But how can SCE afford such outlanding expenses such as a price cut in these harsh times?

If we assume everythings in U.S dollars for a moment, and that Sony sells 10,000,000 PS3s with a price cut. At $400, they would have recieved $4,000,000,000 of revenue whilst at $350 it would be $3,500,000,000. A shortfall of about $500,000,000 (Im assuming the same number sold because I don't want to complicate things)

Note that says revenue. Not profit. Profit is cost-revenue. The PS3 obviously had a high cost (especially in the begining), so the profits will be lower. This does not include the cost of labor and running a facility. Since it is selling at a slow rate, these cost will be more of a hurt on the company.

One reason  to lower the price is to move them. Labor and facility cost will be less of a strain if money is coming in faster. It's a matter of movving consoles they can, then not selling enough.

Killzone 2, Uncharted 2, MAG, Gran Turismo 5, God of War III, the agency.

If you could think of a reason these games will sell fewer than 15,000,000 combined on a userbase approaching the 30,000,000 mark please raise your hand and tell me. Now thats out of the way, if you assume a publisher cut of $38 per game that gives you a total revenue of: $570,000,000 minimum.

http://vgchartz.com/worldtotals.php?name=&console=PS3&publisher=&sort=Total

Look at the sales of those games. Now look at the sales of the games you mentioned. Besides Resistance, most of those games will only make ~1million. It might break 15million on two games a lone, but the truth is that the games may very well not. The games must sell 2.5 million each, and many might not make that, while the ones that sell over might not be enough to over pass the number. It might not make it. Plus, remeber that is only 15million in sales. These are all games with HIGH cost. Killzone has been in development for up to 4 years. These games may just cconver their development cost.

So the PS3 needs a price cut to stimulate sales, fact. The PS3 can afford a pricecut because this is likely to be the biggest year for sales for SCE on the PS3 for a while and even with a crappy exchange rate one can easily subsidise the other.

With Grand Theft Auto and Metal Gear Solid out of the way, I doubt Sony will have a strong year for a while.

The portions that go towards paying graphics designers, etc. are certainly variables, but the percentages that go towards licensing fees and retailer markups are fixed, and those are the only figures that matter in this scenario, since Sony is both the developer and publisher of the games in question.

So the actual profit would be $9 (7+1+1) per copy...

* 25% (aka $15) goes to pay the art and design guys.
* 20% ($12) goes to pay the programmers and the engineers.
* 20% (also $12) goes to your friendly neighborhood retailer. EB / GameStop, whoever.
* 11.5% ($7) goes to a "Console Owner Fee" - ie. whichever one of the Big Boys made your hardware (Sony, MS, Nintendo.)
* 7% ($4) goes to marketing, and puts Mad World and Marcus Fenix on MTV.
* 5% ($3) goes to "market development" -- paying for cardboard Standees of the Gears Crew and elbowing other games out of the way for shelf space at your local retailer.
* 5% ($3) goes to actually manufacturing and packaging the disc.
* 5% ($3) is spent paying the Man for IP licenses or maybe hiring some big name voice actors. If your game isn't an original IP, here's where you get dinged by Marvel, Disney, or Ray Liotta's agent.
* 1.5% (just $1) goes into the publisher's pocket.
* 1.5% (also $1) goes into the distributor's pocket.
* 0.3% (about 20 cents) goes into corporate costs. Management, overhead, lawyers, etc.
* 0.05% (less than 3 cents) go into the cost of paying for the Developer's Hardware. Who knew an SDKs can cost tens of thousands of dollars?

$12 + 3 + 3 + 3 = $21 + 1 (distribution costs) nets $22 out of a $60 price tag, the rest goes to Sony themselves.

Source: http://www.garagegames.com/blogs/37536/11924

As far as being optimistic or not I was also conservative in other areas, I didn't mention cost reductions (65nm RSX just been released), Continued sales of a few titles from last year such as LBP. Much of the cost of these games has been accounted for, and the only way they are going to make the platform viable in the long term is to cut the prices and increase sales so I applied revenue from the games in the same year as the games are going to be released and the sales of the consoles are going to be done.

As NJ5 said, the sales of the first parties aren't enough to justify the number of first party studios. The one thing I absolutely know will kill SCE dead is their large first party studio portfolio and stalling console sales.

http://www.metalprices.com/FreeSite/metals/cu/cu.asp

Coppers down.

http://www.metalprices.com/FreeSite/metals/cl/cl.asp

Oils down.

http://www.metalprices.com/FreeSite/metals/al/al.asp

Aluminium is down.

http://www.metalprices.com/FreeSite/metals/ng/ng.asp

Natural gas is down.

In all cases the difference is larger than the currency fluxuations.

Then why would a company like Panasonic forecast negative profits due to the currency problem and economic slowdown? Hardware production costs a lot more than the raw materials.