Wedbush Morgan’s Pachter answered some questions in a Gamepro story. He admitted that ‘casual gaming’ was growing faster than ‘traditional gaming’ but that price cuts would save the HD twins. He said that 90% of all console sales occurred last generation at or below the $199 point.

What I find most striking about Pachter is that a couple months ago he said Microsoft should focus on being profitable instead of being number one.

“I don’t understand why Microsoft has to be first. It is part of their DNA, but they really don’t need to be first if they’re profitable. To finish first and lose a few hundred million dollars a year is a bad idea. To finish third and make a few hundred million dollars a year is a good idea.”

This quote makes perfect sense. It is better to make money to live again to fight the marketshare battle the next console cycle. Yet, now Pachter is calling for price cuts. Constant price cutting shows that a product is in a ‘Red Ocean’, that its values overlap with competitors and must use price to differentiate to attract consumers.

Questions that need to be asked to analysts:

1) For decades, the value of new consoles have been upgraded graphics. Since graphics have now become a commodity, shouldn’t the future of HD Twins be very different, meaning substancially worse, than prior generations when graphics were not a commodity?

2) If 90% of consoles were sold at or below $199 the previous generation, then how is the Wii going bonkers with market at $250 and more than that due to re-sellers? How come constant previous price drops for the HD twins only kept their sales afloat? What if price cuts don’t work for the HD Twins? What happens then?

3) Why not try explaining why Wii is selling so well instead of trying to figure out scenarios how the PS3 ‘might’ ’somehow’ rocket to the top?

The question that must be delivered to these analysts is the issue that graphics have now become a commodity. Ask that and you will get a very different response.