As the video game industry marches toward the biggest holiday battle in years, market leader Sony is again under attack for its PlayStation 3 strategy.

According to an analyst report released Tuesday, the high price of the system and Sony’s efforts to market the PS3 as a luxury product are likely to cripple the game giant.

“Sony is handing its competitors a golden opportunity,” DFC Intelligence analyst David Cole said on Wednesday. “They’re being attacked from all angles.”

In May, the company said the PS3 would initially be available in two configurations, starting at $499. Sony said the console will hit Japan on November 11, followed by the U.S. and European markets on November 17 (see Sony Prices PS3 at $499).

The $499 price tag makes the system $200 more than Microsoft’s entry-level Xbox 360 console. Nintendo’s Wii will sell for even less—the company says the game system will retail for no more than $250 when it hits stores this holiday season.

“I don’t think they have [conveyed] a message of why it… offers more for that price,” Mr. Cole said of Sony. He said the PS3 is simply too expensive, resulting in a business model not conducive to the mass market video game audience. Sony did not immediately return calls for comment.

Competitors Rising

While Sony sorts out its strategy, Mr. Cole believes Microsoft and Nintendo would do well to narrow their focus. Microsoft should continue to cater to hardcore gamers and build on its Xbox Live network gaming service, while Nintendo should continue to build its message of appealing to a more diverse market. Games such as Nintendogs and the company’s Brain Age series of games for the DS handheld system have been successful in reaching women and adults.

According to Mr. Cole, the Wii’s low price and mass market message give Nintendo an opportunity to make its console the market leader in all major regions around the world.

While Microsoft is the only major video game console manufacturer with a next-generation product on the market, consumers aren’t keeping their wallets closed until the holiday season release of the competing PS3 and Wii.

June numbers from NPD Group reveal the non-PC game industry hit $4.3 billion in the first half of 2006, a 4 percent rise over numbers from the same period in 2005. According to the report, the PlayStation 2 was the best-selling video game console in June, moving nearly 312,000 units in comparison to the estimated 277,000 Xbox 360’s shipped by Microsoft (see US Game Sales Surge).

Such numbers solidify the importance of the PS2, Mr. Cole said, and prove that Sony needs to work to keep the aging platform going. In November the company announced that cumulative worldwide shipments of the PS2 had reached 100 million units, having done so in just under six years.

As many gear up for the holiday console blitz, big publishers continue to pour money into the development of dozens of new titles for the PS2. Sega’s new Yakuza game and refreshed franchises such as Electronic Arts’ Madden, NCAA Football, and Nascar series are just a few examples.