The new console war: pricing

Leading up to the Electronic Entertainment Expo, most companies try to release information that will either (1) become a springboard for the show or (2) become lost in the heavy news traffic -- by design. With Sony's announcement of a $100 price cut, it has effectively achieved the former. And while some brushed my opinion aside claiming I was biased or a Nintendo-hater when I told them Sony and Microsoft would take the day, it seems that opinion may not be so far off after all.

Although I still believe the Xbox 360 will take the lead in this generation, the Playstation 3 will make it difficult for any console to run away with the prize. But cutting the price $100, the company has increased Amazon sales by 3200% and created the buying frenzy Sony has hoped for all along.

By seeing these new sales figures, I have to wonder if Nintendo is wishing it had more third-party support and if Microsoft is wishing it had room in the budget to drop prices sooner than it wanted to. Simply put, the real console war has begun. And unlike previous generations where first-party games became the reason to buy a console, the new battleground is on the shelves where consumers will choose only one system to buy and the decision will be made by their wallets.

Microsoft must drop Xbox 360 prices right now. In order to stay ahead of the game, executives in Redmond better consider the implications of offering a product that is now more expensive than a Playstation 3 if the consumer purchases the most comparable setup: an Xbox 360 Elite with an HD DVD add-on. What is the impetus to buy an Xbox 360 anymore? Before this price cut, Microsoft was winning on price, losing on specs and waiting for the right time to drop the price on its own console. Did the company not expect Sony to do the same?

Playstation 3 sales are not up today because of great games or its Blu-ray player. Sales are skyrocketing because this is the moment most gamers have been waiting for: an affordable Playstation 3. Even better for Sony, Madden is right around the corner and if history repeats itself this year, Playstation versions will sell better than any other system. People know the controller on the Playstation 3 (it's basically the same as the PS2) and have played the game on a Sony console for years. Now that it's affordable and Madden will be here next month, what's stopping them from running down to Best Buy and picking one up?

The dynamics of this hardware generation are completely different from previous eras. Years ago, detailed hardware specs meant nothing to people when it came to gaming. When I was a kid, I would go to school and talk about the 16- or 32-bit systems I was playing at home. Gaming was gaming and that was all that mattered.

This generation is entirely different. The days of debating bits have given way to significant cost implications as video gaming becomes more mainstream. But in the end, will this cost battle even matter? Retail chains are flooded with Xbox 360s sitting right next to a comparably priced Playstation 3 and a sold out Wii sign. For the first time, the Wii is not the most sought-after video game console. Right now, people are speeding their way to Gamestop just to have a PS3 when their favorite games come out. Whether you want to admit it or not, the Playstation 3 will play a significant role in this industry.

Sure, the Wii shortages will end soon and the Xbox 360 will continue to sell at an average clip, but it's the Playstation 3 we should all be watching. The PS3 is no longer the expensive Xbox 360 -- it's the product of choice. Because of this, Microsoft should drop the Xbox 360 price by $100 at E3 to keep the pricing advantage and in the process, promote all of the fine third-party support the console currently receives and will receive in the future. Nintendo, on the other hand, should be worried. While the Wii is a fine machine that offers a unique gameplay experience, those traits alone will not carry the day. Once the Wii becomes widely available, the price needs to be slashed -- the product is over-priced. Not only will this usher in a new wave of purchasing, it will help Nintendo maintain the "good guy, doing it for the gamers" image.

The video game industry has become one of the largest and most lucrative industries in our marketplace. But with this success, it has moved to a more financial focus. And while each console manufacturer begrudgingly loses money on each console it sells, it's a necessary evil. Armed with that knowledge, Sony, Microsoft and Nintendo are poised to enter a pricing battle that will only benefit consumers. But if Microsoft and Nintendo don't watch the amazing sales jump for the Playstation 3 and follow suit, it may be a long year for both organizations.