E3 show-goers
Ric Francis  /  AP
Show-goers wait for the floor to open Wednesday at the Electronic Entertainment in the Los Angeles Convention Center. This year, the hot topic at E3 isn't a new video game, but a price tag.
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updated 5/10/2006 7:04:32 PM ET 2006-05-10T23:04:32

The buzz at the annual Electronic Entertainment Expo usually surrounds the latest new video games.

This year, the hot topic isn’t a sneak peek at “Halo 3” or “Metal Gear Solid 4” but a price tag — namely, the $499 and $599 Sony Corp. said it will ask for its eagerly awaited, next-generation PlayStation 3 gaming consoles when they hit retail shelves around the world on Nov. 17.

Analysts and industry experts attending this week’s E3 show said they aren’t surprised by the price. The PS3 does, after all, include a Blu-ray optical drive for playing high-definition movies. The current crop of stand-alone Blu-ray players retail for around $1,000.

But at $599, is Sony is pushing — or perhaps even crossing — the line on what consumers will be willing to pay for games?

“A lot of people are like, ‘OK, this is a lot of money and I need more justification for dropping this money,”’ said John Davison, editorial director of the video game Web site 1UP.com.

The console price doesn’t even consider the additional cost of the actual games. Microsoft Corp.’s Xbox 360 raised the average price per game from $50 to $60. Sony hasn’t said how much PS3 games will cost.

Only 11 percent of gamers in a national AP-AOL Games poll last month reported spending more than $500 last year on gaming, including consoles, game software, online charges and accessories. The telephone survey of 1,046 adults who said they play games on a computer or gaming console was conducted by Ipsos and had a sampling error margin of plus or minus 3 percentage points.

Outside the conference, reaction to Sony’s asking price was mixed.

“If it was $400, that would be better,” said Nathan Guajardo, 21, as he wrapped up a lunchtime game of Madden NFL at an arcade in Milpitas, Calif.

Guajardo, a longtime owner of the PS2 whose video-gaming hours have now dropped to perhaps a few sessions a month, says the $500 price tag will keep him on the fence for a purchase for himself.

Avid gamer Russell York of San Jose wasn’t surprised about the price tag. The 25-year-old who owns a PlayStation 2 and a PlayStation Portable said he almost bought Microsoft’s Xbox 360 but decided to stay loyal to his brand and wait for PS3.

“If it does what it’s supposed to do, then that’s fine,” York said. “But it better be better than the 360.”

Sony executives have insisted the PS3’s pricing is appropriate, given all its high-tech innards.

“I think that price and value have always been two different things,” said Phil Harrison, president of Sony Computer Entertainment’s Worldwide Studios.

Though game companies won’t say how much, they generally lose money on the actual console with the idea of making it up in sales of games and accessories. They’re hoping people will view the boxes as the hub of entertainment in the living room.

Indeed, the latest consoles are designed to plug into the Internet, work with high-definition TVs and handle a variety of digital content beyond games.

Despite all the capabilities, Sony’s pricing was still higher than expected, analyst P.J. McNealy of American Technology Research said in a research note. It could end up hurting game publishers, who have already been suffering through a sales drought while consumers wait for the new systems.

“We are concerned about consumer spending levels on software given the high price of the hardware,” McNealy wrote.

Microsoft’s Xbox 360 starts at $299 for a basic model, with a higher-end model available for $399 — still $100 less than the cheapest PS3. And though Nintendo Co. hasn’t released the cost of its upcoming Wii system, the company’s consoles historically have been less expensive than their rivals.

Sony’s PlayStation 2 debuted in 2000 at $299 but can be bought today for $130 after a rebate.

“All of a sudden the $299 Xbox (360) looks like a bargain,” Davison said.

The $499 PlayStation 3 will have a 20-gigabyte hard drive but lacks a memory card slot, built-in wireless and HDMI, the favored connection for high-definition televisions. Those features come in the $599 model, which includes a 60-gigabyte drive.

High-price consoles have failed before.

In the early 1990s, Electronic Arts Inc. founder Trip Hawkins created the 3DO Interactive Multiplayer console. Though packed with state-of-the-art technology for the time like a CD-ROM drive, the unit’s $700 price was more than consumers were willing to swallow and it soon failed.

But some experts believe that’s unlikely to happen this time. With 2 million units available worldwide at launch and another 2 million units by year’s end, PS3 demand still will likely far outstrip supply.

Tom Russo, editorial director of games for the G4 cable TV network, said the higher costs won’t deter the hardcore faithful who will gobble up the PS3 — whatever the price.

“There’s going to be a demand, even at $600,” he said. “They’re going to sell out. You’re going to have to end up paying a grand on eBay.”

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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