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Nintendo Announces Console Launch, Leapfrogging Sony

Nintendo will begin selling a lower-cost next-generation game console in December, which could make a dent in Sony’s armor.
September 14, 2006

When the last generation of game consoles hit the market, Sony’s Playstation 2 quickly became the talk of the game world. The company seemingly hit on all the right cylinders: the right game developers made exclusives, the graphics were top notch (even if they were a step below the Xbox), and the controllers were easy to use.

This time, the going is not so easy.

On Thursday, Nintendo announced that the Wii, its next-generation game console, would hit the market in December, retailing for a paltry $250, or $150 less than Microsoft’s Xbox 360.

The price discrepancy is due to Nintendo’s insistence that consoles primarily be game machines, and not entertainment systems for the living room – in stark contrast to Microsoft and Sony, which both have packed their systems with DVD and CD playback capabilities, plus online networks.

Nintendo’s announcement means that Sony will be the last console maker without a console in all three major markets (Asia, Europe, and the U.S.), which could hurt its standing in the marketplace.

The console makers sell their hardware as a loss leader, which means every time someone buys a console (Xbox 360, Wii, Playstation 3), the manufacturer loses money. The real money comes from software sales, which means the company with the greatest installation base makes the most money (in very simple terms).

Sony has lead this race for the last decade. Now, delays in production of the PS3 may allow both Microsoft and Nintendo to leapfrog it, drastically reducing Sony’s clout.

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