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THE MORNING BUZZ: Like Real Wars, the Game Console Battle Will Take Place in the Trenches

16 May, 2002 By: Kurt Indvik

This week's announcements that Sony was dropping the suggested retail price of PlayStation 2 to $199, followed quickly by Microsoft's response, dropping its suggested retail price on Xbox to $199 galvanized the video game business. It's sure to be the topic of discussion at next week's E3 show in Los Angeles.

As writer David Ward discovered in his pre-show coverage for this week's issue, these pricing moves are just one reason why the prospects for the video game rental business appear good.

The battle over pricing that Sony and Microsoft are waging will only serve to spur greater market penetration of both platforms. The third contestant in this battle royale in video games, Nintendo with its GameCube, already prices its console at below $200, and really is a bit out of the fray since it positions its product more for the younger consumer than the serious gamer.

Though Sony's move may serve to at least maintain its iron grip on the game business against these upstarts launched last November to much hype, both new platforms have been doing quite well, thank you, in their first six months of life, and we can expect the price war to only improve their prospects.

With the prospects that more households will have more than one game console, retailers and suppliers both anticipate that the rental of video games will only increase as more players have more game formats they need to play and will want to rent more often than not before deciding to shell out $49.99 to buy a video game.

Even the potential of an industrywide move to a lower average price point, such as $39.99, I don't think will serve to dampen the video game rental business.

We have talked in this space about taking advantage of the video game rental business. We have covered the significant moves into the space by the major speciality chains Blockbuster and Hollywood and last week Movie Gallery also proclaimed its allegiance to the video game business.

The question is: is this a game for only the big boys? Can smaller home video retailers get the pricing they need on their product to have enough selection and be capable of devoting the floor space to make video game rentals for all three formats a viable business?

The age demographic for this product is, as I some retailers have told me, often hard on the game discs, tend toward late returns and the format encourages a greater rate of theft than movies. All of which challenge the bottom line.

It's enticing to think video games may be another hot new product for home video retailing. Outside of the major chains, however, the reality may be somewhat more subdued.



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