Although it's not yet official, most analysts expect the NPD Group's January video-game console report to show Nintendo's Wii game console as the clear winner for December, with the Xbox 360 a distant second.

Analysts are also predicting that even as Sony's PlayStation 3 begins to gain some momentum, price cuts may be just around the corner as the once-leading console maker struggles to compete against its less-expensive competitors.

"We expect December {video-game] sales of $2.625 billion -- up 10 percent compared to December 2007's $2.39 billion. We expect next-generation software Relevant Products/Services sales of $2.42 billion and current-generation software sales of $205 million," said Michael Patcher, an analyst at Wedbush Morgan. "Our forecast Relevant Products/Services reflects growth of four percent year-over-year for Xbox 360 software, 71 percent growth for Wii software, and 48 percent growth for PS3 software."

Slashing Console Prices

In September, Microsoft cut the price of its three Xbox 360 models to $199, $299 and $399. Sony responded by increasing hard-drive sizes and maintaining its PS3 pricing at $399 and $499. In October, Microsoft countered with the launch of its holiday bundles with free games Sega Superstars Tennis for the Xbox Arcade, and LEGO Indiana Jones and Kung Fu Panda for the Xbox 360 Pro and Elite.

"We believe these moves increased hardware sales, and note that the bundled software is not included in NPD's overall figures, so Xbox 360 software sales may show only a modest year-over-year increase," Patcher said. "Microsoft hardware sales have been up modestly over the last two months, due to a higher value proposition and by having its core model priced below $300, and we expect this trend to continue in December."

Once the PS3 is at a more affordable price point -- Wedbush expects a cut to $299 in April -- the company thinks sales will begin to grow. However, Wedbush also expects another Xbox 360 price cut, with the feature-laden Pro model likely to come down to $249 at or before this year's E3 show in June.

Sony Markets Value

Michael Cai, an independent video-game analyst, has been examining the possibilities of a Sony price cut in the summer -- perhaps sooner. "I don't now how Michael [Patcher] came up with April, but I do agree it's highly possible that Sony is going to do a price reduction this year," Cai said. "The PS3 will still be the most expensive console."

Sony is combating its high-price profile with new marketing Relevant Products/Services material that attempts to demonstrate the value of what it has packed into its device. Sony's recent efforts compare the value from a PS3 versus a Wii or an Xbox 360.

"Sony recently sent out a comparison grid where you can see what the PS3 offers and how much additional it would cost you if you wanted to get the same thing with the 360. Of course, the Wii is lacking all the fancy features the PS3 has anyway," Cai said. "I am not sure how much Sony might reduce the price, but we could see an entry level around $299."

For its part, Wedbush predicted, Nintendo will probably maintain Wii pricing at $249 until the company sees signs that demand is slowing. That means a price cut may not happen until late in the year, if at all.