Sony is placing a serious bet that its inclusion of a Blu-ray drive in the PlayStation 3 will entice consumers to pay a premium price for the new console, despite lower cost alternatives from both Nintendo and Microsoft. However, according to ABI Research, Sony’s console pricing strategy is fraught with risk, and may ultimately jeopardize its market leadership position.

“Asking consumers to pay $500 to $600 for a game console, when most have yet to purchase an HDTV, will give many current PlayStation 2 owners reason to consider the competition,” said Michael Wolf, principal analyst with ABI Research's broadband and multimedia research practice.

Competitors Microsoft Corp. and Nintendo offer high-definition gaming and motion-sensitive game controller, respectively. The Xbox 360 game console costs $399, whereas the Wii machine is expected to be priced at $199.

According to a note by ABI Research, the industry embraced the innovation Nintendo has shown with its motion-sensitive controller. By focusing on unique game-play experiences and shunning the graphics space-race consuming its competitors, Nintendo is enjoying much higher publisher support than was evident at the launch of its GameCube, believes ABI Research.

ABI Research also believes that Nintendo is the best positioned of the three to expand into the casual gamer and new gamer audiences with creative titles such as Wii Sports and WarioWare: Smooth Moves.

“Sony has clearly hamstrung itself with a box that is expensive to manufacture, and these costs are driving a retail pricing strategy that places a high financial burden on the consumer,” said Mr. Wolf.