XBOX 360 and Media Center together?

Microsoft has announced a two model Xbox 360 strategy including a stripped down version which will sell in Australia for around $390. The high end version will go to market at around $499.00.

What has not been revealed is whether the Australian versions that are due early in 2006 will include an Xbox 360 running a version of Microsoft Media Centre.

It marks the first time a gaming console has been introduced at a multiple price point, something common with other electronic gadgets. Analysts said it is a good strategy by Microsoft in its battle against Sony, the reigning champion of home video game systems.

By Launching an Xbox 360 with a version of Media Centre running will allow Microsoft to lower the entry price of a Media Centre while also eliminating all of the software associated with the general Windows XP operating system.

“It’s a pretty smart move,’ said Alan Davis, a stock analyst at McAdams Wright Ragen. David Cole, an analyst at San Diego-based game-industry watcher DFC Intelligence, agreed. “Anything that gives a consumer more choice is a good thing,” he said.

The Xbox 360 is the first of a new generation of consoles, with Sony’s PlayStation 3 and Nintendo’s Revolution scheduled for launch next year. New game consoles sprout about every five years and they generate a lot of buzz — and money.

The console business alone — not including games — is roughly a $22 billion annual industry worldwide according to Jupiter Research. Overall, the gaming business is closing on the music industry as the second-highest-grossing entertainment sector behind movies.

This new crop of consoles will feature faster, more powerful processors, leading to a new generation of more realistic games. Sony is currently the market leader, with a 43 percent share in 2004 while Microsoft has a 19 percent share, according to Jupiter.

Microsoft introduced the Xbox 360 in May and gamers have been waiting for news on the price ever since. Wednesday, Microsoft said gamers could buy a “core” system or spend another $100 and buy a premium version with a 20-gigabyte detachable hard drive and several other goodies, including a wireless controller.

Michael Pachter, a US stock analyst at Wedbush Morgan Securities said most gaming enthusiasts would opt for the high-end model. Effectively, “there really is one (price) and that’s US$399,” he said. “The only reason (Microsoft) has a US$299 price point is so they can brag about it.”

His logic: Ordinary gamers will wait for prices to fall before they buy a new Xbox yet early adopters will pay full price because they want all the bells and whistles.

“I think its PR,” Pachter said of Microsoft’s pricing plan, calling it good strategy nonetheless.

Microsoft lost a lot of money on the first-generation Xbox but at US$399 for the Xbox 360, the company should make money or at least break even, Pachter said.