Ah, 2008... things may get very rough for Microsoft, very quickly.
Believe it or not, Sony is not losing money on the PS3 hardware anymore - 30% annual cost reductions, plus the 65 nm chips have arrived, plus the strength of the euro (399EUR = $575 US). Most of the parts are made in China, which ties its currency to the US dollar. At this point, the game division's losses are due to increased advertising costs, as they shift to a mass ad campaign and software revenues start to roll in.
Originally I thought Sony was going to give Microsoft six more months of breathing room, i.e. cut prices to $399 in spring of 2008. But instead they're going for the jugular. $399 for November 2, and most likely a $349 or lower price point by spring of 2008 and $299 by fall of 2008, plus several Godzilla-sized games from its studio system.
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