The Divnich Tapes: This Holiday Season To Decide Next Console Cycle's Start

[Continuing his Gamasutra-exclusive NPD analysis following the release of August's game sales figures EEDAR's director of analytical services Jesse Divnich says that this holiday season could decide Microsoft's Xbox 360 pricing strategy and the start of the next console cycle. Previously: Games industry healthy despite slowed August growth.] There is no doubt that Nintendo will, again, lead the holiday season by a healthy margin; however, for Microsoft and Sony, this will be the most pivotal holiday season in the next-generation race. Its results are so important that it will determine whether the next console cycle will begin in 2011 or 2012. Microsoft hopes that its recent Xbox 360 hardware price cut will finally spur monthly hardware sales past Sony’s PlayStation 3 sales. After all, when comparing the two systems side by side, the Xbox 360 arguably -- at least according to some commentators -- has more compelling features over the PS3. The Xbox 360 has a stronger software library and a superior online network. The PS3 has one strong differentiating feature, its Blu-Ray capability, which most experts suggest won’t play a major role in driving hardware sales until the PS3’s price is more attractive to the mainstream market. If this new pricing strategy fails, Microsoft will likely be forced to drop its Pro model down to $199 by the end of 2009, which will undoubtedly lead to a $149 price drop in 2010 and compel Microsoft to release a successor to the Xbox 360 in 2011. If the strategy succeeds, however, Microsoft could sustain its current $299 price point through most of 2009 and only follow up with a $50 price cut by the end of 2009, and another in 2010, and then in 2011, leaving the Pro model at $149 by 2011. Simply put, if the PlayStation 3 surpasses the Xbox 360 in hardware sales this holiday season, Microsoft will have no choice but to continue to use pricing as a differentiating feature -- since it will be clear that its larger software library and superior online content has little affect on its hardware's popularity. [Jesse Divnich currently serves as the director of analytical services at Electronic Entertainment Design and Research (EEDAR). The preceding is the views and opinions of one person and not of EEDAR, The simExchange, GamerMetrics, or Gametrailers.]