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Mobility and Pricing Are Key Issues at E3

14 May, 2003 By: David Ward

After years of being dominated by home consoles, the 2003 Electronic Entertainment Expo (E3) in Los Angeles has a definite mobile flavor as Sony announced that it would take on Nintendo in the portable game market next year, while Nokia set a $299 price for its upcoming cell phone/game device.

Meanwhile, announced cuts in software pricing overall may offer opportunities for rentailers to build inventory, but may also spur more impulse buying.

Sony Computer Entertainment (SCE) announced the PlayStation portable (PSP) would be available for holiday 2004 and feature at 4.5” back-lit display and miniature optical discs, half the size of a DVD, for content. But that's next year and for this year, SCE will begin selling a new online bundled PlayStation 2 at $199 beginning next month. The new version, already available in Japan, will come complete with network adaptor for Internet play and other enhanced features such as DVD-R playback.

Nintendo took a wait-and-see attitude toward the potential new Sony threat to its GameBoy franchise, but did go out of its way in a media briefing to stress the connectivity between the GameCube console and the GameBoy Advance. Several new games, including updates of popular franchises The Sims and Pacman, will enable players to use their Game Boy Advance to either play against GameCube owners or enhance characters on the portable machine and then port them over for use on the home console, a company representative said.

Microsoft had the requisite amount of flash and hype for its Xbox system at the show, but offered little in the way of hard news other than the September launch of an online sports league and the several new titles that will allow consumers to mix music and store digital photos using their consoles. But that was offset by the fact that arguably the most anticipated game for the Xbox, Halo 2, will not be released until next year. Among the key Xbox titles this year will be Doom III, Project Gotham Racing 2, Counter-strike and Crimson Skies: High Road to Revenge.

Pricing News Good and Iffy For Rentailers
While the hardware makers again captured most of the limelight, the real story behind the scenes was software pricing for all three consoles. Noting the sheer number of expected game releases in the year's second half, Billy Pidgeon, an analyst with the Zelos Group, said, “I think the competition is going to mean a lot more $39 titles.” That's likely to be a mixed bag for game rentailers since lower prices mean lower inventory costs, but the move toward more impulse pricing also means that consumers may be less likely to rent a game before they buy.

Perhaps the biggest risk at the show was taken by Nokia and its N-Gage cell phone/portable game player. The issue isn't really the product itself, but rather the prices. At nearly $300 for the device and $30 to $40 per game, Nokia seems to be going after an older, more affluent portable game player that may not exist in large numbers. Pidgeon suggested the real challenge facing the company may be marketing, as it will have to position the N-Gage not as a game machine but rather as a phone with a great value-added feature.

“It's suicidal to price a portable game machine at $300, but it's a pretty good deal for a phone,” he said.

Somewhat lost in the hoopla over the portable market was Sony quietly lowering the price of the original PlayStation 2 to $179 to clear out excess inventory in North America in advance of the new online bundle. Microsoft quickly followed suit by dropping the price of the Xbox to $179 as well, but Nintendo stressed, at deadline, that it is not changing the price of the GameCube ($149 with bundled game) anytime soon.

The rental and sell-through retail community will no doubt appreciate the cuts, but they aren't the substantial $50 hardware price drops that many were hoping for.

“You're looking at systems that are at the midpoint or even further of their lifecycles, so I think you're going to need more than this to jumpstart sales,” said Jim Stroud, analyst with Blackbird Communications. Stroud said he expected more substantial cuts this fall--$149 for the Xbox and PlayStation 2 and $99 for GameCube.

Doug Lowenstein, president of the Interactive Digital Software Association seemed to agree, suggesting that hardware price cuts may be just what the industry needs to help stoke growth.

“If console makers cut prices at some point this year, history suggests that the resultant boom in hardware sales will trigger a powerful surge in software sales and could push total sales into the mid-double-digit range,” Lowenstein said.

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