Analysts Mull Possible Wii Price Cut, New Peripheral Reveals At E3

With E3 events beginning next week, video game analysts have weighed in on what to expect from the re-revamped expo, which takes place in Los Angeles. Analyst Doug Creutz with Cowen and Company expressed his belief in widely-circulating rumors that Sony's PSP will be getting a substantial upgrade that will allow the handheld to become a bigger player in the digital distribution arena. "The original PSP is now four years old and continues to play second fiddle to the Nintendo DS in terms of market share. We expect the new PSP to be more iPod-like (ditching the UMD) and could potentially have tilt/motion input. Handheld software growth has been slowing so a new PSP could be a (minor) positive growth catalyst for the publishers." Creutz, however, hasn't completely bought into rumors of a PlayStation 3 price cut announcement at E3, ironically saying that such a move would be "too logical" for Sony. "In our view, Sony needs to significantly cut price on the PS3 rather desperately, but the company still seems to believe that their superior technology will carry them to victory by the eventual end of the cycle." He said a price cut is more likely to take place sometime later this year. Sony expects to sell 13 million PS3 units this year, or 30 percent more than fiscal year 2008. A mid-year price cut could be enough to facilitate such an increase. While Creutz has doubts about an E3 PS3 price cut, he agreed to the possibility that Sony could introduce a slimmer version of PS3 hardware during the event. Sony has been working towards reducing the costs associated with manufacturing the Blu-ray enabled console, so a hardware revamp would fit nicely into those cost reduction plans. It's the Wii, Creutz said, that is more of a likely candidate for a price cut. The console has held the same $250 price tag since its late 2006 launch, and has maintained a solid lead, although hardware sales have shown signs of weakness in Japan. "...We think a [Wii] price cut would be unlikely to serve as a major catalyst for the third party publishers since the Wii remains a difficult proposition for third parties," Creutz added. "...Based on the title announcements to date we expect to see few if any hit titles on the Wii from any of the third party publishers over the next year, aside from entries by Activision Blizzard and Harmonix in the music genre." As for Microsoft, Creutz agreed that the company is poised to reveal the rumored 3D motion-sensing camera for Xbox 360. The analyst also said that investors will likely be most impressed with Activision Blizzard's pipeline. Creutz listed nine upcoming Activision Blizzard games that he expects to break 1 million unit sales in their first year, led by Infinity Ward-developed Call of Duty: Modern Warfare 2. He estimated that the military shooter would sell 7.4 million units during the period. He also forecast Guitar Hero 5 (unofficial title) would sell 3.8 million, while D.J. Hero would sell 2.5 million. Other notable Activision Blizzard game estimates include Bizarre Creation's Blur (2 million), Blizzard's StarCraft 2 (2 million) and the peripheral-based Tony Hawk Ride (1.5 million). Mainstay games industry analyst Michael Pachter with Wedbush Morgan added in a separate research note that he expects Nintendo, Sony and Microsoft to all announce "major news" during next week's expo. For instance, he said that he expects Nintendo to announce "at least two new hardcore games" (possibly Zelda, Mario or Metroid) as well as a new peripheral and the rumored in-game walk-through feature for games. He concurred that Sony may announce a UMD-free PSP and a corresponding iTunes-like download store. "If this is true, this will be a major step towards the transition away from physical medias and may portend the disintermediation of video game software retailing (and force the adjustment of GameStop’s current business model)," he wrote. Aside from an announced release date for the long-awaited Gran Turismo 5, Pachter said it's also possible that Sony will introduce a 3D EyeToy camera similar to the one rumored to be revealed for Xbox 360 at E3. Pachter added, "Microsoft will showcase several games, with the most emphasis on Halo 3 ODST. We do not expect price cuts for the Wii or Xbox 360 at E3." If Sony doesn't announce a PS3 price cut at E3, Pachter said he expects a cut to happen in September this year. Gamasutra will be reporting from E3 all next week, so stay tuned.