PS3 holds all the aces up its sleeve.

[Squilliam]

WiiStation360 said:

PS3beats360 said:

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You might argue that Sony can not afford price cuts blah blah blah. But the truth is Sony is a huge company and these small losses on hardware is a small drop in the ocean and the extra game sales will more than make up for any insignificant PS3 hardware losses.

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Discuss

 

Not trying to discount a PS3 price drop this year, which i do think is coming, but:

$100 price drop x 10m+ console sales for a year = $1 Billion dollars in decreased revenue.  That is a large amount of money to any company, not a "small drop in the ocean."

If Sony were to do a price cut and revenue actually fell then they would have been better off not doing a price cut in the first place. In reality if they do a $100 price cut, revenue would actually increase because they would sell more PS3s. The word you're looking for is gross margins on the hardware itself.

If for example the PS3 @$400 gave $40 gross margin and they sold 10M consoles they would have $4B revenue and $400M 'profit'. 

If they cut the price to $300 and then lost $60 per console and they sold 15M consoles they would have $4.5B revenue and they would make losses of $900M and overall the move would cost them a total of $1300M in this hypothetical scenario, moving from a profit to a loss on hardware.