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Where they stand: Xbox One and PS4 launch prices
Where they stand: Xbox One and PS4 launch prices
June 10, 2013 | By Matt Matthews

June 10, 2013 | By Matt Matthews
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    52 comments
More: Console/PC, Business/Marketing, E3



Gamasutra contributor Matt Matthews looks at a few figures and analyst forecasts to see how the Xbox One's $499 and PlayStation 4's $399 launch prices fare against consoles past.

Today Microsoft announced that the new Xbox One console would launch in the U.S. at $500, a price that puts it higher than the launch price of the Sega Saturn, below the price of the NeoGeo, and right at the base-model price of last generation's PlayStation 3.

Microsoft has placed it squarely in the company of consoles which found a cold reception from consumers in part because because of its price. With its presentation of a slew of exclusive games today and the television and telecommunications features shown at last month's introduction, the company clearly wants to justify the console's challenging price up front.

That strategy is risky, but not without precedent. In the initial years of the PlayStation 3's life, it was one of the more robust Blu-ray players available, and consumers could justify its hefty price tag in part based on those features.

Last month Wedbush analyst Michael Pachter told me in email that he expected Microsoft's costs for the Xbox One to run around $350, leaving the company some room for profit if it priced the console at $400. Given his breakdown, along with historical precedent and what I believe is an increased sensitivity to hardware pricing, I thought that price sounded both plausible and appropriate for the Xbox One. Clearly I came out wrong on the price, but I believe that the market's sensitivity to price will still have an effect on the Xbox One's sales.

Given the price announced, I think that we may be seeing either the failure of part of Microsoft's strategy, or simply that part of that plan is yet to be announced. Specifically, I think the company intended for the system to be subsidized by cable companies, who would then use its interactive television features for service-specific integration and targeted advertising. If that part of the plan didn't pan out, then Microsoft is now left with an unsubsidized system at an uncomfortably higher price.

The company could still try to subsidize the system by tying it to the Xbox Live service. Last May Microsoft began experimenting with a service-subsidized hardware program for the Xbox 360. Under this program, consumers could buy a 4GB Xbox 360 for $99 after agreeing to pay for the Xbox Live Gold service for two years at a price of $15 per month. The program later expanded to GameStop and ultimately to big box stores like Best Buy, Walmart, and Target.

Update: Sony has now announced that it will launch the PlayStation 4 at $400, a price that is $100 below the entry-level price for the PlayStation 3 last generation. However, that price is also well above the launch prices for the Xbox 360 and Wii, both of which outsold the PlayStation 3 in the U.S.

Combined with the announcement of a $300 PlayStation 3 bundle with Grand Theft Auto V this fall, the $400 price suggests to me that Sony will announce a new pricing for the PS3 soon, probably at GameCom in August of this year. Otherwise, Sony's own older system would look too competitive against the new PS4.

To put the new prices into some historical context, I've put two graphs below. The first shows the launch prices of the systems available in the U.S. in the past 36 years, in absolute terms.



The second shows what the prices would be for those systems if adjusted for inflation according to the Bureau for Labor Statistic (bls.gov). This is more for a sense of scale than a real meaningful comparison; electronic devices in general do not follow the same economic pressures that affect the rate of inflation.



Given the $100 advantage, it seems quite likely that the PlayStation 4 will have an edge at retail in the fall. However, those launches are still several months away, and I suspect that Microsoft will work hard to emphasize the broader value of its integrated living room system.


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Comments


Dane MacMahon
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I don't think it's too expensive compared to history. I think it is too expensive right now, though.

Ryan Langley
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If I wanted to go out today and buy a bundle of an Xbox 360, with a large hard drive, and a Kinect sensor (With a throw in game), it would cost be $399USD

Actually $412 on Amazon: http://www.amazon.com/Xbox-360-250GB-Holiday-Bundle-Kinect/dp/B00
5VBVRGY/ref=sr_1_10?s=videogames&ie=UTF8&qid=1370901110&sr=1-10&k
eywords=xbox+360

$499 doesn't seem so bad now, does it?

Matt Matthews
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That's not entry-level pricing. The price for entry-level Xbox 360 is $200, or $100, depending on whether you want a service contract or not.

Groove Stomp
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And the 360 is way overpriced. I thought it was overpriced over a year ago (last January) when I was considering buying one for ~$200 but the list price was $300.
Here we are over a year later and the list price is still $300.

