Box Shipments Continue

DTV Reception Problems Worry FCC Commissioners All FCC commissioners expressed concern about possible DTV reception problems at Thursday’s open FCC meeting. It was devoted to the lessons from early analog shutoffs by about one-third of the nation’s 1,798 full-power stations. All agreed that some portion of viewers will lose at least one station in their market as analog and digital coverage areas diverge. Commissioners and industry officials said the Feb. 17 analog cutoff by 421 sta-tions went well and offers guidance(CED March 2 p2) for switches to digital through the new deadline of June 12. Some witnesses said most viewers can get all DTV channels by properly scanning digital converter boxes. “Most callers are unable to distinguish between true reception problems and scanning problems,” said Association for Maximum Service Television President David Donovan. Almost all viewers could receive all stations after they were walked through the proper steps, he said. “The frogs aren’t falling from the sky, and certainly no anvils are falling from the sky.” Gary Epstein, a short-term DTV adviser to the office of acting FCC Chairman Michael Copps, agreed. “We had a mostly uneventful and successful partial transition, and I emphasize partial,” Epstein said. “There were no real crises.” Questions about scanning and reception were the most common in the 152,500 calls taken Feb. 12-21 at 888-CALL-FCC, said Chief Information Officer Andrew Martin. “As the chairman mentioned, I think millions of calls is still on the table” as possible total number in the lead-up to June 12, Martin said. He hopes for “a more thoroughly trained agent [staff] with more skill” to run diagnostics and spend about 10 minutes on each call, on av-erage. The FCC must “be prepared for millions of calls between now and June,” though predicting call volume is “an inexact science,” Copps said.

Today’s News: DTV RECEPTION PROBLEMS worry all FCC mem-bers. Feb. 17 widely agreed to have gone well. NTIA clearing waiting list. (P. 1) NEW GAME PLATFORM to be unveiled by WebTV foun-der Steve Perlman’s company Rearden, sources say. (P. 4) TRANS WORLD TO RENEW VIDEOGAMES PUSH at 347 f.y.e. stores as it seeks to expand sales in the category. (P. 4)

DIGITAL TV: FCC is getting a new DTV expert advis-ing the chairman’s office on the transition. (P. 5) MERGERS & ACQUISITIONS: Panasonic issues 400 billion yen in bonds toward Sanyo acquisition, ex-pected to close next month. (P. 6) RETAIL: CE products, games drove 36.5 percent in-crease in Blockbuster's Q4 same-store sales. (P. 6)

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FRIDAY, MARCH 6, 2009 VOL. 9, NO. 43

