“The continued economic turmoil, and in particular the troubling unemployment rate, is undoubtedly impacting industry sales,” said NPD analyst Anita Frazier. “Our latest Economy Tracker indicated that although consumers’ general opinion about the economy is improving, their outlook on their own personal situation is worsening. If consumers’ personal outlook continues to erode, they could very well be much more conservative with their holiday shopping this year.”

A somber warning for the videogame industry. Even recent price cuts on game consoles have done little to spur demand.

“Year to date, the hardware category has experienced the sharpest decline in the industry, with unit sales down 10 percent compared to the same time period last year,” Frazier wrote. “Recent price cuts helped spur a one- to two-month increase in unit sales, and this month’s Wii sales reflect that boost, but the other platforms have not sustained the sales momentum after price reduction.”

The videogame industry may be recession-resistant, but it is clearly not recession-proof, as some once believed. Sales data, below.

U.S. Hardware Sales, October 2009

1. Wii 506.9K
2. Nintendo DS 457.6K
3. PlayStation 3 320.6K
4. Xbox 360 249.7K
5. PSP 174.6K
6. PlayStation 2 117.8K

U.S. Top Ten Software Sales, October 2009

1. Uncharted 2: Among Thieves (PS3, Sony) 537,000
2. Wii Fit Plus (Wii, Nintendo) 441,000
3. Borderlands (360, Take 2) 418,000
4. Wii Sports Resort (Wii, Nintendo) 314,000
5. NBA 2K10 (360, Take 2) 311,000
6. Halo 3: ODST (360, Microsoft) 271,000
7. NBA 2K10 (PS3, Take 2) 213,000
8. Forza Motorsport 3 (360, Microsoft) 175,000
9. Kingdom Hearts 358/2 Days (DS, Square Enix) 169,000
10. FIFA Soccer 10 (360, Electronic Arts) 156,000

“This exclusive partnership offers you the ability to instantly stream movies and TV episodes from Netflix to the television via Xbox 360. Xbox 360 will be the only game console to offer this movie-watching experience, available to Xbox LIVE Gold members who are also Netflix unlimited plan subscribers…at no additional cost.”

– Microsoft on its Xbox 360/Netflix partnership, Aug. 2009

So much for Xbox 360’s game console exclusivity on Netflix streaming. This morning, the DVD-by-mail pioneer said that beginning sometime next month, owners of Sony’s PlayStation 3 game consoles will be able to stream movies and TV shows from Netflix.

The feature, which brings an unlimited amount of online viewing with any subscription worth $9 or more, will initially require an “instant streaming Blu-ray disc” to enable it. Not the most elegant of implementations, but presumably a firmware upgrade will likely follow and bake the feature into the PS3.

For Netflix (NFLX), the deal provides a chance to broaden its subscriber base. About nine million PlayStation 3 systems have been sold in U.S., and more than 25 million worldwide. So the potential for new customers here is substantial. For Sony (SNE), which already offers movies and TV shows to PS 3 users for a $3 to $4 fee, it’s a way of removing an Xbox 360 marketing advantage Microsoft (MSFT) has been lording over it since this past August.

Consumers.

Two weeks after Sony lowered the price of the PlayStation 3 to $299 from $399, Microsoft did the same for the Xbox 360 Elite by slashing $100 off the price of the console. In addition, Microsoft cut the price of its now discontinued Xbox 360 Pro console by $50 to $249.99, while supplies last. Both price cuts go into effect tomorrow.

“This is really an effort to pass the cost reduction we are able to achieve through engineering and manufacturing onto consumers,” David Dennis, Microsoft Xbox 360 product manager, told USA Today. “Reducing the number of (models) really just simplifies our manufacturing and makes it easier for our retail partners to manage their inventory and makes the purchase decision easier for consumers. It’s really a win-win-win all around.”

Like Sony (SNE), Microsoft (MSFT) believes the move will lure a new segment of price-conscious consumers into the market and goose sales heading into the crucial holiday shopping season, though it may not prove as effective as the company hopes. To really drive sales, says Jesse Divnich, director of analyst services at Electronic Entertainment Design and Research, Microsoft needs to drop its prices even further.

“Some would argue that Microsoft’s new pricing scheme represents more of a pseudo price drop than an actual price drop since consumers looking to purchase a core Xbox 360 system will still have to pay $299, as they had prior to the new hardware line-up,” Divnich explained in a recent research note to clients. “The price drop on the Xbox 360 Elite means that Microsoft’s core hardware SKU now boasts a bigger hard-drive and HDMI support than its Xbox 360 Pro predecessor.”

Moreover, while the 360 and PlayStation 3 might share the same $299 price point, they don’t share the same specs. “…Technologically the Xbox 360 is not at the same level as [the PS3],” Divnich said. “This puts the Xbox 360 into a tough position where it is outmatched in terms of hardware capabilities at $299 and the Nintendo Wii remains alluring to casual and price sensitive consumers at $249.”

