When Microsoft hits the market with the Xbox One in November, its $499 price point is going to stand out against Sony's PS4 at $399 and a deluxe Wii U bundle at $299. Fans of the Xbox console franchise will argue that it's worthy of a premium. They'll say the Wii U is for kids. They'll point out that the PS4 was able to undercut Microsoft's machine by leaving out the motion-sensing camera that's included with the Xbox One. That may all be true, but history hasn't been kind to the higher-priced console. That was the PS3's role last round, and Sony's market leadership position in this country suffered as a result of initially pricing its machine at least $100 higher than the competition.
Microsoft probably thought it had this generation in the bag when it announced its pricing and release strategy in kicking off the annual E3 gaming powwow back in June. It couldn't have imagined that Sony would turn heads a day later by unveiling a lower price for its PS4 and taking shots at the Xbox One's restrictive ways.
Everything seemed to be settling down for Mr. Softy, but then Nintendo's desperation kicked in.
Nintendo's move earlier this week -- slashing the price of its deluxe Wii U console by $50 and making it an even better deal by bundling it with a new Zelda game for the Wii U -- wasn't a surprise. The Japanese gaming pioneer cleared only 160,000 systems worldwide in its latest quarter. A price cut was a given, and it had to act before the November PS4 and Xbox One rollouts to hammer home its value proposition.
Nintendo didn't stop there. It also unveiled the 2DS handheld gaming system at $129. Microsoft doesn't have a portable gaming system on the market, but it will be one more item for adult gamers and parents of young gamers to consider as they size up their holiday shopping priorities this year.
And it could still get worse for Microsoft and that iPad-esque price tag. Reports this summer indicate that Amazon.com (NASDAQ:AMZN) is going to dive into the console gaming market later this year. The Android-fueled set-top box will naturally stream TV and surf the Web, but it will also lend itself to the Android games that are rapidly evolving from the Angry Birds and Temple Run that you were playing a couple of years ago.
As the Wii U, Xbox One, and PS4 become more than just gaming machines, it's not a shock to see other media companies moving into gaming platforms. Furthermore, anyone who's seen Amazon's aggressive pricing strategy on the Kindle e-reader and Kindle Fire tablet knows that if the company does put out a gaming system in time for this holiday shopping season, it's going to be cheap.
Are you still comfortable at $499, Microsoft? You may want to rethink your pricing. Isn't that what the Surface RT tried to sell for last November?
We saw how well that played out.
Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and owns shares of Amazon.com and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.