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“It’s absolutely essential to get” word out before June 12 to consumers who stand to lose signals, Copps said. “We must tell the American people the truth. They don’t want their information sugar-coated,” or alarmism, on who needs a new antenna and where digital signals will be “less robust than they may have thought,” said Copps. “With apologies to Jack Nicholson, consumers can handle the truth.” It’s a “huge priority” for the FCC to identify places that may lose signals, Copps told reporters. “We better keep working fast and furious at trying to narrow that down and pinpoint not only the gross number of people impacted but figure out where it is.” He wouldn’t say whether the April 8 open FCC meeting also will cover DTV. “We’re going to continue to highlight this problem, but the commission as you know is doing lots of other things right now.” Economic Stimulus money has begun flowing into the DTV coupon program, allowing the NTIA to begin clearing its waiting list without having to wait for money from expired coupons to be recycled back into the pro-gram, Bernadette McGuire-Rivera, associate administrator of the NTIA's Office of Telecom and Information Appli-cations, told the FCC. The NTIA thinks it will take about two and a half weeks to get through the "backlog," she said. "The funding will also allow us to issue approximately 12 million new coupons and we expect, depending on redemption rates, to have another million and a half or three million available for distribution." The NTIA "within the next two weeks" will issue new final rules conforming with the DTV Delay Act that will allow the agency to fill orders for replacement coupons from consumers whose first coupons expired without being redeemed, McGuire-Rivera said. The rules, which will be "very simple," will take effect upon publication in the Federal Register, she said. "We're in the process of retrofitting our systems now, so when the rule becomes ef-fective, we'll be able to move with that." Under questioning from Copps, McGuire-Rivera said her agency thinks perhaps half of the 16 million cou-pons that have expired "will come back into the program." To speed processing and delivery of coupons, the NTIA has gone from bulk-rate to first-class mail and added banks, she said. It now has capacity to process 2 million cou-pons a week, she said. She said the NTIA doesn't fear having to compile a waiting list again, unless consumers all wait until June 11, the day before the cutoff, to apply. The NTIA also is changing its rules to provide for "an alternative mechanism to deliver coupons other than through the U.S. mail," she said, without mentioning specifics, such as e-mail delivery. The agency has no "firm plans on exactly how that would operate right now, but that's something that we're looking into," she said. The NTIA expects to use about $3.5 million of the $90 million Congress set aside for DTV education, with the FCC likely using the rest, McGuire-Rivera told reporters. Copps later declined to say how much money the FCC may use. The NTIA will focus on the 5 million households Nielsen says are "still totally unready" for the DTV transition, she said. "It's going to be a tough group to find." Those "last 5 million" households "are a special circumstance," McGuire-Rivera said in her testimony. "This last group needs special attention." Nielsen has done special research on the 5 million that will help the NTIA "retool" its advertising message, she said. Many viewers will be “left in the dark” because of antenna issues and may need to move them, buy am-plifiers or take other steps, Commissioner Jonathan Adelstein said. Although most viewers simply need to oc-casionally re-scan their digital converter boxes, some will lose signals and “it’s better to inform people upfront rather than getting a rude awakening on June 12th,” he added. Commissioner Robert McDowell is happy Feb. 17 “will thankfully not live in infamy.” Lessons learned from then should be applied “to the major challenges that lie ahead of us,” he said. “We also know that consumers in many places around the country are going to encounter reception problems” when analog broadcasts cease altogether. That will come as a surprise unless they’re warned, McDowell said. NAB President David Rehr agreed that “challenges remain” but said Feb. 17 “went well” and viewers “have gotten the DTV message.” “The first challenge is rebranding the June 12th date” in viewers’ minds, he said,

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citing “antenna issues” as among possible difficulties. Broadcasters took the suggestion of McDowell at the FCC’s last DTV meeting (CED Feb 6 p1) and are naming leaders in each market to coordinate transition efforts, Rehr said. Nielsen said Thursday that 4.5 million households, 3.9 percent of the U.S. total, are unready for the transition, 570,000 fewer than less than a month ago. Despite “many policy disputes” between broadcasters and cable operators, NCTA President Kyle McSlar-row said the two industries worked well on the technical “nitty gritty” of switches. “We have a huge challenge in front of us” with 85 percent of terrestrial TV viewers in markets where few or no stations have yet switched, he added. CEO Sandy Markwood of the National Association of Area Agencies on Aging and Mark Lloyd, vice presi-dent of the Leadership Conference on Civil Rights, said analog cutoffs last month went smoothly. But they added that their groups, which got money from the NTIA for education, have much work ahead. From the “retailer’s perspective, the remarkable thing about Feb. 17 and 18 is that nothing remarkable hap-pened,” said Chris McLean, executive director of the Consumer Electronics Retailers Coalition. In fact, for some coalition members, the week of Feb. 17 was a slower week for converter box sales than the previous week, he said. And February “has been a much slower month for sales than January,” he said. “From this vantage point, our report is, so far, so good,” McLean said. At every turning point in the DTV transition, beginning with the Wilmington, N.C., cutoff in September and through Feb. 17, coalition members and other retailers have had “ample” supplies of converter boxes in stock, McLean said. “Since Feb. 17, converter sales for some members have continued to slow, as has coupon demand,” he said. “But given the circumstances, that is not too surprising.” Coalition members “have stock on the shelves and new supplies are on the way,” McLean said. One member reported in a Thursday e-mail that its stocks were “plump,” McLean said. “One thing seems very clear,” he said. “Based on our communications with CERC members, the converter box market is closely tied to the availability of coupons. Published reports indicate that less than 10 percent of converter boxes are sold without a coupon.” “There will be individual stores that run out of boxes on one particular day,” McLean told Copps during Q-and-A. “New product is on the way. Deliveries are coming in March. So our members feel ready.

