Wedbush Morgan Securities analyst Michael Pachter expects Microsoft to experiment with pricing options for its new Xbox 360 Games On Demand service “until it gets it right.”

The service launches tomorrow as part of the platform holder’s latest Xbox 360 dashboard update with games set to be individually priced at 1600-2400 MS Points ($19.99-$29.99 / £13.60-£20.40).

Numerous consumers have questioned the wisdom of setting the cost of Games On Demand titles above the prices they carry at stores or online retailers, but Pachter said that even at relatively high price points downloadable titles will appeal to ‘convenience’ customers.

“It’s pretty clear that Microsoft is working with publishers to generate incremental sales,” he told us. “The games are all fairly old so demand is probably pretty light for most of the games. Mass Effect will get a boost when ME2 comes out early next year, and NFS Carbon could get a small boost when NFS Shift comes out.

“I think that the point of pricing at or above catalogue prices at retail is to capture the convenience customer, who wants the game and doesn’t plan to make a special trip to the store to buy it… The Games On Demand service should be popular with convenience focused customers, as some people will value the immediate gratification of a download, the ability to download 24/7, etc."

Pachter also said that if trade-in values are as low as $5, “even the value-conscious trade-in customer may sacrifice resale for convenience.” In addition, he expects Microsoft and publishers to “figure out a way to provide exclusive content" with Games On Demand titles.

“Microsoft is going to experiment with pricing until it gets it right. It’s harder to start low and raise price than it is to start high and cut price. Microsoft can start at $20–30 per download, and if demand is light, can cut to $15–25, then can cut again if necessary. My guess is that as they build a library, Games On Demand will have a variety of pricing from $10–30.”

Microsoft executive Shane Kim noted recently that simultaneous retail and digital releases via the Games On Demand service are some way off. Pachter said they could become a reality by late 2010.

“Ultimately, when we all upgrade to the 500GB Xbox 360+, they’ll have all games available day and date, and pricing will range from $10–60. I think that the hang-up holding back day/date downloads has more to do with disc drive space and less to do with any disagreement with publishers. Once we see a significant number of Xbox 360 owners with Elite (120GB) models and once the Xbox 360+ is introduced, I think you’ll see day/date downloads. That should be some time year-end 2010 or early 2011.”