The poor performance of the PS3 allowed MS to respond to the first PS3 price cut with an average price cut of $33 ($20 on Core, $50 on Premium and $30 on the Elite).
The continued poor performance of the PS3 force Sony to reduce yet another $100 and reduce capabilities of the 40GB PS3 to get into the game the remainder of the year.
MS has lots of room to reduce yet again and this time it can be more aggressive because of the cost reductions that have taken place and continue to take place simply because of time. MS can cut the price when GTA IV and by the time Holiday 2008 comes around the 360 will still be profitable. In fact the SKU that may get the biggest bump has the added advantage of possible additional hardware sales of HDD.
Sony can of course cut prices again if they are willing to stay deep in the red, but I dont think they have any more features they can cut.
Libraries sell systems not individual games
