That said, Nintendo is cutting the price of its Wii videogame system by $50 in hopes of growing the market for the popular device as we head into the winter holidays. On Sunday, the company will begin peddling the Wii at a suggested retail price of $199.99.

The new price is the first reduction since the console launched in November 2006 and follows similar price cuts by two rivals, Sony’s (SNE) PS3 and Microsoft’s (MSFT) Xbox 360.

All three are hoping they’ll attract recession-addled gamers into the market, and according to Reggie Fils-Aime, president of Nintendo of America, they’ve got decent shot at it. “Our data shows in the U.S. alone there are 50 million consumers who are interested in playing videogames but they haven’t yet done so,” Fils-Aime told The Wall Street Journal. “They are waiting for product innovation or a slightly better value.”

If it was, surely we wouldn’t be seeing the sixth consecutive month of declining sales reported by NPD. According to the market research firm, overall sales in the United States in August of hardware, software and game accessories were $909 million–a 16 percent drop from the same period a year ago.

Hardware sales were down 25 percent for the month and 17 percent for the year. Software fared little better. It was down 15 percent for the month and 14 percent for the year.

Six straight months of falling sales. Overall, the industry is down 14 percent for the year, earning nearly $9.1 billion so far in 2009, according to NPD. Is this a trend that can be dismissed with the standard “well, software drives console sales” explanation? I’m not so sure. It’s not like Mario Kart and Madden NFL 10 have disappeared from the shelves. Indeed, they’re still top-selling titles. They’re still driving sales. They’re just driving a hell of a lot fewer of them.

Indeed, Electronic Arts (ERTS) CEO John Riccitiello bemoaned this very fact in an email to employees, released yesterday. “It is discouraging that one of our highest-rated and best-marketed ‘Madden’ titles in years is facing strong headwinds,” he said, adding industry trends “present a challenge.”

Perhaps that’s because we’re in the middle of the worst American recession in 50 years and $40 for a videogame is still $40. I’ll bet $5 and my old Intellivision that the videogame industry will post its first year-over-year loss since 2004 this year.

Hardware Sales:

1. Nintendo DS     552.9K
2. Wii     277.4K
3. Xbox 360     215.4K
4. PlayStation 3     210.0K
5. PSP     140.3K
6. PlayStation 2      105.9K

Top 10 Software Sales:

1. Madden NFL 10 (Xbox 360, Electronic Arts): 928,000
2. Wii Sports Resort (Wii, Nintendo): 754,000
3. Madden NFL 10 (PS3, EA): 665,000
4. Batman: Arkham Asylum (360, Square Enix): 303,000
5. Batman: Arkham Asylum (PS3, Square Enix): 290,000
6. Madden NFL 10 (PS2, EA): 160,000
7. Dissidia Final Fantasy (PSP, Square Enix): 130,000
8. Wii Fit (Wii, Nintendo): 128,000
9. Mario Kart Wii (Wii, Nintendo): 120,000
10. Fossil Fighters (DS, Nintendo): 92,000

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).”

Confirming recent speculation, Sony this morning said that it’s dropping the price of the PlayStation 2 from $129 to $99.99 as of April 1. “With this new price, we intend to introduce a new generation of consumers–some of whom weren’t even alive when the system was first introduced in 2000–to the immense entertainment value offered by PlayStation 2,” John Koller, Sony’s director of hardware marketing, explained in a blog post. “In the gaming industry, the typical lifecycle for a console is around five years, but because we build each of our platforms for a large and diverse consumer base, we design our platforms differently. With the original PlayStation and now PlayStation 2, we’ve proven that consumers can rely on our platforms for their gaming and entertainment needs for at least a decade.”

And that does indeed seem to be the case. Though nearly 10 years old, the PS2 remains quite popular. Indeed, Sony expects to sell eight million of the consoles in its current financial year–not so far off from the 10 million PlayStation 3s it expects to sell in the same period. And it will certainly grow in popularity at this lower price point, giving Sony (SNE) a means to really take Nintendo’s Wii to the mat.

Now, about that PlayStation 3 price cut rumor: Sony isn’t planning one, though arguably that’s exactly what the console, which is being outsold two-to-one by the Xbox 360 and the Wii, needs. “As we have stated previously, we do not have plans for a PS3 price drop, and any rumors to that effect are false and are the result of speculation,” Sony Computer Entertainment America said in a statement. “SCEA remains focused on the long-term momentum of PS3. With the industry’s best software lineup this year, combined with our most aggressive marketing campaign to date, we remain confident in our approach and the value we’re delivering with PS3.”

