The financial results & follow-up statements all but confirmed this.

Where Ninty are making bucket-loads of cash, and even MS have had two profitable qrts in a row - Sony have now lost a total of $3.6bn on their gaming division over the last two years.

It simply had to stop - and it will. There will be NO more price cuts on the PS3 - for a good 12 months at least. Every PS3 they are selling is losing them a significant amount of money, and its no longer being offset by PS2/PSP sales (PS2 sales are significantly down, and will continue to drop). I personally think their PSP forecasts are excessive, but that is another discussion.

The focus now shifts to bringing down PS3 manufacturing costs as soon as possible, while not artificially selling more PS3's than they should. A price cut would do the following:

PS3 loss = $loss per console x #number sold

...after a price cut of $100...

PS3 loss = ($loss per console + $100) x (#number sold * 1.5)

...

Sony's aim with the PS3 (which they have stated will have a 10yr + lifetime - they ARE banking on this, quite literally) is basically to make it profitable - at the expense of additional market share.

A year ago, the PS3 was on tenuous ground - and the price cut & stripped down model definitely helped them gain ground against the 360. They needed to do this, as they were at a real risk of losing the BluRay battle and the HD console battle in general.

They would be pretty happy with their current market position (again compared to last year), but also that this is the wrong time to be making aggressive price moves to win more market share. The next move is MS's to make, and as long as they are turning a profit - MS is in no big rush to make this move. Profitability was always going to be critical for them as well, with pressure from the rest of MS (get profitable, or get out!).

...

The other angle is software - this is the only way way that Sony can "win" this generation. And producing top-notch PS3 software is a very expensive, and time consuming thing to do.

This next 12 months on the market is now a consolidation point for them - work on software, almost double their install base, bring the PS3 back to price parity - and maybe even work on the first "PS3 slimline" models.

After this period, we may see a more aggressive Sony/PS3 again - pushing for more market share with a cheaper model, and some compelling software. But in the meantime... the towel has been thrown in. 

I would say the towel has been thrown in, I would call it more just taking a defensive stance for a round or two.

Whatever the case, pretty good read.

Well if PS3 sells as it is NOW....I think SONY will be happy

otherwise I FULLY agree with your post..

Great analysis, although are you sure you're using the definition of "Throwing in the towel" correctly?

@Montana HAtchet

he isn't.....as he means to say SONY has given up...

SONY gamers Day 08....DEFINETELy didn't show this

I agree with twestern, Sony is taking a defensive stance and needs to get profitable, forecasting 10 million PS3s this next year should be a clear sign of no price cut.

The only way I see a price cut on the PS3 is if MS aggressively cuts the price on the 360.

I'm saying they have given up on being "#1" - although I should have stated this more clearly. They are clearly happy with their current position, and they simply can't be too aggressive for the next 12 months. BluRay will help them as well.

PS - another note: their market share WILL continue to rise, as they have the lowest install base and are selling on parity with the 360 at the moment. This will also make them happy. Unless Wii sales REALLY explode.

Well, the basic definition of "throwing in the towel" relates to a boxing match, in which a coach would throw in the towel to concede their boxer's defeat.

So far, Sony hasn't conceded defeat, although the definition of defeat is very broad. If they're still releasing games and selling software, they haven't conceded defeat in any measure just because they're not willing to drop the price of their console for the next year or so.

Maybe Sony have realised that the point of being in the videogame business is to make money, not necessarily to be no. 1, (although that helps).

Your grammar is wrong!

You meant to say, "Sony has thrown in the PS3 towel... (for now anyway)" instead of "Sony have thrown in the PS3 towel... (for now anyway)"