AirShot

Nintendo will not let an AO game tarnish Wii's reputation. Nintendo brand means family gaming. So Manhunt 2 is not going to be licensed with its AO rating.
I'll go as far as saying that if the story goes mainstream, even a revised version with an M rating will not be licensed ; Nintendo will make a point about protecting their brand.

I have two scenarios in mind.

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Scenario #1
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The PS3 price is going to drop at E3 next month, down to $499. No official in their right mind would announce that they are "thinking about it" if it's not already sorted out and imminent. That's because a market waiting for a price drop alienates existing PS3 customers while putting the prospects on hold.

A price drop of the 360 will follow very closely.

Why? Because this is an installed based war.

Currently Sony has few developers who want to learn the PS3 intricacies, because there is no installed base to justify the effort. No effort from developers means PS3 titles look just the sames as the 360 counterpart. The current perception in the market is that unless you have your money on blue-ray, there's no reason to buy a ps3. No reason to buy a ps3, means no installed base, back to point 1.

Sony needs to break this death spiral *before* GTA4 comes out. They need to enter the fray and start giving themselves a chance by making their hardware accessible. Yes, the 360 price will also drop, but at $390 for the 360 elite vs. $490 for the ps3, the competition will really begin.

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Scenario #2
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Sony officials do realize that they are currently losing the war on the hardware front.
If they don't do anything, someone in the market for a console will end up buying a Wii or a 360.

So it is Sony's advantage to slow the whole market down.

Buy pre-announcing a price drop, they are simply putting some FUD (fear uncertainty and doubt) in the prospect's mind. Doing so, a prospective buyer will obviously not buy a PS3, but won't buy a 360 or Wii either, because he knows that a PS3 price drop will also make the 360 price drop, potentially making both suddenly affordable and competitive vs the Wii.

In this second scenario, the price drop will eventually come, a week or two before GTA4 comes out.

Well, I do not own a 360. I am a PC gamer, and am facing the choice of upgrading my PC ($400 just for a decent video card) or buying a console to play current games.
I am pretty much set on the 360, because I can play it on my computer's LCD (it has two inputs), thus pushing back the upgrade of my TV.
Reading the internet, I am worried about the reliability of the hardware. I guess that when an offer is too good to be true ($399 for a video card, processor, hard disk, dvd player), it probably isn't.
So I am holding off until I read that 65nm XBOX is out there, runs cooler, and is more reliable. I'll have to leave with my 3 year old PC for another few months I guess.

I think the price cut has to happen way before Christmas. I expect it this summer for the following reasons:

1 - they need a larger installed base before the great titles come in (starting in September).

2 - they need to introduce the 65nm design to start saving money on the hardware and customer support. In order to introduce 65nm, they need to sell their current stock - who will want a 90nm when the cooler-running, more reliable 65nm is available?

3 - if they want to get to 90 millions users, they need to make a move asap. Time is critical, as a mom that buys a Wii now is less likely to buy any console at any price in the coming 3 years

I think the price cut has to happen way before Christmas. I expect it this summer for the following reasons:

1 - they need a larger installed base before the great titles come in (starting in September).

2 - they need to introduce the 65nm design to start saving money on the hardware and customer support. In order to introduce 65nm, they need to sell their current stock - who will want a 90nm when the cooler-running, more reliable 65nm is available?

3 - if they want to get to 90 millions users, they need to make a move asap. Time is critical, as a mom that buys a Wii now is less likely to buy any console at any price in the coming 3 years