Hard-Core Gamers Brace for High Console Prices

LOS ANGELES – It's more expensive than ever to be a hard-core gamer as Microsoft Inc. (MSFT) and Sony Corp. (SNE) add costly upgrades to their new high-powered video game consoles, and those higher prices may keep some fans on the sidelines for a while.

The $28.5 billion global video game market is undergoing a transition as new consoles with eye-popping graphics and paid online services roll out. The industry is again depending on fans who wouldn't be caught dead with anything but the best of what's new to get it through the early days.

Those players are almost always willing to pay big money for bragging rights bestowed on those who are first to take the plunge. Their price insensitivity appears to be holding this time around, even as retailers like Wal-Mart Stores Inc. (WMT) warn that high energy prices could slow sales.

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"Early adopters are price insensitive, period," said Michael Pachter, video game analyst at Wedbush Morgan Securities, who added that some hard-core gamers may be forced to wait to get in the game due to more expensive consoles that require users to upgrade their televisions to take advantage of advanced graphics technology.

The high-end version of Sony's PlayStation 3 will cost $600 — two times the 2000 U.S. debut price of the PlayStation 2 when it hits stores later this year. Microsoft's premium Xbox 360 costs $400, but unlike the PS3 does not include a next-generation high-definition DVD player.

"With the new systems, it seems all across the board more expensive. They're going into uncharted waters with the price points they're looking at now," said David Cole, president of market research firm DFC Intelligence.

In the last cycle, Sony and Microsoft's consoles debuted at $300 and the magic number for attracting fans outside the hard-core realm was $200 and under, Cole said.

HIGH-DEF CONNECTION

Higher console prices are not the only first.

"You never had to buy a new TV before to play video games," Pachter said.

Many owners of the Xbox 360, which came out in November, quickly realized that to get their money's worth they needed to upgrade to a widescreen HDTV — an investment that can quickly run upward of $700.

"The price-sensitive consumer is watching the cost of the monitor," said Pachter, who added that the 42-inch HDTV many gamers would want costs between $1,500 and $2000.

"All 16-year-old boys are hard-core gamers, do they have $2,000 laying around?" he said.

Further, the new Microsoft and Sony consoles connect to online services offering free and for-sale downloads. A subscription to Microsoft's Xbox Live that allows group game play costs $50 per year and requires a high-speed Internet connection that costs roughly $40 per month.

Finally, new games for the system run $60, 20 percent more than for the PS2 and original Xbox.

Some analysts are concerned that the higher prices could keep mainstream gamers on the sidelines longer than in previous transitions, leaving the overall industry in the doldrums.

"It's more the 'Regular Joe' gamer who's going to feel the prices. To them, games aren't live or die things," Cole said.

Game enthusiast Jamil Moledina is not one of those consumers. He spent $3,000 for a commercial HDTV in November to make sure he would have the right set to showcase the Xbox 360's cutting-edge graphics.

Moledina, a movie buff and director of the Game Developers Conference, also plans to buy a PS3 as soon as possible: "I'm definitely getting it, and the $599 version."

The PS3 will have a built in Blu-ray DVD player and Microsoft has promised to release a rival HD DVD player for its Xbox 360 in time for the holidays — additions analysts say will likely be key selling points, particularly in the roughly 20 million U.S. households that already have HDTVs.

Moledina said the DVD players would help him net a savings from buying both consoles.

"This saves me $1,500 from having to get separate Blu-ray and HD DVD players," he said.