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Next-gen starts at $400: Analyst chimes in on PlayStation 4 and Xbox 720

Wild graphics! VR helmets! New motion controllers! Game screens projected directly into the living room! No more used games! Ridiculous names! The rumors about what the next video game consoles from Sony and Microsoft—how powerful they’ll be, what they’ll be called, what will make them different, whether they will in fact slice bread—are flowing thick and fast these days, with so many unnamed sources claiming insider status that it’s impossible to figure out just what might be true or not. The biggest question mark of all: How much will the Xbox 720 and PlayStation 4? What will you plunk down for a Durango or an Orbis?

Baird Equity Research believes that you’ll pay between $350 and $400 for Sony and Microsoft’s next boxes. After spending the Consumer Electronics Show “with a number of companies involved in video game development and distribution,” the group’s research analyst Colin Sebastian told investors to expect pricing somewhere between the high-end launch prices of Nintendo Wii U and the Xbox 360.

That console saw Microsoft pushing consumers to spend more than they had on a console in many years at the end of 2005. The Xbox 360 debuted with a 20GB hard drive at $400, while Sony followed a year later with two models priced at an outrageous $500 and $600. Today, the console market has cooled considerably and while consumers are believed to be interested in new hardware, they likely won’t entertain prices like those again. Hence why industry insiders are suggesting the $350-$400 range.

“Given the fragile state of the console game market, we expect the E3 trade show in June will take on added significance, most likely providing the industry with the first public opportunity to examine next-generation hardware,” said Sebastian, “Our check suggest that next-generation console hardware will be largely build from ‘off the shelf’ high-end PC components, along with hybrid physical/digital distribution models, enhanced voice controls and motion sensing (Kinect integration with every Xbox), and broad multi-media capabilities.”

Nintendo’s Wii U, with 890,000 consoles sold over the past two months worldwide, has demonstrated that people are very price sensitive to consoles so Sony and Microsoft would be wise to sell close to that range with dramatically improved hardware. It’s possible both companies will charge more for their machines, though, as both are expected to roll out subscription payment models that subsidize the initial sale of a console. Microsoft has already started testing this payment model with the $99 Xbox 360 that includes a two-year subscription contract.

It’s also possible that the consoles will be sold at $400 base price and they can be improved with new technology as time goes by. Microsoft patented technology for a scalable game console in December 2010.