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The way I see it, its pretty simple:

Sony is worried. Real worried. The PS3 has failed to really take off - even with the price cut. Their "10-year" strategy at the moment, is in tatters due to forced price cuts early in the cycle.

To make matters worse, their "planned domination" of the next-gen DVD market is looking worrying. Not only has HD-DVD managed to put up a fight - in some circles (and general news) it is "winning".

...

For BluRay to "lose" (outright) would be terrible for Sony - and the PS3.

For the PS3 to "lose" (come 3rd) would be terrible for Sony - and BluRay.

For both of them to "lose" - might almost be enough to sink Sony completely.

They know this, and they cannot - any UNDER circumstance - allow this to happen (at least without a real fight).

...

So what do they do?

i) Sell off part of their company (non-core) to raise capital

ii) Use this to fund a price cut on the PS3

iii) Use this to fund a promotion/further push for BluRay to regain some territory

...

This means the bottom-line for Sony won't look that bad - purely because of the cash investment from the sold division. Of course selling a profitable division can have longer-term impact on the company as a whole - but if there is no Sony, it wouldn't matter anyway... so its worth it for now.

Sony STILL lack the titles this year to really drive sales. MS has a cheaper console, more compelling content, more marketing budget (thanks Halo!) - and a much bigger warchest in general. If MS want to further drop the price - they will. They are pretty happy where they are now though, as they will actually be MAKING a lot of money from the 360 this qrt.

If Sony want to get all price competitive on them, MS will analyse the market and decide what to do. If they are pushing the numbers they want - they may not care, and will walk away with more profits.

But if they want to get nasty to Sony - they can easily drop the 360 price further - put together a Halo/Mass Effect bundle - and probably sell ALL stock they can send to retail.

...

My predicted sales figures for the end of the year took all this Xmas promotion/price war into account, and I think the numbers will still end up like (1st Jan '08):

PS3: 7.5-8.0m (sell 3-3.5m)

360: 14.0-15.0m (sell 3.5-4.5m)

Wii: 17m-18m (sell all the stock they can send out, about 6-7m)

 



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