Looking ahead, Divnich predicts that “Over the next year Microsoft will most likely reposition the Xbox 360 Elite model closer to the $249 price point to both pressure Sony and attract potential Nintendo Wii consumers. From a strategic standpoint this would then allow Microsoft to introduce the new Natal model in 2010/2011 at the $299 price point and still have an option for consumers cheaper than the (PS3).”

“In 2004, as you may recall, we launched a slim version of PlayStation 2, a defining moment for that console, helping us to really expand the user base of PlayStation 2 further,” Sony Computer Entertainment Chief Executive Kazuo Hirai said at the Gamescom videogame trade show in Cologne, Germany. “Today is that day for PlayStation 3.”

And so, starting Sept. 1, the PS3 will be available for $299. That’s still well above Microsoft’s (MSFT) Xbox 360, which retails for less than $200 and Nintendo’s Wii, which sells for $250, but it’s a hell of a lot better than $399. And analysts say it will almost certainly spur demand for the console. “People were expecting this to happen. [Sony] had to do something,” MKM Partners analyst Eric Handler told MarketWatch. “This will bring some new customers to the fold.”

Indeed. But how long can Sony sustain such market share gains, when Microsoft and Nintendo are almost certainly mulling price cuts for their platforms as well?

In a research note today, FTN Equity Capital Markets analyst James Hardiman said “evidence is mounting” that Sony will announce a PS3 price cut, perhaps during its Tuesday presentation at GamesCon.

Videogame analyst Heath Terry of FBR Capital Markets shares this view, and in a note to clients, he put a dollar figure on the cut. “With Sony set to announce a $100 price cut on the PS3 on Tuesday at Gamescom in Germany according to our retail checks, we believe the other hardware manufacturers will respond with a combination of price reductions and bundling strategies that should drive significant acceleration in hardware sales,” Terry wrote, adding that the cut, should it come to pass, will mark “the first of a series of catalysts that should drive a return to growth” for the videogame industry.

Certainly, it would give Sony (SNE) a nice boost in sales in the run-up to the winter holiday consumer binge. And given its most recent financials, the company could really use one right now.

In March, Japanese sales of Nintendo’s wildly popular game console fell below those of rival Sony’s PlayStation 3 for the first time. According to data released on Monday by research outfit Enterbrain, Sony sold 146,948 PS3s in the five weeks to March 29, while Nintendo sold 99,335 Wiis–and, for those keeping track, Microsoft (MSFT) sold 43,172 Xbox 360s. Driving sales: Yakuza 3 and Resident Evil 5–two new titles not yet available for Wii.

Could this be the beginning of a new trend, a dramatic reversal of fortune for Sony, which ceded its gaming console dominance to Nintendo back in 2006? Sony (SNE) clearly hopes so, but Nintendo doesn’t seemed too worried. “It is still the first few months of the year when sales are slow for the industry so we are not particularly concerned,” a spokesperson told the Financial Times. “We hope to line up strong software to support hardware sales in the second half of the year.” And if it’s able to do that, Nintendo probably does have little cause for concern–at least for now. The Wii is still outselling the PS3 by 3-to-1 in the states, and at eight million sold, cumulative Wii sales in Japan exceed the three million consoles Sony’s managed to sell.

A remarkable metric, given the economic downturn. How is it that gaming is thriving at a time when the global financial crisis is squeezing wallets? “There are a couple of reasons,” Ron Meiners, director of community for the Hollywood Interactive Group, recently told News.com. “One is the traditional value of entertainment during tough economic times. Like the great fantastic musicals in the 30s. Movies did great, because they took people’s mind off of the troubles they were facing. [And] videogames have great value as entertainment. The number of hours of solid entertainment that comes from a videogame purchase is much greater than a movie, for example, for very comparable cost.”

And so the company has begun offering a video-downloading service for its PlayStation 3 videogame console. Announcing the service at the gaming industry’s E3 conference in Los Angeles, Sony (SNE) said TV-show rentals will cost $1.99 per episode and movie rentals $2.99 to $5.99. Movie purchases will start at $9.99 and top out at $14.99. Not bad for content from Sony Pictures, Fox Film & Television (NWS), MGM (MGM), Lionsgate (LGF), Warner Bros. (TWX), Disney (DIS), Paramount (VIA) and Turner Entertainment (TWX). Certainly a compelling proposition for the 10 million or so PS3 users in the U.S., who no longer really need to buy an Apple TV (AAPL) or Netflix Player (NFLX) to deliver downloadable video to their TV sets.

Still, PlayStation Network’s video delivery service faces stiff competition from those rivals and from Microsoft (MSFT), which on Monday announced a deal with Netflix to stream movies over the Internet to the Xbox 360 game console. That said, Sony doesn’t seem much concerned with Microsoft, which it seems to view as a bit behind the curve. “The Xbox 360 is irrelevant in Japan, and in Europe PlayStation 3 sales have passed the Xbox 360,” said Peter Dille, senior vice president of marketing for Sony Computer Entertainment America. “We have a good dog fight in the U.S. but worldwide, when you look at a global footprint, the PS3 is the only console that can offer developers the ability to amortize costs over three markets. We’re looking at this as a marathon and we’re confident that the PlayStation 3 will win the crown.”