There is a lot of innuendo in this thread that implies that Microsoft is not in a position to offer a real price reduction, but on the flip side somehow Sony is in a perfect position to do so, and that friends flies in the face of logic. Microsoft is farther in its development cycle, they have better secondary revenue streams, they have a stronger attach rate, and they have a higher install base. All these things married together mean they can more then easily afford a small price reduction. They simply have more ways to realistically make it up. While Sony not enjoying these advantages recently said that they weren't even breaking even on their hardware.
Frankly I do not believe that Sony or Microsoft are going to offer price reductions in the latter part of this year. Though I doubt any side would shy away from a pricing war. The important thing to remember is that Microsoft has Sony on the ropes in North America. It would be foolish for them to allow Sony to work itself back into the fight. To me as far as Microsoft goes is can they maximize the potential if it comes to a price war.
Were they to cut the price of the arcade by fifty dollars they would probably need to have a few million more consoles in the channel to meet demand. A further drop could probably edge Sony out of the North American market as long as Nintendo holds firm, but can Microsoft get that many consoles to market. Remember Sony is only seventeen percent of that market so a great holiday for Microsoft could push them terrifyingly close to single digits.
I think Microsoft would answer a price cut if they could meet demand. The possibility of dealing a death blow to Sony in that one market alone is worth the loss of some profit in the short term.
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