and nothing more.)
• Sony and Nintendo do the same thing. The box, one controller, and lowest common denominator AV pack. That's how I bought my XBox, that's how I bought my PlayStation 2. Of course, given the difference in cost between the XBox360 bundle and the XBox360 core + hard drive + wireless controller + etc., well, Gabe and Tycho have it right.
• I have yet to buy a DVD player, at any price, that included the latest top selling Michael Bay explosion-fest, or a CD player that included a new saccharine pop artist.

Re:Who cares, it's still $500 at launch

[Digital Vomit]

Buying a new video card every 3-4 years for that much is one thing, a new console every year is quite another.

Huh?

PS3/XBox360/Revolution = 2005/2006

PS2/XBox/GameCube = 2000/2001

PS1/N64 = 1995/1996

SNES/Genesis = 1989/1991

That's about a five year time span between generations. If anything, console upgrades are less frequent that pc video card upgrades.

Re:game prices

[Leiterfluid]

You know, I hear this "logic" mentioned quite a bit, and I would like to point out that the cost of optical media, used by all three major manufacturers, is significantly less than the cartridge-based games of yore. Nintendo tried upping the price when the N64 was released (Shadow of the Empire was $90!) and they couldn't maintain that price point for long. The fact of the matter is, regardless of what the development and marketing costs are for a game, manufacturers save a BUNDLE on manufacturing because of the minimal duplication costs, which help maintain the price of the games at about $50.

Add onto that the fact that developers can slap a sequel together for most licences without having to rebuild the game from the ground up. Grand Theft Auto is an excellent example of this. While there were ginourmous differences between GTA II and GTA III, the base elements of GTA:SA haven't changed much since GTA III.

The other side of that coin is that casual gamers are quite simply not going to spend more than $50 for a game. Sure, the gaming elite will spend three times that for a "super special limited edition" that comes in "collectible" packaging, but I'm starting to wait for games to become a Greatest Hits/Platinum Hits/Player's Choice (yes, I own all three consoles) title before shelling out the $20 for it. And sometimes I'll wait until a retailer has a 2 for $30 deal before spending my dough.

I won't buy a next-gen console until they hit the $150 mark. And I dig on video games.

Adjusting for inflation?

[hal2814]

I see a lot of posters trying to make themselves feel better about the next-gen pricing structures by adjusting yesteryear's system launch prices for inflation. This will not give you an accurate picture of what's going on for two reasons:

1. Electronics are getting cheaper. How much was that TV you bought in 1983 adjusted for inflation? How about the VCR you bought in 1985 for $250? Or even your refrigerator or oven? The price of a next-gen system SHOULD be cheaper by this logic.

- BUT -

2. Consoles are becoming more powerful compared to their peers. Back in the day when the NES came out, it was significantly less powerful a machine than the PCs of the time and the arcade machines of the time. Now the XBox and PS2 are about 3/4 as capable as a PC that came out around launch. As these consoles become more and more powerful compared to their peers, they SHOULD become more expensive.

The important thing isn't what the XBox 360 or PS3 will cost compared to the NES. It's far more important that you think the XBox 360 is a good value from the money. Judging by these "adjusting for inflation" defenses, I get the idea that a lot of people aren't happy with the price but are willing to pay it.

Three pricing strategies

[UES]

It looks like there will be three discrete strategies to grab differing types of consumers.

1) Sony

-Very high price point.
-Going after large installed user base as well as hardcore gamers.

Negatives:

-High manufacture cost means less opportunity for dicounting.
-Casual gamers and Parents (who buy gifts for minors) will likely balk at ultrahigh prices.

2) Microsoft
-Very high price point.
-Going after installed user base as well as hardcore gamers.

Negatives:

-High manufacture cost means less opportunity for dicounting.
-Likely consumer confustion over various hard drive options*
-Casual gamers and Parents (who buy gifts for minors) will likely balk at ultrahigh prices.

* Spare me your lectures. If you have ever worked retail, you know customers are dumb about stuff like this.

3) Nintendo

-Lower price point than Sony or Microsoft.
-Going after casual gamers, Women, and nostalgic gamers, as well as Nintendo Fanboy base.

Negatives:

-Unusual controllers may have tech glitches, forcing costly recall.
-Hardcore gamers think Nintendo is 'kiddy' and will probably avoid.
-Going after people who usually don't buy games is risky. They may still not care about games.

Just from this sketch, the best case scenario for each company is:

SONY
-Devotion to the Sony brand and superior graphics carries PS3 to victory.

MICROSOFT
-Marketing 'cool factor' and online elements, including exclusive licensing deals, carry XBox 360 to victory.

NINTENDO
-Expansion of the market due to lower priced option and attempt to keep games simple and innovative carry the Revolution to victory.

Note: 'Victory' means THE MOST PROFIT, not THE MOST UNITS SOLD. If you are a shareholder, you care about PROFIT.

I'd put my money on Nintendo. Sony and Microsoft and going to beat each other to death with their unlimited marketing checkbooks while Nintendo creates new customers.

Sony has the most to lose. Why should consumers pay hundreds of dollars for graphics that are somewhat better than what they have now?

I don't see where Microsoft goes. THey aren't innovative like Nintendo. They don't have the huge installed fanbase that Sony does.

Nintendo is taking a very high risk strategy, but the payoff could be immense.