■ SUPER-EFFICIENT ELECTRONICS should be promoted with funding in climate-change legislation, coalition of environmental and energy groups tells Congress. ■ BILLS IN SEVEN STATES would restrict or ban sale of TVs, computers, other electronics with bromi-nated flame retardants. ■ VERIZON TAKES STEPS TO GREEN through more efficient networks, director says. ■ STATE ACTIVITIES: California Energy Commission expects to get $300 million from American Re-covery and Reinvestment Act for energy efficiency and other programs. ■ ENERGY EFFICIENCY: New Ethernet switchers cut power use up to 70 percent by monitoring needs of connected devices. ■ GREEN NOTES: Cegedel uses FalconStor, VMware virtual IT to reduce carbon footprint.

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They feel prepared.” When Copps’ asked how many more boxes will fill the pipeline through June 12, McLean said, “Our best proxy for the number of boxes we’ll need are the number of coupons that are re-quested... We stay on top of that in real time.” Some commissioners and witnesses said FCC coordination on the transition has improved. McGuire-Rivera said “having the involvement of the commissioners and the chairman” now “makes all the difference.” Adelstein, asking her about interagency cooperation, complained that “you could never get the White House’s at-tention” on DTV “until it had a new occupant.” Associate Chief Eloise Gore of the Media Bureau said staffers are drafting an order to implement the next part of the DTV Delay Act. She said they’re reviewing at least 30 com-ments received by Wednesday’s deadline and hope to have a draft order next week for the commissioners to re-view. -- Jonathan Make, Paul Gluckman Details Sketchy

New Game Platform to Be Unveiled by Rearden Technology incubator Rearden will introduce a new networked game platform using cloud computing, March 24 during the Game Developers Conference in San Francisco, sources familiar with the company’s plans told Consumer Electronics Daily. Details were sketchy, including about which game developers and publishers will support the platform and whether Rearden or another company will manufacture the Internet-connected device expected to be used with it. A Rearden spokeswoman wouldn’t discuss the company’s plans. Rearden’s CEO is Steve Perlman, best known as the creator of WebTV in 1995. He was a developer at Ap-ple before that, in the 1980s. He has dabbled in gaming and holds various game-related U.S. patents. Rearden division Mova, started in 2004, develops advanced motion capture technology and provides motion capture services. Mova’s work has included videogame motion capture for Electronic Arts' The Godfather and From Russia with Love and Vivendi Games’ Eragon, according to Rearden’s Web site. It’s unclear whether EA and Activision Blizzard are backing Rearden’s new platform. They didn’t immediately respond to requests for comment. Game-related patents assigned to Perlman include 6,134,590, “a method and apparatus for automatically connecting devices to a local network” for “real-time games,” granted in 2000, and 5,956,485, “network architec-ture to support real-time video games,” granted in 1999. -- Jeff Berman ‘Room For Us to Compete’

Trans World Renews Push Into Videogames at 347 f.y.e. Stores After a Q4 test, Trans World Entertainment will expand use of a new merchandising display for video-games that will make the category central to 347 f.y.e. stores, company officials said. Trans World tested the new display in two Albany, N.Y., stores in December and increased its use to a larger number of outlets in February, Chief Financial Officer John Sullivan told us. The new merchandising strategy moves videogames from the side of a store to the middle and also increases the amount of shelf space dedicated to the category, he said.

