Wedbush Morgan analyst Michael Pachter believes the PlayStation 4 will retail in the United States for US$349, cheaper than the Xbox One, which he predicts will retail for US$399.

Pachter estimates the bill of materials for the Xbox One is US$325 compared to just US$275 for the PlayStation 4.

At this stage, the PlayStation 4 console is widely estimated to have higher technical specifications than the Xbox One, however, Microsoft's next console comes with Kinect 2, a motion sensor control input.

Nonetheless, Pachter believes there are more opportunities to subsidise the price of the Xbox One with subscriptions to cable, ISP, and gaming services.

“We believe the ability to watch live TV from a cable, telco, or satellite set-top box through Xbox One could entice an MSO to drive subscriptions through a subsidised box in exchange for a multi-year contract,” said Pachter in E3 preview note to investors. “The ‘always connected’ requirement for the Xbox One likely means that a broadband connection will be required, suggesting to us that ISPs may have an incentive to offer a subsidy as well.

“In addition, Microsoft could conceivably subsidise the Xbox One through prepaid Xbox Live Gold subscriptions (as it has done on a limited basis in the past) or premium Skype functionality as well. Similarly, Sony could subsidise the PS4 through prepaid PlayStation Network subscriptions, but unlike Microsoft, it does not have a history of doing so.”

Pachter also suggested that Nintendo risks a further loss of market-share if it cannot present a powerful software line-up next week.

“If the Wii U's popularity does not improve by the end of the year, many third-party publishers may pass on producing games for the console. We note that EA recently announced that it had no Wii U games in development, and it remains a possibility that the publisher will abandon the platform entirely. Should other third parties follow EA's lead, the Wii U could be relegated to a first party only platform.”

Finally, the Wedbush Morgan analyst predicted a round of US$50 price cuts to existing hardware including the Wii U, PlayStation 3, and Xbox 360.