Now that’s not nearly the 44 percent spike of the previous year, but it’s certainly far better than expected. Said NPD analyst Anita Frazier: “While industry growth has not continued at the blistering pace we saw during the second and third quarters, December’s 9 percent increase over last December brings the year in 19 percent ahead of last year, and sets a new record for total industry sales.”

The engine of the industry’s sales growth? Nintendo. Defying the continued deterioration of the economy, the company saw sales for its Wii and DS consoles surge 59 percent and 23 percent in December and 62 percent and 17 percent for all of 2008. Meanwhile, Microsoft (MSFT) sold 1.44 million Xbox 360s during the month. And Sony (SNE) sold just 726,000 PS3s and 410,000 PSPs.

Clearly, Nintendo carried the industry despite the current economic downturn. Indeed, the Wii accounted for an astonishing 55 percent of all current generation home console sales in 2008.

“Without these sales, the industry would have likely felt the full wrath of the recession–much like other industries closely linked to gaming,” said Jesse Divnich of Electronic Entertainment Design and Research. “We believe their simple-to-use design, cheaper and wider variety of software titles, and the already ‘hot effect’ in place on both systems, all played a role in driving both the Wii and the DS to the top of their segments. Simply put, Nintendo saved Christmas.”

If Amari can recall when that was Sony’s image, he has a good memory. Because Sony (SNE) lost its dominant position in consumer electronics to rivals in Japan, South Korea and the U.S. long ago and has yet to regain it.

And nowhere is that more apparent than in the the company’s videogame division, which really should be the shining star in Sony’s core electronics business. Sales of Sony’s Playstation 3 console fell 19 percent year-over-year in November, according to NPD. This while sales of Microsoft’s Xbox 360 rose eight percent and sales of Nintendo’s Wii doubled. U.S. consumers purchased two million Wii consoles and 836,000 Xbox 360s last month. But they bought just 378,000 PS3s.

Ugly news for Sony and for CEO Howard Stringer, who’s promised the company’s games division will turn a profit this fiscal year after two years of losses. Clearly, Sony’s going to have a tough time managing that. No easy task peddling the $399 PS3 to a public that would much prefer to spend $150 less on the Wii.

The first computer ever to pass the petaflop milestone, Roadrunner is more than twice as fast as the top-ranked computer in the previous Top500 ranking. It’s also one of the most energy efficient systems on the Top500. But you wouldn’t know from looking at it. It’s housed in the Los Alamos National Laboratory and will be used principally for nuclear weapons simulations.

And while the anti-GTA zealots who blame the game for inspiring real-world violence are decrying it, the press is heaping it with praise (of 31 reviews listed on Metacritic.com, 24 are perfect scores). The New York Times calls it “a violent, intelligent, profane, endearing, obnoxious, sly, richly textured and thoroughly compelling work of cultural satire disguised as fun.” Noting that innocent bystanders in the game now groan in agony when murdered, Slate’s reviewer explains, “what makes Grand Theft Auto IV so compelling is that, unlike so many video games, it made me reflect on all of the disturbing things I had done.” MSNBC says simply: “Grand Theft Auto IV will blow you away.”

Which is likely what it’s going to do to sales estimates as well. GTA IV was inevitably going to be one of the biggest games, if not media events, of the year–one that Hollywood executives worry might depress movie ticket sales as GTA fans drop everything to play the game. And though that might sound like so much PlayStation 3 promoting exuberance, it may not be that far off. With $400 million expected in first-week sales, GTA IV’s debut could be the most lucrative launch in entertainment history.

Woolworths’ decision came after it found Blu-ray movies outsold HD DVD by 10 to 1 in its 820 stores. “Sales figures clearly show that the market is moving toward one format of high-definition DVD,” said Woolworths’ DVD buyer Steven McGunigel. “The main reason is the success of Sony’s PlayStation 3 machine. Because it plays Blu-ray discs, there are over three-quarters of a million homes in the U.K. that can view the new high-definition format. There is no where near that number of HD DVD players around.”

Another nasty blow for the HD DVD, which appears to be fast losing the support of its initial backers. Last week, Warner Bros., New Line and HBO all abandoned HD DVD. And according to Variety, Universal’s exclusive commitment to HD DVD has expired. Toshiba, HD DVD’s, main backer, is soldiering on in spite of such setbacks. It’s even gone and purchased a 30-second TV spot during next week’s Super Bowl. But as Andy Parsons, senior vice president of the Blu-ray Disc Association points out, it’s no silver bullet. “I certainly admire [Toshiba’s] chutzpah,” Parsons told Home Media Magazine. “They can certainly choose to do as they please with their marketing. Running a Super Bowl ad is not likely to convince consumers that HD DVD will win the format war.”