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The chain slashed the number of stores carrying videogames to 347 from 600 last year after it was un-able to get enough hardware/software to stock all locations (CED Aug 22 p1), Sullivan said. Trans World re-newed its videogames push after allocations improved last fall, Sullivan said. Videogames accounted for nine percent of Trans World’s $987.6 million revenue in the fiscal year ended Jan. 31, the company said. Trans World hopes to increase videogames and number of the stores carrying them, Sullivan said, declining to dis-close details. Trans World has 712 stores, about 652 of them operating under the f.y.e. banner. It also has 60 Suncoast Motion Picture Co. and Saturday Matinee locations, having closed many of the Coconuts Music and More, Spec’s and Wherehouse Music stores. “We know that we have to make” videogames a “real business” and have “an opportunity to compete” with GameStop in mall-based locations, CEO Robert Higgins said. Trans World has 550 mall-based and 162 freestanding locations, Sullivan said. “I think there is room for us to compete with them in the malls,” Higgins said. Trans World hired a video games buyer, filling a post that was vacant for 10 months, company officials said. Trans World’s overall Q4 same-store sales declined 14 percent, with those of videogames hardware and software falling six percent and 27 percent. In addition to videogames, Trans World will expand the depth of Blu-ray titles it carries in cutting the num-ber of standard DVDs, Sullivan said. It also will increase the assortment of used videogames, CDs and DVD and is rebuilding its “foundational business” in accessories and electronics products, President James Litwak told analysts in a conference call. The chain will likely increase the mix of headphones and musical instruments it sells, he said. Sales of electronics and accessories accounted for 14 percent of fiscal 2008 revenue, company officials said. One area that Trans World isn’t expanding is the sale of DRM-free digital music downloads via kiosks located in the stores. Trans World tested the concept at f.y.e. stores in Minneapolis and Albany, capping a two-year effort stemming from its purchase of Mix & Burn. About two million songs, at 99 cents each, were available from most major labels, including Universal. But Trans World slowed expansion after reaching 40 locations, including 10 in Providence, R.I., Sullivan said. “We just didn’t get customer acceptance,” Sullivan said. “It’s still a business that is slow to develop.” Trans World’s Q4 net loss narrowed to $9.4 million from $66 million a year ago, despite its taking a $15.2 million charge to write down “long-lived assets” and closing 74 locations, Sullivan said. Trans World didn’t dis-close the expense tied to the store closings, Sullivan said. Trans World also took markdowns on inventory in Q4, but Sullivan declined to disclose the amount. Revenue slid to $344.7 million from $451.5 a year earlier when it had 813 stores. Video same-store sales fell 9 percent, while those of music declined 21 percent, company officials said. Videogames posted a 16 percent same-store sales decline. Video accounted for 43 percent of Q4 sales, followed by music (31 percent), electronics and accessories (15 percent) and videogames (11 percent). Trans World gross mar-gin dropped to 30.9 percent from 33.7 percent a year earlier as it featured “more aggressive” promotions and got lower vendor allowances. –- Mark Seavy

Digital TV The FCC is getting a new DTV expert advising the chairman’s office on the transition, commission offi-cials said. William Lake of WilmerHale is taking over the job from Gary Epstein, a former FCC official who came out of retirement from a law firm, they said. Epstein had recently joined the commission as a “special government employee,” he said at Thursday’s open commission meeting.

--- National media must do a better job covering the switch to DTV, acting FCC Chairman Michael Copps said at Thursday’s commission meeting. He bemoaned that coverage has markedly tailed off in the weeks since

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Congress delayed it to June 12. Though specialized publications have done a good job, “I have found the national news media coverage more than a little wanting,” Copps said. Apart from a “small snippet” of coverage of con-gressional passage of the DTV Delay Act, many consumers have “heard precious little” about looming analog cut-offs, he added. “I have run into a lot of people that told me nothing was going to happen until June 12th.” Allud-ing to C-SPAN’s taping the meeting, he said others should “emulate” such coverage.

--- The FCC’s revamped www.dtv.gov has a mapping tool that lets viewers find the signal strength of each station in their area and shows the position of its antenna in relation to an address, coordinate or other location, said Julius Knapp, the chief of the Office of Engineering and Technology. The features will help consumers fix recep-tion problems, he said at Thursday’s FCC meeting. A color-coded list of stations serving each location divides broadcasters by signal quality: strong, moderate, weak or no signal. The Web site also has a “gain/loss map” com-paring digital to analog coverage, Knapp said. Acting FCC Chairman Michael Copps saw a demonstration of the coverage maps and called them “one cool tool.”

Mergers & Acquisitions Panasonic took the next step toward acquiring Sanyo, announcing the terms for issuing $4 billion worth of unsecured bonds toward the purchase. They'll be offered in the yen equivalents of about $1 million denomina-tions with three, five and 10 year maturities at 1.14, 1.404 and 2.05 percent interest, Panasonic said Thursday. It expects to complete the acquisition in late April.

