E3 stirs up game console speculation

Predictions regarding possible price cuts on game machines run the gamut, as the industry prepares for its main trade show of the year.

Gaming
How low can the game industry go?

That's what video game buffs are wondering as the industry gears up for its biggest trade show of the year, next week's Electronic Entertainment Expo (E3), which regularly triggers major price cuts for game consoles.

Sony jumped the gun last year, triggering a widely expected round of price cuts just before E3. But expectations for this year's show, which runs from Wednesday through May 17 in Los Angeles, are hazier, with many analysts calculating the odds as slightly against any price cuts.

Billy Pidgeon, an analyst for research firm Zelos Group, said current prices for game consoles--$200 for both Microsoft's Xbox and Sony's PlayStation 2, and $150 for Nintendo's GameCube--are already pretty aggressive. Instead of cutting into their bottom line, game companies are more likely to look for other ways to juice up sales, such as offering deals that bundle consoles with selected games.

Hardware changes are also likely. Sony has already announced a new PlayStation 2 configuration, and Pidgeon expects Microsoft to introduce a slimmed-down version of the Xbox.

Schelley Olhava, an analyst for research firm IDC, calculates a 50-50 chance of price cuts around E3. "I can see justification both ways," she said, adding that bundling deals have proven to be effective sales boosters lately. "There's been a big trend since the holidays to bundle, and they may just continue with that," she said.

David Cole, founder of research firm DFC Intelligence, said price cuts may come later this year, as console makers scramble to gain market advantages during the critical holiday-shopping season.

"I think sometime this year, there's likely to be a price cut," he said. "But if you do it now, you lose out on the opportunity to make sales in September."

Xbox Live in spotlight
Aside from pricing, hot spots at E3 will include the next chapter in the story of Xbox Live, the much-hyped online gaming service that Microsoft announced at last year's E3.

Olhava said Microsoft will need to show a convincing roster of new games that take advantage of Xbox Live. "They really need to prove to the industry this online console gaming thing can take off," she said.

Gamers will also be looking for upgrades to Xbox Live. Earlier this week, Microsoft announced a new pricing schedule for the service, which will cost $50 for a one-year subscription or $6 per month. A starter kit, which includes a headset for voice chat and a one-year subscription, will cost $70, up from the initial $50. Pidgeon said it's smart for Microsoft to offer an annual plan to limit subscriber turnover.

"I think if they go for an annual charge, that would probably make it easier for them to maintain the user base they have," he said. "I think they'd have a difficult time getting a significant monthly fee at this stage. They'd risk losing the gains they've made."

In the midst of stagnating sales for the Xbox, Microsoft will also need to cough up some killer games for the console. Olhava expects a lot of promotion surrounding games developed by Rare, the studio that Microsoft acquired in a $375 million deal late last year.

Nintendo, stung by sagging GameCube sales, is expected to emphasize the market it does dominate--portable gaming. Pidgeon expects Nintendo to present a number of new games and hardware products that will connect Nintendo's market-leading Game Boy Advance handheld player with the GameCube.

"They're going to try to use their advantage on the handheld side and really exploit the connectivity between the GameCube and Game Boy," Pidgeon said.

On the PC side, expect more hoopla surrounding big-scale online games, despite several recent high-profile blunders in the sector. Sony and LucasArts will again show off "Star Wars Galaxies," the oft-delayed online games based on the movie series, as well as a slew of smaller-scale games targeting everyone from pirate aficionados to armchair generals.

Mobile gaming will also get plenty of attention. Nokia is set to reveal more details on its N-Gage wireless gaming device, and game publishers such as Sega will have scores of new titles for cell phones.

"There's a lot of interest in mobile gaming and how you make that business model work," Olhava said. "Basically, it revolves around the carriers...and how willing they are to subsidize this kind of content."

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