And in the end, is this particular format war even worth worrying about? Isn’t physical media doomed? “People are saying Blu-ray won the war but who cares,” Seagate CEO Bill Watkins said earlier this year. “The war is over physical distribution versus electrical distribution, and Blu-ray and HD lost that. In this, flash memory and hard drives are on the same side. The war is over and the physical guys lost.”

To keep you abreast of tech news while he’s away, we’re compiling a daily digest of 10 must-read tech stories. Our Tech 10 appears below.

1. Auction Action: Confirming the expected, Google announced today that it would indeed apply to bid for wireless spectrum in the Federal Communications Commission auction in January, writes Kevin J. Delaney in The Wall Street Journal, adding that if the search giant grabs a wireless license, it could become a provider of mobile phone and Internet services, among other things.
2. Facebook Gets a $60 Million Infusion… Hong Kong mogul Li Ka-shing has invested $60 million in Facebook, reports BoomTown’s Kara Swisher, who notes that the billionaire businessman has the right to invest another $60 million.
3. … And Pulls Back on Privacy: The social-networking site, under siege from Move.On and its own members, as well as from “Landmark Partner” Coca-Cola (which, says Louise Story of the New York Times, is holding off on participating in the social-advertising feature) has announced changes to its new Beacon ad system. Observes Om Malik: “Facebook finally backed down, more or less acquiescing to the demands of those concerned about its seemingly blatant abuse of privacy of its fast-growing user base.”
4. Rise and Fall of Motorola Magnate: Ed Zander, CEO of the electronics manufacturer whose mojo with the Razr cellphone brought the company big gains, is resigning in the face of equally disappointing declines to rival Nokia over the last year, The Wall Street Journal reports. Greg Brown, the company’s president and chief operating officer, will succeed Zander.
5. Sprint Rejects a Suitor: Sprint Nextel has turned down a $5 billion investment offer from Providence Equity Partners and SK Telecom of South Korea in exchange for sacking its management, according to the New York Times.
6. Big Brother Online: Government agencies worldwide are increasingly using the Internet to spy on and conduct cyber attacks on their enemies, according to an annual virtual criminology report by McAfee, writes Jon Brodkin of Network World, noting that the U.S. joins China as one of the biggest employers of Internet espionage.
7. Kiwi Teen in Botnet Probe: New Zealand police have held for questioning a teenager suspected of leading an international cyber-crime group, according to the BBC, which adds that the group allegedly hacked a million computers to steal millions from people’s bank accounts.
8. Publishers Want Web Respect: Launching an effort to bring them more power to say what content search companies may make available, publishers have developed a framework to inform online search engines that certain pages, directories or sites must not be indexed, reports eWeek, noting that supporters of the measure to respect copyright include the Associated Press, Reuters and the Association of American Publishers.
9. Sony Hears On-Demand Demands: Starting early next year, users of Sony’s PlayStation 3 will be able to download high-definition video to their devices, according to Variety, which adds that each download will cost about $1.85.
10. Exploding Cellphone Death Greatly Exaggerated:The Korean quarry worker whose death was blamed on an exploding cellphone was actually killed by a co-worker, who admitted he concocted the story after accidentally hitting his colleague with a drilling vehicle, the Associated Press reports.

Posted by Associate Editor John Sullivan.

To keep you abreast of tech news while he’s away, we’re compiling a daily digest of 10 must-read tech stories. We’re calling it the Tech 10 and it appears below.

