I think last generation showed that price wars in consoles do nothing positive for consoles.  You can force your competition to lower price, and thereby hurt them, but price wars are rather predictable with very few options for movement.

Why is that?

Price is one of the most important elements for a video game console.  Too cheap, and the machine seems lower quality.  Too expensive, and, well, people won't pay.  Pricing is a rather streamlined process that any marketer should be fluent in.  Price affects perception, which is the most important thing for a console.

So what if you could drop a console's price without that drop in perception? 

I ran into a guy a couple weeks ago at a shawarma stand who wouldn't stop talking about his iPod.   He kept going on about how he got it for 700 Shekel, which is roughly $175.  See, in Israel, electronics prices aren't standard, and you can find three different shops in the same mall selling the same product at three different price points.  People choose which price point to percieve the product at, based on their personal experience, and generally choose the cheaper of the three.  Some people will choose to be lazy and pick up one of the more expensive ones just because they value their time more than their money, but the people who think they're getting a deal will talk about it, and you've got some decent viral marketing.

So what if you had the best of both worlds?  This mostly affects the PS3, since they seemingly chose the worst price point of the three, but what if you could influence certain stores to have "sales" on non-traditional days.  The $600 tag is still on the shelf, and people are forced to percieve the device at this price point, but the consumer gets to go home and brag about how he got the thing for $475.  He'll convince other people to go out looking for the product, and some of them might even buy it at the $600 price point because of the guy that bought it at $475.

Give different retailers incentives to price the console differently, but keep the original MSRP viewable... everyone loves a sale.  And you never really dropped your price, did you?

I doubt it would really work. Gamers aren't stupid and the internet would spread it around pretty quickly.

Trust me, most gamers *are* stupid. And what is there to spread around? "I saw a sale at Best Buy?" That's precisely what you'd *want* to be spread around.

I agree. The issue is how the manufacturers price the systems. Most videogame companies force a MSRP to the T. and there are very few stores that defect from whatever the big boys (Nintendo, MS, Sony) decide the official MSRP to be. I think, what should be critical for every company this generation is to let the retailers to their job: sell the systems, by any sale and any means nessecary. When you force communistic laws on what something should cost, your restricting the retailer to offer the best incentives to war against the other companies sales. Look at it this way: I doubt MS is selling 360s to Wal-Mart for $399.98 for prem. models from launch. However, we could really never know, because you have that imaginary MSRP at $399. If there was no such hardcore MSRP for a PS3, 360 or Wii (atleast in the US, and probably elsewhere), the retailers could even sell below their cost in an attempt to gain a userbase purchasing their software vs. competitors (where the real cash is made). The fact is, video game companies are using a 30 year old archaic model of sales. Heck, I think most publishers still go on the basis of consignment for video game sales (which led to the crash of 1983)

well, more what I'm saying is that there's a dilemma with price drops in that as soon as you say "New Low Price!" people look at your product in terms of the new price. The value is lowered. So what if you institute a policy of "creating" sales, where people get to buy your product at that new price, but you're free to put it back up to the old one without a loss of perception.

Now, see the thing is, i dont understand ur story about the Ipod, as Ipods have a set price by Apple. If you go anywhere (well, basically anywhere), the price of Ipods will be at the same level, take or give a few quid. This is because Apple give the retailer money to keep the price above a certain level, and they do this for a few reasons. Mainly however, it allows Apple to market and sell the ipod effectively through their own stores at a large markup without having too much competition from other retailers, as all other retailers are selling at certain set prices which they wont go below. This allows Apple to make a hefty profit on all their sales; many people will buy from there because itll be impossible to find it cheaper anywhere else and also Apple wont be squeezed out of their own market. Now see, Sony uses the same system. Sony and Apple use this system more than most other producers of electronics, because they are retailers as well as producers. While Sony stores arent as common as Virgin Stores or HMV stores, there will probably be at least one in most major cities. Now see, one of the reasons why the PS3 is basically the same price everywhere is because Sony uses MAP (Minimum Advertised Price), which is the thing i explained in the last paragraph. Sony gives retailers money to help advertise their product if they keep the price of the PS3 above $600, or £425 here in the UK. This means that Sony, effectively, cant be squeezed out of their own market by other retailers who are selling their product. All electronics tend to be so similar from brand to brand and model to model that low prices play a larger role in determining which of them we ultimately buy. When you buy your PS3 though, its understood that your getting something different and unique. Sony knows this, and therefore set their prices to reflect this. Despite all this... it doesnt seem to be working very well for them :P

My example with the iPod was in Israel, where the market is so small and hard to access, it's usually *internal* pressure that brings the high-quality products here. Apple doesn't distribute themselves here, they work with a middle-man who, frankly, isn't all that good.  Prices for most high-end electronics are very rarely standardized here.  I saw two DSs in one store that were the equivalent of $50 different.  "One must have been a DS Lite" you say.  No, no.  They were both phat.  The more expensive one... it was blue.  That's the whole $50 difference. 

The other things you said are descriptions of the current status quo. I'm asking, specifically for consoles, why do you have to keep this status quo?

You're working with what the market *is.*  I'm trying to see what the market *could be.*

360 did this a *lot* last holiday, there were tons of $100 off coupons floating around and free bundled games, especially in Europe.

Sony just needs to A) Bundle a game B) Lower the price C) Bundle something else

i disagree that lowering the price "lowers" the value. Its all a game of "perceived" values anyways. The appeal of the PS3, for example, is that (at least among gamers) you're getting a good deal because the machine is actually *worth* (i'm using the word "worth" subjectively here) 800 or 900 dollars. So since you're only spending 600 on it, then you're getting a good *value* out of it. the same goes with the Wii. The pack in game is *worth* 50 extra dollars, but Nintendo decided it to bundle it in as a free game. So you're actually getting something that might be valued at 300 dollars at only 250. (though one might argue that Nintendo is charging you extra money for Wii Sports, since its only like 215 in japan and there's no pack in game)