Mario Kummer
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I think its good to have the option not to buy Kinect if you don't want to. Don't think it will turn out good for microsoft that they force a feature (always on Kinect) to people and increase the price by approx. 100$ due to it.

Lars Doucet
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I think the mandatory Kinect was a mistake. It adds an additional $99 cost to the machine. So now we're looking at:

-Always-on DRM
-Crippling changes to used games
-Serious Privacy concerns
-Smallest jump in visuals in console history
-Threat of losing access to all your stuff if/when MS servers go down
-Little to no support for an open, indie-friendly marketplace

AND I have to pay $676 to own this for three years (including the $69/year Live subscription fee).

Yeah, not interested.

Wyatt Epp
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I suspect the new model Kinect and whatever custom ASICs they've added are driving up their costs, and the price reflects that. I'd say they're probably still profiting on the hardware, but depending on the black boxes it may not be MUCH profit.

Luke Jones
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A subsidising strategy most likely wouldn't work in my country. Let alone the drm.
No cable services, slow internet in 80% of the country and no decent internet in quite a few parts.

Bob Johnson
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Figured it would be $400-$500 on Gamasutra awhile back. Fairly obvious given the price points today of the 360 and PS3 and the spec increase needed for proper next-gen processing power. Also figure MS doesn't want to lose as much money this generation. Neither does Sony.

I do think MS might have come down with whatever Kutaragi had last gen. Aspiration Fever is the layman term for it.


Anyway $500 means it won't storm out of the gate. Sony has an opening if they can hit $400 combined with no Live fee.

But still it is a marathon. The price will eventually come down. Games will pile up. In the meantime they will support the 360 quite a bit.

Jason Withrow
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I love this reoccurring feature and I look forward to its return once we get the PS4's prices! Though every time it pops up, I wonder how the Dreamcast failed. You can list every one of its technological, lineup and market failings - and believe me, I understand every one of them - but I guess when something is going for peanuts I'm surprised when that doesn't outweigh the other factors by juuuust enough!

Alex Covic
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This chart makes no real sense, unless you have the years next to them? US$ 1000 in 1980 is something different than in 2013.

Inflation adjustment does not account for "cost of living", "average income", "income per hour" and equal metrics. But it's still interesting.

Dave Smith
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it would be so easy for Sony to win this generation before the consoles are even released, but I just know they are gonna fuck it up.

Dane MacMahon
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I would guess part of their problem is that the DRM stuff is publisher mandated.

Dave Smith
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well I'll be darned, they did it!

Casey Dockendorf
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$500 Is expensive for a brand new gaming console? Says who? I have never once bought a gaming PC for less than $500 (Not including post upgrades, i.e. Video Card, extra RAM, new Power Supply, etc.). Tablets and even some phones cost this much, and this is cheaper than most laptops that don't even compare to these specs.

This price is exaclty what I was expecting for this generation of consoles, and I would be SHOCKED if PS4 didn't announce at the same price, if not higher.

Dave Smith
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says me. I've never paid that before, and dont plan on it now, especially in this economy.

Michael Wenk
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People don't take history in account when buying these things. People have a price they're willing to pay for a game system and that's it. I find it interesting that most of the best selling devices during their generation on the list (Wii, SNES, NES, PS2, and PS1) are all priced below the Xbox One. Personally, I game on my iPad and PC more than I do on my console which is mainly because most of the software on consoles is terrible for the cost.

Duong Nguyen
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There isn't any question its on the expensive side of the price chart, its up there with the original PS3 price and I don't think anyone thought that was a good "price" when it released. Microsoft strategy is to aggressively reduce the price over time, so I'm sure they are not too worried about the initial price. What is more concerning is can they reduce the price fast enough to capture the market share they want? Newer setop devices will eclipse the Xbox One eventually and if it isn't price competitive by then, it might be a total wash for Microsoft.

Simon Ludgate
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I find it unusual that you picked the "undercut" model price for both Xbox 360 and PS3 as your comparison point, since the "normal" model price would have more evenly matched with all other equivalent priced consoles.

Xbox 360 "Core" = $299
Xbox 360 = $399 <-- this is the "real" fully-functional hard-drive equipped Xbox 360

Playstation 3 "20 Gb" = $499
Playstation 3 "60 Gb" = $599 <-- this is the "real" fully-functional HDMI-equipped PS3

Matt Matthews
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The rule here is very simple: what was the price to get a system at launch. If I start doing things like "the normal system at launch was..." then it's all open to interpretation.

max bowman
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What is normal again? I bought the xbox 360 for 299 just because the price was more manageable and the "fully-functional" hard drive was bought a year later when I needed it for games. Your rationale makes no sense.