1. Getting to know you: Facebook is developing targeted ads based on the information that users of the social-networking site reveal about themselves. Quoting anonymous sources at the company, The Wall Street Journal says the advertising system is at an early, changeable stage, but Facebook hopes to launch a basic version late this fall.
2. It looks like Apple will turbocharge its iPods with the Mac OS. According to AppleInsider, the upgraded digital music players will debut at a media event next month and are part of the computer maker’s master plan to create devices around its legendary operating-system software.
3. Dude, where’s my YouTube? Initial response to ads overlaid on downloaded videos from the popular online site is overwhelmingly negative, Computerworld reports, noting that the comments on a YouTube feedback blog could be summarized by the one-word review of a user from Oro Valley, Ariz.: “Yuck.”
4. Hoping to shore up anemic sales of its PlayStation consoles in the face of competition from Microsoft and Nintendo, Sony said it will market a recording-transfer device (pictured here) in Europe enabling users to record TV programs on their PlayStation 3 video-game consoles for transfer to the PlayStation Portable. According to the Associated Press, the new gadget, dubbed PlayTV, will give game consumers an additional function for their PlayStations beyond playing video games.
5. Too hot to handle? Microsoft announced that it’s offering a free retrofit to the Xbox 360 Wireless Racing Wheel after reports from a number of users that smoke issued from the device when used on AC/DC power, according to PC World. The retrofit comes six weeks after it extended the Xbox warranty for “flashing lights of death” failures–and took an earnings hit of $1.15 billion for the anticipated repair bill.
6. Paper trail, indeed. Many iPhone customers are irked over the book-sized bills they are getting from wireless provider AT&T, reports the New York Times. The bills itemize all phone calls, as well as every text message and online data transfer. In response, AT&T announced that beginning Sept. 28, customers would get summarized bills removing the wireless detail.
7. Microsoft and Nokia won’t sit back and watch while the iPhone marches through Europe, apparently. The companies are joining forces to put Windows Live services on selected Nokia S60 handhelds, reports IDG News Service. Customers in 9 countries in Europe and two in the Middle East will be first to get the services, including Hotmail and Live Messenger. A Microsoft spokesman couldn’t say when the functions would be available for cellphones in the United States, however.
8. Speaking of teaming up, MTV and MySpace are collaborating on a series of one-on-one dialogues with the major Democratic and Republican presidential candidates. CNNMoney.com reports that the hourlong events will be streamed live on MTV.com and MySpaceTV throughout the fall on college campuses.
9. Palm’s Foleo computer, first exhibited at this year’s D Conference, is having trouble leaving the gate, writes Tech Trader Daily, quoting a Deutsche Bank analyst who disclosed that the debut in stores of the stripped-down laptop scheduled for this week “was delayed after software bugs were detected. … Palm now expects the device will ship in late September/early October.”
10. Playboy Enterprises is, uh, unveiling Playboy U, a social-networking site targeted exclusively at college students. The move online by the granddaddy of the skin rags, says the Associated Press, is an attempt to capitalize on the Playboy brand as the 54-year-old magazine continues to lose money and readers. The site is modeled after Facebook and MySpace, with users allowed to “friend” other college students. Although there will be no nudie shots, users will be able to discourse on such topics as how many sex partners they’ve had or what they think of penis enlargement.

–posted by Associate Editor John Sullivan

It’s hard to believe that the handful of announcements made last night will gain it much truck in the next-generation console war, but you never know–especially the way things are going over at Sony.

So what were the announcements? A bunch of knock-’em-down, shoot-’em-up, carjack-’em-and-run-’em-down Xbox 360 games like Madden NFL 08, Halo 3 and Grand Theft Auto IV. And a new Fisher-Price-looking controller called “big-button pad” that’s meant to be less intimidating to new gamers. “For the Xbox 360 and the industry to grow, you’re going to need a lot more social experiences that are not intimidating and easy to jump into,” said Shane Kim, corporate vice president of Microsoft Game Studios. “That’s what we’re doing with the big-button pad. You realize it’s something that’s not intimidating.”

Nope. Definitely not that. Looks like a big baby rattle … or something you might find at Good Vibrations. Anyway, Microsoft is packaging big-button pad with Scene It?, a trivia game similar to You Don’t Know Jack, presumably in the hopes that it will loosen’s Wii’s stranglehold on the casual-gaming market a bit.

In the end, Microsoft’s E3 event was most notable for what didn’t occur. The company did not cut the price of the Xbox 360, as some had speculated it would after Sony slashed the price of the PlayStation 2. “We feel really good about where we’re at right now,” Kim told the Seattle Post Intelligencer. “Of course, we’re always going to be looking at those opportunities. But we’re certainly not feeling any pressure to react to anything that Sony has done.”

The 17% cut comes just seven months after the PS3 arrived in the North American market and is essentially an acknowledgement that the device–as technologically advanced as it is–is just too damn expensive to woo gamers from Nintendo’s Wii. “From a pocketbook standpoint, we know we’ve presented a challenge for consumers,” said Jack Tretton, president of Sony Computer Entertainment of America. “Our initial expectation is that sales should double at a minimum. We’ve gotten our production issues behind us on the PlayStation 3, reaching a position to pass on the savings to consumers, and our attitude is the sooner the better.”

Of course, even after cutting the price, Sony will still have the most expensive game console on the market. Nintendo’s wildly popular Wii is just $250. Given that, it’s hard to see the massive spike in sales that Tretton predicts. “It’s still expensive,” said Michael Pachter, an analyst with Wedbush Morgan Securities. “With a 17% price cut, you may get a 50% increase in sales. It’s unrealistic to assume that demand will double.”