One rumor that seems to refuse to die is that there will be a 40GB PS3 at $399 coming this fall.  That would be a whopping $200 price cut from the current 80GB model on shelves now and a $100 price cut from the clearance prised 60GB unit.  This new model would fall between the price of the Xbox 360 Pro($349) and Elite($449) models and possibly steal a few sales away from the 360. 

Does this new price make any sense for the PS3 this holiday season?  I tend to think not since the three big games for the PS3 all flopped.  Lair, Warhawk and Heavenly Sword have not gone the hearts of gamers so far.  All three have seen sales drop off significantly after their first week of sales.  Games like Folklore, Haze and Uncharted: Drakes Fortune may get a few of Sony's hard core audience excited but none of these games are system sellers.  It takes established franchises to move systems Sony is hoping Ratchet and Clank Future: Tools of Destruction, Tekken 5 and  Grand Turismo HD will fit the bill.  Seems hard to believe people will spend $599 for the PS3 if they can hold out for the possibility of a $399 model.  Sony just doesn't have a must buy game this fall.

If Sony has a $399 model in the works they better get it to market soon because the possibility of one is hurting their sales right now.  If they don't have one you could see some abysmal sales numbers for the PS3 this holiday season.  If Sony sees horrible sales this could lead to more developers porting their games over to the 360 to help offset the cost of their games.  In the end you could see Sony losing developer support and in turn see the Xbox 360 getting exclusives that used to be on Sony's platforms.

Source:
http://www.joystiq.com/2007/09/24/rumor-sony-announcing-40gb-ps3-this-week/