Divnich: PS3 is "simply too steep" at $399

In a just-published research note, EEDAR analyst Jesse Divnich has warned that PS3's $399 price tag is likely to drive consumers into Microsoft's open arms this Christmas, and has urged Sony to consider a pre-holiday drop for the machine.

"While we have no doubts that titles like Resistance 2 and LittleBigPlanet will drive the core gaming market to purchase a PS3, we do, however, have doubts that either title will lure in casual and mainstream gamers," he said.

"The $399 price point is simply too steep to entice the casual and mainstream markets, regardless of how great Resistance 2 and LittleBigPlanet may be."

He added, speaking of EEDAR's predicted post-cut boost to 360 sales in September: "The surge in Xbox 360 sales likely came from the mainstream and casual markets who were enticed by a sub-$200 Xbox 360 SKU. We should note that if Microsoft's first-party titles perform significantly better in quality and popularity than Sony's this holiday season, we could begin to see a considerable amount of potential PS3 owners, who may be waiting for a PS3 price cut, to choose the Xbox 360 over the PS3

"Currently, we expect Gears of War 2 to be the single best selling SKU this holiday season."

And the note of doom:

"We still urge Sony to consider a possible hardware price cut this holiday season. If September hardware sales fall below our estimate (under 200,000 units), it could be an indication that the Xbox 360 price cut played a bigger role on hindering PS3 sales than what we originally expected."