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Microsoft Xbox One and Sony PS4 Want Your Holiday Budget

Big-ticket prices and a dicey economic recovery didn't stop diehard gamers from lining up on Thursday night to make sure they got their Sony (NYSE: SNE  ) PlayStation 4 system at midnight. A similar scene will play out this week with Microsoft's (NASDAQ: MSFT  ) Xbox One.

The consoles aren't cheap. The PS4 was setting players back $400, and that's without the $60 motion-sensing camera. Microsoft's Xbox One comes with its own motion-sending camera platform, but it will cost gamers $500. These may be high prices to pay for machines that aspire to be the centerpiece of the home theater experience, but good luck trying to get your hands on either system this month if you didn't order ahead of time.

It's hard to beat the timing. After years of struggling, the industry is showing signs of life. NPD Group reported on Thursday that physical software sales rose 12% last month, fueled by the bar-raising success of Take-Two Interactive's (NASDAQ: TTWO  ) Grand Theft Auto V

The successful return of Take-Two's biggest franchise may have inflated results, but this was the third month in a row that software sales posted year-over-year gains. You haven't seen that in several years, and the trend is surprising since the Xbox One and PS4 are not organically compatible with earlier games. Cloud-based tweaks will be available in some cases, but most of the games being bought in the past three months are either for handheld systems that aren't being updated or by console owners that may not be upgrading right away.

That's fine. All technology migrations take time, and cash-strapped gamers may just wait a few years until the inevitable console prices begin to drop. Today's PS3 and Xbox 360 are far cheaper than their original incarnations.

Despite the high ransoms, holiday releases should keep demand ahead of supply for both systems. If you think $400 for a PS4 this weekend or $500 for an Xbox One next weekend is rich, just wait until you see what desperate parents are willing to pay on eBay, Craigslist, and other marketplaces next month. 

The aftermarket markups are unlikely to be the same as we saw the last time that Microsoft and Sony introduced a new platform. Consoles are now competing with smartphones, tablets, and netbooks as cheaper -- in most cases -- holiday wish list items. However, you can be pretty sure that both systems will be snapped off the shelves as quickly as they arrive in the coming weeks. Early adopters won't be denied.

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