Simon Ludgate
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Last generation was fairly unique in that it sported "scaled down" versions of the consoles; those were the erroneous blips, not the comparison points.

"get the system at launch" is exactly the rationale that led to the development of those units, but since there are no scaled down $100-cheaper units to compare those with this time around, it doesn't seem to make sense to me to compare the "$100 off options" with the "full price options."

Your rationale should be "get the system THAT DOES EVERYTHING THE SYSTEM IS SUPPOSED TO DO at launch", which is the only option this time around.

That's also the price points that other journalists use:

"Sony s PS3 launched at $599, now widely regarded as a colossal mistake."

http://www.forbes.com/sites/davidthier/2013/06/10/499-is-a-danger
ous-price-for-microsofts-xbox-one/

Matt Matthews
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@Simon The $200 model of the Xbox 360 has, in several months, been the top-selling model of that console, according to data I've seen. So "normal" is still not well-defined.

Simon Ludgate
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But the $200 model wasn't a fully-functional launch model, was it?

At the very least, you could include both launch models and provide a complete picture of launch prices.

Matt Matthews
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@Simon What essential functionality was it missing? None, as I recall. Smaller hard drive, but everything required to run every game at retail. They even restricted download game size for a long time because of storage limitations on the low-end models.

At least, that's my recollection. Happy to be proven wrong!`

Simon Ludgate
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The 20 Gb Playstation 3 model lacked wifi, which may or may not be considered a serious omission. It also lacked the PS2 chips-set for backwards compatibility and a number of flash card readers on the front panel.

The two different PS3 launch consoles had completely different motherboard configurations. In a sense, Sony considers the 60 Gb unit to be the main initial Playstation 3, as they are coded as CECHAxx, wheras the 20 Gb units are CECHBxx (further units followed the alphabetical nomenclature with CECHCxx for the 60 Gb revision, etc.).

I was wrong about the HDMI; that was actually both XBox 360 launch units, so is not relevant to this issue.

The Xbox 360 versions were less significant, as they were based on the same motherboard (unlike the PS3). The Core shipped with a wired controller and standard-def cables, and no hard drive; whereas the Pro shipped with a wireless controller, a headset, high-def cables, and a 20 GB hard drive. However, given the later importance of the hard drive for installation of some games and downloading patches, etc., it's hard to argue that the Core system (with no additional purchases) could really qualify as a complete Xbox experience.

Matt Matthews
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@Simon I really don't follow. Are we really going to say that the 20GB PS3 wasn't enough because it lacked some flash card slots? Please tell me how that's relevant to the system as a game console. It also lacked the chrome trim! And, unless I'm terribly mistaken, the 20GB model did have backward compatibility. Only with the European launch in early 2007 and then again in the U.S. in November 2007 did backward compatibility get phased out.

I maintain my original position: every retail Xbox 360 game can be played on a launch Xbox 360 without modification. The same is true of every PS3 game on a launch PS3 system without modification. If you want to add online games, fine, but that's a different discussion. Neither system was launched with that as their primary mode.

And, I would add that measuring the worth or normality of a system sold in 2005 by a meter stick from 2010 or later is a really slanted view. How shall we apply that standard to the new consoles without knowing what the appropriate metric will be in five years?

Glenn Sturgeon
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The big option differance in the pro20GB & the base 360 w 64MB memory card was, the base 360 would not run online games. You had to have the HDD to play MP.

Henry Shilling
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Hey who remembers VHS vs Beta? Oh wait who remembers Xbox 360 vs PS3? Lower price wins.

Dane MacMahon
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$100 cheaper and 2 weeks earlier and Sony will have a huge advantage, if they want it.

John Flush
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@Dane - all we need to see is if they do the 2 week thing now... they did the price right.

Glenn Sturgeon
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Actualy on world wide scale the 360 & ps3 are neck & neck for total units shipped.
Ps3 has cought up. Even though the 360 got an untold amount of system sales in the first few years due to people having to replace RROD systems with other retail models.
Everyone should remember how slow MS was to admit there was a massive problem and to change the warranty accordingly.