Retail Increased sales of CE products, games and game merchandise drove a 36.5 percent increase in Block-buster's U.S. comparable store sellthrough revenue in Q4 ended Jan. 4, it said Thursday. But it said U.S. compara-ble store rental revenue fell 2.6 percent in Q4. Overall Q4 domestic comparable store revenue, including rentals and sellthrough, increased 4.4 percent, an improvement from the 0.9 percent decline the company reported for the same period in 2007. For all of 2008, Blockbuster's overall U.S. comparable store sales increased 6.4 percent, ver-sus a 6.9 percent decline in 2007. Included in the growth for 2008 were a 1.2 percent increase in U.S. comparable store rental revenue and a 37.4 percent increase in U.S. comparable store sellthrough revenue. More detailed re-sults won't be announced by the company until March 19, and the data provided Thursday was only "preliminary and subject to change," it said. Blockbuster is still trying to determine the amount of a non-cash goodwill impair-ment charge it will record for Q4, as well as "assessing the impact" of its August 2009 debt maturities and "the suc-cess of its refinancing initiatives on its financial statements in light of the current conditions in the capital markets," it said. The announcement came hours after Blockbuster denied it was considering a bankruptcy filing (CED March 5 p5). The company in 2008 "executed on our key initiatives to grow the core rental business, enhance our retail offering and develop digital delivery channels," said CEO Jim Keyes. "As a result, adjusted EBITDA ex-ceeded" Blockbuster's forecasted range of $300 million to $315 million, he said. Of the company's financing initia-tives, he said "we continue to work diligently to resolve the August 2009 debt maturities, aggressively reduce costs and maximize the company's strong cash flow generation."

--- Systemax installed Retail 1.5, a variant of its Retail 2.0 retail format, at CompUSA in Fort Myers, Fla., company officials said. Retail 1.5 provides the same Internet connectivity as 2.0, but is limited to a store's note-book and desktop PC departments, company officials said. The Retail 2.0 concept, installed at CompUSA stores in Miami and Raleigh-Durham, N.C. -- features 300 Internet-connected PCs that essentially offer a home page for

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each product. It also includes flat-panel TVs and 34 kiosks spread around a store. Systemax expects to have Retail 2.0 in its 25 CompUSA stores by midyear (CED March 5 p1).

--- The fate of Rex Stores’s locations is being decided this month. Rex is shutting stores in Florence, Ala., and Danville, Va., but an outlet in Decatur, Ga., will reopen March 9 as Appliance Direct, according to newspaper reports. Appliance Direct signed leases on 39 Rex stores and has an option on 44 others. Rex had more than 100 stores in 32 states Oct. 31. The company hasn't disclosed the fate of the 22 locations apparently not included in its Appliance Direct deal. Appliance Direct has 20 stores in Florida. Meanwhile, Rex has sold a 16,488-square-foot store in Kent, Ohio, to Aaron Rents for $1.08 million, according to CoStar Group real estate research. Aaron Rents had earlier bought 25 to 30 former Rex stores (CED Oct 31 p6).

Companies SeaChange International and TiVo will solicit tier 2 cable operators in offering video-on-demand through CableCARD-equipped DVRs, a SeaChange official said. Those service providers are the target because larger ones have "fairly mature" plans for tru2way, a SeaChange official said. The service -- billed as a way for MSOs to in-crease VoD revenue without waiting for tru2way deployment -- uses TiVo electronic program guide to search for VoD content, company officials said. Video will continue to be transmitted using QAM multiplex, but the broad-band connection will be used as a return path to set-up streaming and to pause, rewind and fast-forward program-ing, company officials said. TiVo also signed an agreement with Alticast to graft its DVR software onto Alticast’s middleware platform that's used in cable set-top boxes and Blu-ray players. Alticast counts Broadcom and Intel among its customers for Blu-ray, and its technology has been used in Samsung, Best Buy's Insignia and Vizio play-ers, a company spokesman said. Alticast's tru2way customers include Humax, Kaon, LG Electronics, Pace and Samsung. Alticast's electronics program guide and DVR software are used in South Korea and the U.S.

