[Michael Pachter, Wedbush Morgan Securities]

On the Wii's progress so far: So far, Nintendo has handled supply fairly well. They could not have anticipated at launch that the Wii would sell more than the PS3 and 360 combined, and I think it was prudent to grow their production capacity based upon a sell-through plan, even though actual demand exceeded that plan. At the outset, they also committed to send a disproportionate share of production to Japan, and once demand there was satisfied, they apparently diverted supply to the U.S.

I would imagine that we're near balance in all territories now, as you can occasionally find a Wii on the shelf at GameStop, and can usually get one on Sunday mornings at Target. The game selection is still limited to a good -- but so far pretty average -- set of Nintendo products and a small handful of third-party games. That small handful will be much larger this holiday, and I think we'll see some surprise winners for the third-parties.

On the Xbox 360's progress so far: The 360 team has done a phenomenal job with Xbox Live Arcade, and there are several great casual games offered there. The problem with the 360 to date is its laser focus on the hardcore gamer, and the price point remains a bit out of reach of the mass market. Once the 360 is below $299, I think you'll see greater mass market acceptance. There is a ton of casual third-party content coming, like SpongeBob, WWE, Simpsons Movie, etc., and I think you'll see sales pick up year-over-year this holiday.

The overheating issues appear behind them, and it is pretty clear to me that newly purchased 360s will not have that problem. They are doing fine in Europe, but not as well in Japan. I think that they're going to continue to have a tough time in Japan, but not for lack of trying, as they have continued to sign up games like Blue Dragon to drive sales.

On the PS3's progress so far: It looks like Sony has decided to focus heavily on 2008. They have a bunch of phenomenal titles coming out, many of them exclusive: Killzone, Little Big Planet, Gran Turismo and Metal Gear Solid. The box is still too high priced for most people, but I think the company intends to use the proceeds from its upcoming IPO of [their] financial services business to fund "losses" from both the consumer electronics and gaming divisions.

These losses can only persist if Sony decides to sell [PS3] consoles and Blu-ray players below cost. I think that it's logical to conclude that they intend to do so, and would guess that a PS3 costs around $550 to make right now. If they come down by $50 by early next year, they will likely cut the price again to $399, and may be in a position to cut again to $299 later in the year. I think that we have to write off 2007 for Sony, but we should acknowledge that their lineup in the first half of 2008 is better than any in recent memory, and should again start to drive console sales.

I can't say enough positive things about Little Big Planet, by the way. There were looks of delight on the faces of the people playing it and the people watching it in Tokyo. It looks like a genre-defining game [with] the potential to move consoles.