John Flush
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Wow, if you think about it you can return your cable box and hook up one of these. While saving $10 a month for the box fee from comcast it will only take 60 months (5 years) to break even. Totally worth it. Oh wait, no DVR? Oh you have to be an XBL subscriber or anything to work... What are they even thinking?!

Bob Johnson
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Oh wait it doesn't even replace a regular cable box.

Joshua Hawkins
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MS's approach to next gen seems a little scattered, and I think the price tag proves it. They say the want to reach out to a broader market, but I can't imagine many people buying the Xbox One for their living room entertainment center when the price tag is $500. I believe that's more of an enthusiast price point which would be great if the system was aimed more at enthusiasts. Then there's their approach to used/borrowed/2nd hand games. Even gamers are confused on how it's going to work, and I can't imagine regular consumers feeling comfortable buying games on the Xbox One. If enthusiasts are confused consumers are lost. Lastly we have a console who's focus is attempting to be the one "box" in your living room... except if you want to play you're old games you'll need to keep your 360 for that.

Tom Spilman
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Xbox One at launch will cost the same as a low end iPad4... I see nothing wrong with that.

Freek Hoekstra
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the problem isn't te price,
it is that sony is launching a more performant system for significantly less.
that and the bad PR they have provided for themselves...

kevin williams
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Someone needs to redraw those charts with the price drops for each system through their life!

Matt Matthews
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Or price increases. Remember, the PS3 went from $250 to $270 with the introduction of the Super Slim.

Rick Kolesar
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Note the $399 does not have a camera in the box. If MS was smart, they would bundle a free game (of choice) with each system.

Gil Salvado
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Given the current state of economy within the EU I doubt Mircosoft will prevail against Sony. The pricing here will probably be the same as in the States and 100 is quiet a lot no matter with what they bundle it. But I also believe Microsoft is going to have a harder time in this generations launch due to the similar economical problems in the US.

I'm very interested in what else Sony is going to unveil in the coming months, because I doubt that's all they have up in their sleeve.

Morgan Ramsay
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The 3DO launched at $599. Months later, the price was reduced to $499. By the time Sony introduced the PlayStation in the US, the price had been reduced again to $349.

Matt Matthews
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I have contemporaneous news reports in Lexis-Nexis (e.g. on 4 October 1993) saying $700. Unless you have other evidence, I'm sticking to what I've got in front of me.

Edit: And here is a quote from a Panasonic press release dated 6 October 1993:

"The FZ-1 REAL 3DO Interactive Multiplayer is the first product to utilize the powerful new 3DO interactive technology. The system employs specially designed, ultra-fast animation and sound processors to draw on the vast storage potential of the compact disc. The result is an interactive system that offers performance levels up to 50 times greater than current personal computer or 16-bit video game systems. (A)

The Interactive Multiplayer has a suggested retail price of $699.95, and software titles are expected to be priced competitively with computer and video game entertainment software. One title, "Crash 'N Burn," an exciting 3-D combat racing game from Crystal Dynamics, is included with the FZ-1, ensuring buyers they can use the Interactive Multiplayer as soon as it is connected to the TV. A second CD packaged with each unit offers a series of brief interactive programs, as well as information on the FZ-1, 3DO technology and 3DO software.

Also available now are additional optional controllers (FZ-JP1) with a 7.5-foot cable for a suggested retail price of $39.95. Depending on specific software, the REAL 3DO Interactive Multiplayer can accommodate up to eight controllers at a single time."

Morgan Ramsay
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When I interviewed Trip Hawkins in 2010, he said:

"A great deal is made of 3DO's high hardware price, but this mistake is overrated. First of all, the initial street price was $599, not higher myths that are often reported. Within a few months, I negotiated with Panasonic to bring the price down to $499, which was, by the way, Sony's introductory price the next year in Japan. Sony was very aggressive when they later entered the United States at $299, but by that time, 3DO's price was $349."

Here are a few sources for after the launch:

September 12, 1994:
"Sanyo Electric Co., here, next month will ship a game machine based on 3DO Co.'s technology, making it the second vendor to market a 3DO-based player. Available only in Japan, the 32-bit "Try" will be priced at 54,800 yen (US$548) and will feature the 3DO standard specifications: dedicated animation, graphics and sound processors, and digital images that move at a rate of 30 frames/s with a resolution of 64 million pixels. [...] U.S. prices for 3DO machines are about US$450, while the price of a Sega Enterprises Ltd. machine stands at about $120, Mr. Miao said."
(Electronic News. 9/12/94, Vol. 40 Issue 2031, p24. 1/5p.)

