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Microsoft Corporation (MSFT), Sony Corporation (ADR) (SNE): Who Wins the Game Console War?

Microsoft Corporation (NASDAQ:MSFT)’s Xbox One is slated to cost $499. Sony Corporation (ADR) (NYSE:SNE)‘s PlayStation 4 is going to list at $399. Let the war for gamer dominance begin!

Microsoft Corporation (MSFT)

Coming this Winter

Both Microsoft and Sony are planning to launch new game consoles in time for the holiday selling season. This has big implications for the entire video game industry, since the release of game machines is a key demand driver. In fact, with new machines slated for later this year, game sales are likely to be relatively soft as customers await the new consoles.

While both companies have been touting the features of their new game boxes, the big news just came out: price! The Xbox has taken the high road, with Microsoft Corporation (NASDAQ:MSFT) pinning a premium price tag of nearly $500 on its machine. That’s a steep price compared to the PlayStation, which will be $100, or 20%, cheaper.

About the Same

The thing about the two game systems is that they are very similar to each other. Sure, each has its own unique technology, but the games they both play are pretty much the same, so a 20% lower price could be a big selling point. For the same amount as buying an Xbox One, a customer could buy a PlayStation 4 and two $50 games.

Both units are also looking to get further into their customers’ family lives. That means a shift from the gamer in the house’s bedroom to the living room. Or, it means attracting a broader audience. Microsoft appears to be fighting itself on both fronts.

Hurting the Core

While hard-core gamers are more than willing to pay up for top-notch machines, mom and dad usually look for the best experience at the best price. That will favor Sony Corporation (ADR) (NYSE:SNE)’s machine, since it handles games and movies and costs less.

Meanwhile, gamers have been upset by Microsoft Corporation (NASDAQ:MSFT)’s heavy focus on living room features. So while Sony has targeted its early marketing directly at gamers, highlighting features like games that can be played while they download, the Xbox’s ability to replace a cable box, stream video, and other media focused aspects have been highlighted by Microsoft. In fact, the Xbox One was originally set to limit the ability to buy, sell, and trade physical copies of games, showing just how badly Microsoft had positioned its machine. Gamer outrage led to a quick reversal of that decision.

If Microsoft’s business decisions, including a premium price point, alienate gamers, the Xbox One may never even make it into the house to begin with. In which case, it doesn’t have a chance at getting into the living room. So far, this game machine battle is tilted in favor of Sony Corporation (ADR) (NYSE:SNE).

Out in the Cold

Interestingly, Nintendo is the also ran. The company changed the face of gaming when it introduced the Wii, leading sales to more than triple from $500 million in 2003 to $1.8 billion in 2008. Since then, however, sales have fallen every year and now stand at about a third of their peak.