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NotStan said:

Yeah it does need a cut to stop from falling behind the competition, it's the question or whether they'll do it or not. This gen Sony has made several mistakes that have put me off the PS3, even though I liked the original Playstation and was somewhat positive towards PlayStation 2, although preferred Xbox at the time x). I don't know even $50 cut seems optimistic at this stage, although somewhat likely, in comparison with the $100, all comes down to how much Software makes up for possible loss on hardware. Interesting year, I think 360 and Wii cuts are given though.

It's going to be a push between marketshare and profitability for Sony, I agree.    The other effect is that maybe a PS3 drop drives up the PSP2 asking price ($299? $329? $349?)... either way I think Sony's in tough spot.  Their software lineup is also very much "more of the same", which should please the base, but do little to move them past that.

I really don't see MS or Nintendo dropping prices though, value adding will get them a lot farther and at less cost/risk overall.  Nintendo's the more likely of the two, and even then I can only see a minor fall/holiday reduction (say to $179).