September 17, 1994:
As anticipated, Matsushita has cut the price on its Panasonic REAL 3DO Player by 20% to a suggested retail of $399.95 "in anticipation of a strong Christmas season," according to the company. The price cut will be supported this fall by a promotion, running through Oct. 31, that includes a free copy of Crystal Dynamics' "Total Eclipse" space-combat game. The cut won't come as news to QVC shoppers; viewers late last month were offered the players at $399 (Billboard, Sept. 10).
(Billboard. 9/17/94, Vol. 106 Issue 38, p68. 1/9p.)

January 1995:
"After leaving Panasonic alone in the 3DO hardware market since the platform's inception, GoldStar U.S.A. jumped in with its own Interactive Multiplayer in time for the 1994 holiday buying season. The GoldStar GPA 101M 3DO system, priced at $399.99, features a double-speed CD-ROM drive, full-motion video capability and CD-quality sound, and ships with $150 worth of free software. The system requires a special card to play video movie CDs, which is not yet available."
(CD-ROM Professional. Jan1995, Vol. 8 Issue 1, p68. 1/9p.)

September 1995:
"Matshushita lowered the price of its Panasonic FZ-10 REAL 3DO Interactive Multiplayer system from $399 to $299.95. The player is sold bundled with GEX from Crystal Dynamics and is available in over 9,000 outlets, encompassing an expanded distribution plan. Over 200 titles are currently available for 3DO with another 185 in development."
(CD-ROM Professional. Sep95, Vol. 8 Issue 9, p27. 1/9p.)

I couldn't find any sources from 1993 that indicated an initial price less than $695, so I contacted Trip Hawkins for clarification.

Matt Matthews
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I'm not sure what you want me to say. My source is a Panasonic press release at the system's launch. What more primary source would you want me to use?

Morgan Ramsay
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I'd say that the founder of 3DO is a pretty good primary source...

Trip just e-mailed me back. He said the initial SRP was $699 but the street price was $599. The SRP is often discounted by retailers. The wholesale cost was around $450, which gave retailers a higher average margin. The street price was reduced to $499 in February 1994.

Matt Matthews
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Then he's saying that Panasonic published one price and retailers did something else. Why should I take unofficial retailer discounts as the price? And, I would point out that this is a claim -- regardless of the source, it is just that at this point.

I'd rather there were an official consumer receipt, retailer advertisement, or something concrete to counter what I'm seeing in Lexis-Nexis (which is PR and contemporaneous news reports) If he or you wants to contact me directly, he can do so at j.v.matthews@gmail.com

Morgan Ramsay
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Why? That's the way retail works.

By the way, you do have a concrete source: Ramsay, M. (2012). Gamers at Work: Stories Behind the Games People Play. New York: Apress.

Matt Matthews
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I have two sources which appear to contradict each other. Now what?

Retail has not worked like that for a while, at least from what I have observed. Every system launch I've seen since the PS1 had retailers selling the system for the price listed by the manufacturer. Why should the 3DO be different?

Edit: Aaaaaaaaand here we go:
http://goo.gl/upYcH

That's a post on USENET from 12 October 1993 from a user who claims to have bought a 3DO and cites the $699 price. Note the user's employer: Panasonic.

Prior to that, there is a post of a sighting of a 3DO box in a store with a $700 price tag. However, that's slightly before launch.
http://goo.gl/ZO8H8

If you dig further, you will see that shortly after launch Chips & Bits was reported to have the system for $599, and Marty Chinn (a name us old USENET people will remember) selling systems on 7 October 1993 for $650:
http://goo.gl/9jMJB

So here we have it: launch prices ranged from $599 to $699, but for the same system. Now, which one is the launch price? And how do you know?

Like I said before, the company itself announced it for just a hair under $700. If retailers decide to cut the price on their own, eating into their own margin to get some sales, what are we to take from that as the correct launch price?

Edit: See also: http://gamasutra.com/view/feature/167392/

Morgan Ramsay
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I'm just going to e-mail you because my response has become longer than your article and continues to grow...

Matt Cratty
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I'll buy one of them in a year or so when they have a huge "market share" push.

Anything exclusive to a console is not going to interest me.

Then again, I'm not exactly the target market.

Jason Chen
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funny thing is, I think most of us paid more for other electronics/hardware so why the big fuzz? damn my phone cost more than a new console.


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