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Game For a Price War?

And consumers who are paying $500 or more to buy an Xbox 360 bundle this holiday season are unlikely to balk at paying another $10 for some titles, others argue.

The question is whether those premium prices hold up when more games hit the market and when more mainstream -- and presumably price-conscious -- consumers start buying the next-generation systems.

"We'll see how long that will last," says one buy-side analyst, who asked not to be named.

However next-generation pricing shakes out, many analysts expect prices on current generation games to fall by the time the PlayStation 3 launches next year, if not sooner.

Some analysts hear EA's recent price cuts as the death knell for premium pricing on current generation consoles.

As the Xbox 360 and other next-generation consoles become more available and as the games for them become more sophisticated, the quality gap between current and next-generation games will become more apparent, says the buy-side analyst, whose fund is long EA and Take-Two.

That will pressure publishers to lower prices for current generation games.

The danger for publishers is that many of them are investing heavily in developing games and technology for next-generation systems while getting the bulk of their revenue from current generation consoles.

And if prices erode precipitously on current generation games, and if publishers are unable to maintain premium prices on next-generation games, their bottom lines could take a big hit.

Sales of next-generation games "should start to help" those bottom lines this holiday season, but "it's going to be gradual," says the buy-side analyst, who adds that companies' results "might go backwards for a period of time."
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