What I find highly entertaining about this entire debate is that it pivots on production cost having a parity with retail pricing. Yet everyone is discussing two manufacturers that have not only employed loss leading methodology in the past, but who have business models that are highly skewed to the peripheral profits generated from existing hardware. To put it in simple terms it is far less relevant then most of you believe. While the manufacturers may be leery of taking on huge losses. They are in no way inhibited by them.
Were that really the case you would not have PS3 on the market today. How quickly some of you seem to have forgotten the billions of dollars Sony lost on their console. There truly are only two questions. What is the short term situation, and what is the long term goal. Microsoft's short term situation is the one they have enjoyed for most of this generation, and that is of holding their ground while mining profits. They have been very proactive and steadfast throughout the generation. They make the moves for the most part at times of their choosing.
Microsoft's long term goal on the other hand has never been in question. They are not in this market for any semblance of coexistence. Lets be honest Microsoft is a rather vicious competitor. They spent the majority of this generation strong arming Sony into playing the game they really wanted Sony to play. Which was basically a game of lets see how much money we can make you lose. Going so far as to suggest PS3 price cuts to the press months in advance to stifle current console sales.
In summation manufacturing costs aren't really the issue for Microsoft. They can easily afford to take up a loss leading position. Especially with how thoroughly they mine price points, and how well they have exploited peripheral profits from service, hardware accessories, and licensing. The only real question is how predatory Microsoft is planning to be this year. Microsoft as far as the world of gaming goes places a high premium on perfect storm scenarios. They like to really pour it on at those points for maximum impact. They really do believe that there is such a thing as a real knockdown blow as far as gaming is concerned.
This is a terribly old debate. The actions of Microsoft have never shown a distinct correlation between production costs and retail pricing. The costs of the consoles manufacture are never truly reflected in the retail price. Microsoft simply feels no need to function in anything close to a incremental fashion. So to say well they would be selling at cost is nonsense. For Microsoft it is no excuse at all. Their motivations are thoroughly strategic. Their sole goal does not need to be fully large profit motivated if they are achieving a long term goal. Which is basically dominating the market at the expense of Sony.
You may be able to plot the coarse of Sony with production costs, but you simply cannot apply such a logic to Microsoft. They never have worked their pricing like that. In fact they usually make the console fit the price point that they want. The price is almost a built in feature.
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