Sony should catch up to Microsoft by the end of 2008, for three reasons:
(1) HDTV has finally become affordable, which helps Sony enormously - Blu-Ray and HDMI become de facto standards, and the whole Sony media strategy suddenly makes perfect sense. Microsoft has no counter to this.
(2) The price of the PS3 is going to drop another $100 next year, either in the spring or, more likely, summer. Remember inflation: $399 in 2008 equals about $299 in 2000 dollars, the magic price-point where the mass market opens up.
(3) Yes, the 360 will drop in price, too, but this won't help. Even if Microsoft fixed their hardware problems tomorrow, they sold at least 10 million problematic consoles. Even if only 5% of those consoles die, that's half a million extremely angry consumers - and hell hath no fury like an infuriated gamer.
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