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As console sales go, the PS3 is getting manhandled by the Nintendo Wii and DS. Even in Japan, Sony’s supposed stronghold, the Wii is outselling the Ps3 by a ratio of 5:1. Recent Japanese-centric releases have closed the margin in recent weeks, but Sony execs are clearly troubled by what they see as a week-by-week descent from grace.

That probably explains the sudden flurry of rumors about a PS3 price-cut. While Sony and some analysts continue to deny such a cut would happen, a leaked Circuit City ad shows the PS3 at $100 less (from $599 to $499) the week of July 15. As sales go, it would be highly unusual for a national chain to sell the PS3 for that much less than its competitors, not to mention the legality behind it given the Supreme Courts’ latest economically senseless ruling.

The question now is whether a $100 price drop can turn the tide on Sony’s faltering division, and thus far, the answer — at least for the US market — seems to be “no”. From the eyes of the consumer, the $499 price tag isn’t new — in fact, Sony offered a slightly less advanced version of the PS3 for that price on release so to the average consumer, this price drop, even if it’s for the higher-end model, may seem almost invisible. If you weren’t going to bite at $500 before, the addition of 40GB and memory card slots isn’t likely to radically change your opinion. This thus far unspoken reality may explain why despite the price cut, most gamer boards and blogs aren’t all that thrilled.

What will be interesting is Microsoft’s response. Although the spotlight has been on Sony, the fact is the 360 has had its fair share of lackluster sales. With the sure-fire hit, Halo 3, due Sept. 25, there’s little incentive for Microsoft to drop the price but not doing so may steal some of the thunder away from its booth. A Halo 3 or some other packaged deal might be a clever way to spoil Sony’s announcement without formally introducing a price cut.

Of course, in either instance, the winner is still Nintendo. Sony will now surely be bleeding dollars well past the usual 3-year marker for console profitability, and the tug-of-war for hardcore gamers (who, btw, apparently drive most of this industry) between Sony and Microsoft is keeping both preoccupied enough to practically ignore the larger picture. All in awhile, the DS and the Wii are cleaning up the house. Who would have thought Nintendo would ever — even for a moment — be worth more than Sony?

Expect an all-out war at mini-E3 this year. Sony will try to push its remaining exclusives (Uncharted, Heavenly Sword, Final Fantasy XIII, Tekken 6, Metal Gear Solid 4) and tout its blu-ray technology. Problem is 3 out of the 5 big titles are now 2008 and the blu-ray advantage hasn’t demonstrated its worth quite yet. Microsoft will ride Master Chief as far as he can take them, but it also has Mass Effect, Beautiful Katamari and Too Human. Problem with the 360 is that beyond that, it doesn’t have much more.

GTA4, DMC4, and SC4 — now all multi-platform will probably lead the chatterbox, but it will be Nintendo’s Wii that has the most to gain or lose. The Press will want to see whether that fancy-pants remote can do more than replicate fishing games and golf. If the DS is any indication, then Nintendo should wow its audiences with Metroid Prime 3, Super Mario Galaxy and Super Smash Bros. Brawl — all 3 are set for release this year. If the Wii can establish why it should remain relevant at this parade, then look for it to remain dominant through the holidays.

Me, I only care about one game, and it’s a remake of sorts. Bloody Capcom has *finally* given us 2-D gamers the gem we’ve always wanted.

Here are some other potential announcements I suspect will be part of each company’s press meetings:

Sony:

(1) HOME will be pushed into 2008 but become a central component of Sony’s push to capture the mainstream gamer — good luck with that non-mainstream pricetag.

(2) The ailing PSP will see a redesign — likely thinner with a built-in hard-disk. Unfortunately, Sony will keep saying its already defunct UMD format is still alive and “popular”.

Microsoft

(1) Look for more Sony exclusives to jump ship. The most talked-about one is likely to be Kojima’s Metal Gear Solid 4 and Namco’s Tekken 6. The only one that probably won’t quite make it over is Square-Enix’s Final Fantasy 13 but something tells me 360 is going to get something Square — may be a derivative of the FF universe akin to Crystal Chronicles. After all, how else are developers going to recoup costs — the PS3 penetration numbers are simply nowhere near the Wii’s or 360’s, and won’t be anytime soon.

(2) And while talking exclusives, prepare for an onslaught of US companies declaring them on the 360. Microsoft’s push for its Games on Windows platform will finally see some benefit as PC titles will migrate over to the 360, bolstering the company’s already dominant LIVE service.

(3) There are rumors Microsoft might be getting into the handheld fight but that’s a tough one to call. Rumors of MS stealing former PSP and Gameboy designers has floated around the Net for some time but that end-result was the Zune. With the games division poised to turn its FIRST ever profit (remember the orig. Xbox never made a dime — costing Microsoft an estimated $3.5bn), it makes little sense for the Redmond-based powerhouse to bleed more dollars and scare off its true believers (aka Wall Street investors). Sorry, no dice here.