As I said in another thread, this seems less like bluffing as it does like playing a game of chicken ...
If this was a discussion behind closed doors Sony could make a token offer that would allow Activision-Blizzard to back down without losing any face, and Sony would retain the ability to time their price-cut as they saw fit. With it being such a public argument, any offer Sony does make to get Activision to back down will have to be made to EA, Ubisoft and THQ (at least) which makes it difficult for Sony to make that offer; and unless Bobby Kotick can come out as a "Winner" in this situation he will (probably) be forced to follow through with his threat.
Essentially, Sony is in a position where they have to choose between losing hundreds of Millons of dollars apeasing third party publishers, losing hundreds of millions of dollars on a price reduction for their console, or losing third party publishers' support; at a time when they don't have the money available to lose, and when they can't afford to lose third party support without hurting the viability of their console.
Now, while people may think the loss of Activision isn't a big deal, third party publishers have a herd mentality and they want to release their games on a platform where other major publishers are releasing big games; while this may hurt their ability to stand out in the crowd, it is easier to sell a game on a platform where their is high consumer interest than on a platform where few people look for games (due to lack of releases). A loss of support from one major publisher tends to translate into a loss of support from other publishers, which starts a deadly cycle for a platform.
