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Sony must slash the PlayStation 3’s retail price in order to avoid losing sales to its arch-rival, Microsoft's Xbox 360, a gaming analyst has warned.

Jesse Divnich, an analyst at US investment house EDAAR, said in a recently published research note that the PS3’s $399 (£228/€292) price tag – which applies to the 80GB model - “is simply too steep”.

He stressed that Sony must reduce the price in the run-up to Christmas, to avoid customers choosing cheaper alternatives.

The analyst’s comments might fall of deaf ears at Sony, though. In July, Nobuyuki Oneda, Sony’s CFO, said that the company's “plan is not to reduce the price” of the PS3.

Instead, the firm’s long-term strategy is to concentrate on profitability, rather than selling more PS3s. In short, it wants to work on making the console cheaper to produce and so more profitable.

Microsoft has chosen the opposite strategy and, last month, cut the cost of all three models by £20 in the UK. The Xbox 360 Arcade now costs £130/€180, while the Premium and Elite cost £170/€240 and £230/€300, respectively.

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