Con: Will the $399 40GB PS3 turn the tide?

The backwards compatibility is a money trap for Casual gamers
Indeed, the 40gb version may improve sales but will only very slightly improve the probability of a come back. Trust me, that probability isn't exactly high as of this moment, as you probably already know.
As far as the backwards compatibility and USB limitations goes, most casual gamers either don't know what the USB ports are for, or think that backwards compatibility will truly give them a faster-increasing library. Stick with your old console if you're going to keep playing the games for it, since it will probably die out soon anyway.
But we also have to consider the fact that casual gamers don't even want to get the PS3 because of its price anyway. Most are leaning towards a less-pricy and more newb-friendly console such as the Wii (which is actually exactly the case we're getting).
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Posted by Furyhunter
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