I agree.
On your point about all the great software in the world won't make the fence sitters buy a console and/or a dirt cheap price, all one would need to do is look at the GameCube. It was 99 USD less than two years after it came out and had a slight resurgence in sales the 2003 holiday season (beating out Xbox for that holiday) but it still wasn't enough to take 2nd place overall.
On another point, if Nintendo indeed cuts the price of the Wii, that could be seen by the gamers (specifically HD gamers) that Nintendo is trying to compete with the HD twins, which is not the case. So Nintendo could be stuck in that hole as well.
I don't see Nintendo losing too much market share this upcoming holiday season. However, if the HD twins prices drop below 249.99 USD, then Nintendo will drop the Wii's price. I guarantee it.
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