It tells me that it is struggling in the US... which is not what this thread is about.

 I won't deny that the 360 has big problems outside of the UK and a few markets in Europe. Their best chance is to stop being a pussy about price drops before GTA4 hits. That is not a boat MS can afford to miss. They need to put more money in advertising, and better ones at that. Still, Europe has only until recently been a very turbulent market for the 360 and PS3. I think you're far too quick in assuming this sales spike will last through next year.

 With that said, I feel you are the one failing to see the situation here. MS does have a significant advantage in the price drop department, and Sony really can't afford to go crazy with the cuts anymore. This last round of cuts and new hardware took a $3 billion IPO to finance. If you think Sony has the cash reserves to maintain a price war with MS, you sir are delusional.

I still think a price drop is not necessary as long as its still selling well. I have a feeling Microsoft is gonna be singing a high note of profits when they reveal their quartery earning this Dec. Sony will downplay their losses talking about short term losses for long term gains, and Nintendo's gonna have an appraised market value thats higher than Apple.

You miss my point totally. Sony don't need to go into a price war with Microsoft. They just need to get the price down low enough that it's no longer a major factor in consumers choosing consoles because Europe will favor Sony by default over Microsoft unless price deters them.  The current situation proves that, and Sony also made profit last quarter despite the price cuts and losses. They are also working on cheapening the cost of the PS3, if MS take long enough, Sony will drop with them.

Either way, Sony will definitely drop before MGS4 hits in an effort to greatly boost sales with their stellar game.

When a company can take a 800million loss in one department and still turn over a nice profit, they are not in that much trouble money wise.

And if Microsoft were smart they would have already dropped the price during the major buying season. More consoles are sold now then in any of the other months of the year. A price drop in Feb when not many are buying does not help much...

@Rocketpig

The PS3 has only dropped $100 in price, but has removed two chips from its cheapest model, as well as having the price of the blu-ray laser come down. Thats everyones misconception, which is why I think Sony planned this out perfectly

60gb-599
20gb-499

80gb-499
40gb-399

Yet they have had multiple sales boosts so far from price drops that really werent price drops at all. Sony has dropped the price $50 more than Microsoft has. They have room to drop the price more, IMO, if they release the new cheaper PS2, and the PSP still keeps selling relatively well.

PS3 will reach 299 next year. I have no doubt about that

And many of you are thinking that the Xbox360 itself is profitable already. If I recall correctly its the gaming division as a whole that is profitable, so im assuming Microsoft still loses money on its console per unit.

Microsoft is probably making money on its hardware, since it's had two years to do cost reductions. The problem is, their penny-pinching and arrogance resulted in a disastrously inferior and crash-prone hardware design, which has already cost them $1.1 billion (maybe it will be more, we don't know). And that's why Japan and Europe won't buy 360s. They have more of a culture of quality there - think Toyota and Mercedes. The PS3 really is a top quality media machine and a really excellent BluRay player, built to last, so it's been successful in those regions even at its high price point.

I'm pessimistic about the 360, not because I dislike the platform - it's a wonderful system with terrific games - but because Microsoft is run by jackasses. I don't blame Microsoft's game division - they have some sharp people who came up with a wonderful machine with immense potential.

But Ballmer and the suits could have spent the money to create a decent product. They didn't. In fact, they haven't taken a single ounce of responsibility for any of their monster screwups - prematurely killing off the Xbox (hell, come up with a model which doesn't have a harddrive, how hard could that be?), treating Bungie so badly that Microsoft's biggest franchise left the company (again, how hard could that be?), RRoD, etc. Those are all self-inflicted failings.

Maybe if they keep the same price and bundle the HD-DVD drive with it. Elite would be $50 more, 3 times the hard drive space, hd movies, 2 free games, and a better game library than the $399 ps3. Add the 5 or 10 or however many free movies with it and sales will soar.

I think I know what the problem is:

<-- see avatar.

I think hardware reliability is a major player in this. Especially since the price has become less of a factor.

There's an issue just as big as RROD, though: 

Also, as a person who plays FPS on a PC (I won't touch a console FPS), the 360 really doesn't have a lot of variety of good games. Think about it: in all this huge glut of games in the last few months on the 360, how many have NOT been FPS? And of those FPS, how many have a superior PC version?

Orange Box, CoD 4, BioShock. All of these also on PC, all of these also better on the PC. All besides Halo 3, which turned out to be the weakest of the bunch in terms of quality anyway. PC also got a better version of Gears of War in this time.

So really, the 360 is not only competing with the PS3, but also the PC. In Europe the PC is also much more popular, which adds to the 360's problem.

Ultimately, RROD will continue to haunt them, and the problem is going to get worse over time as the PS3 narrows the gap in terms of games and sales. Being unreliable is a bad distinction to have.

If they price drop, it'll put a temporary bandaid on the wound. If the PS3 gets their act together and their upcoming games deliver on their promise, we may yet see a flip flop between the 360 and PS3.

If that flip flop even catches on early enough, the 360 is screwed.

I didn't think it was possible for me to completely disagree with everything in a post with that many points in it.  I don't want to write a 5 page essay about why I do, but I could. 

Sony isn't even close to a low enough price where price isn't a major factor.  If 360 drops the price again it will probably be something like what happened before the price cuts.  360 would outsell PS3 for a few weeks, then it would level out so PS3 barely is outselling 360 in Europe. 

Sony will NOT drop the price before MGS4 hits.  What's that like 2 price drops in 5-7 months?  Seriously, get off the drugs.  Perhaps they will try to increase the value of the system by adding a game or something, but there is no price drop anytime soon.  Also Sony won't drop the price in Europe alone, they would be looking at a worldwide price drop, which is a long ways away.  If they dropped the price in NA AGAIN it would be 3 price drops in 6-8 months.

It's not ok to take losses in 1 area just because another area is making money, that's the basic of business.  So they've lost all the profits they made in the PS2 era, maybe they can lose all the profits they made in the PS1 era too huh?  Is that supposed to be ok just because they are successful in other areas? 

Microsoft can actually afford to drop the price and at the same time take far less losses than Sony will WITHOUT dropping the price.  Microsoft is a very profitable company, according to you they can afford to sell their consoles for free because they make so much money in other departments.