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Will Gamers Take a Hike?

Price may be no object to the initial purchasers of the Xbox 360 and other new systems. But with next-generation consoles burning a hole in consumers' wallets, Spiegel and other analysts question how much money will be left over for games -- particularly the higher-priced titles.

"The average gamer's discretionary [spending] is going to be eaten up with hardware costs," says Mike Hickey, who covers the video-game software sector for Janco Partners, adding that publishers are not going to price games in a way that will "eat sales."

Additional factors will weigh on publishers' ability to maintain higher prices. While Activision, EA and the like are apparently targeting a $60 price point for next-generation games, Microsoft and other console makers seem to have a different pricing plan.

Amazon is listing Microsoft's Project Gotham Racing and Perfect Dark Zero -- two of the company's more widely anticipated games for the Xbox 360 -- at $50, or $10 less than rival titles.

Competition also will weigh on prices later in the cycle. As more games are released for the next-generation consoles, older titles will become available as cut-price catalog editions or as used games, meaning that titles will have to be truly different to distinguish themselves -- and command a premium price.

Further pressure could come from the kind of bargain pricing Take-Two engaged in last year when it was trying to gain market share in the sports game front.

As the number of games and consoles increases, "it becomes much harder to maintain a higher price point," says David Cole, an industry analyst with DFC Intelligence. "It's just basic economics."
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