Videogames Harmonix and MTV Games shifted strategy on their coming videogame featuring the music of The Beatles, saying they decided to include the Rock Band brand name in the title after all. The name of the game will be The Beatles: Rock Band, the companies, both Viacom divisions, said Thursday. The companies origi-nally said the title wouldn't include Rock Band (CED Oct 31 p7). The game still "will be a custom standalone dedicated game experience and completely brand new production that will be an unprecedented, experiential progression through and celebration of the music and artistry of the Beatles," a spokesman for publisher MTV Games said Thursday. But that company, developer Harmonix and Apple Corps, which holds the rights to the Beatles' music, decided together to include Rock Band in the title, he said. "As we moved through the creative process, it just seemed to make sense to clearly highlight the association between the Beatles game and the criti-cally-acclaimed Rock Band franchise," he said. MTV Games and Harmonix still wouldn't say which songs will be in the game, but they finally provided a specific shipping date: Sept. 9 in PS3, Wii and Xbox 360 SKUs. The title will ship at the same time all around the world, the companies said. A "limited number of new hard-ware offerings modeled after instruments" used by John Lennon, Paul McCartney, George Harrison and Ringo Starr will be available, along with the game, the companies said. Software-only SKUs for the PS3, Wii and Xbox 360 will cost $59.99. New AAA releases for Nintendo's console generally cost $49.99, and Rock Band 2 does. Stand-alone guitars will cost $99.99 and a "Limited Edition Premium Bundle" including the game and all instrument controllers $249.99, the companies said. Prices outside the U.S. will be announced later, they said. Electronic Arts will be distribution partner for the game, as it has for all the other Rock Band games. Giles Martin, co-producer of The Beatles innovative Love album project, is music producer for the game. Exclusive

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content created by Apple Corps, MTV Games and Harmonix will be made available "over the next few months" to consumers who pre-order the game "through major retailers," the game makers said. Details on the game and pre-order campaign "will be revealed in the coming months," they said. -- JB

--- GameStop didn’t respond Thursday to Amazon.com’s starting a beta test of a videogame trade-in busi-ness. When Toys "R" Us disclosed a test of a used-games program at a small number of New York-area stores early this week, GameStop's spokesman said his company wasn't worried (CED March 4 p10). But Amazon's pro-gram stands to provide significantly more competition to GameStop than the toy retailer’s. Amazon, unlike GameStop, will be do business by mail. To qualify for a trade-in at Amazon, games "must be in good condition and your trade-in shipment valued at $10 or more," the company said Thursday. GameStop gives customers who trade in used games cash or a larger amount in store credit. The e-tailer is using Amazon gift cards. "Trade-in titles are purchased by a third party merchant," Amazon said without identifying any merchants taking part in the plan. Some game publishers have expressed concern about used games, saying they cannibalize new game sales. But GameStop says used game sales lead to more new game purchases. Amazon is accepting used games for all the current-generation systems and the PS2. Leading PS3 trade-ins listed Thursday at Amazon.com included Warner Bros. Interactive Entertainment's Lego Batman, with a trade-in value of $17.50, Electronic Arts's Tiger Woods PGA Tour 09, valued at $20, and Midway's Mortal Kombat vs. DC Universe, $21.50. Top Xbox 360 trade-ins included Microsoft's Gears of War, $7, Activision's Guitar Hero World Tour, $17.50, and Activision's Call of Duty 4: Mod-ern Warfare, $17. Top Wii trade-ins included Nintendo's Super Paper Mario, $13, THQ's WWE SmackDown vs. Raw 2009, $15, and Sega's Sonic Unleashed, $17.50.

--- Cumulative U.K. PS3 sales hit 2 million units, and PSP sales hit 3 million there, Sony Computer Entertain-ment Europe said Thursday. Giving the PS3 a significant sales lift in recent days, SCEE said, was the release of Sony's game sequel Killzone 2, which became the best-selling game in the U.K. its first week available, according to Chart-Track data released by the Entertainment and Leisure Software Publishers Association early this week (CED March 4 p). Some analysts and third-party game publishers have said the PS3 needs another price cut for the console to start mounting a serious challenge to Wii and Xbox 360 systems. The PS3's entry-level price remains the highest by far among the three consoles. But SCEE said the latest PS3 sales milestone offered an encouraging sign.

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