when do existing users get the free games?

As many other pre-adopters (at least in this thread, but probably elsewhere as well), I have been enjoying my 3DS and getting the 20 free VC games is more than ample "compensation" for paying the higher price. I think they did the right thing, as to whether it will be enough only time will tell.

This kind of fierce competition can only be good for consumers, as long as both parties manage to stay in the game. I don't see Nintendo or Sony giving up without a fight, so we can look forward to some interesting times ahead, that's for sure!

Regarding pricing on the Vita, this certainly makes it the odd man out, but hopefully they can find some clever incentive to get gamers to invest, either by offering some kind of rewards program or payment system or something... for example having the ability to play every single Vita game on my TV as well as on the device right out of the box would be an incentive for me... Another thing I hope Sony offers is their own version of download play. They can also offer free downloadable PSP/PSN games along with the purchase, like they did after the blackout.

I agree, and after having seen the sales data BEFORE the announcement, I'd also add Ninty was scared the shit out of itself watching 3DS sales already plummeting.

About PS Vita, Sony could learn from Ninty's mistakes. It's too late to cut the launch price, and it would make Sony lose a lot of money on HW, but it could bundle a game for that price, for example, moneyhat devs to not delay games, make good offers on downloadable games to early adopters BEFORE it's actually forced to do it by sales plummeting and other things.

One last things: 3DS early adopters that happen to be retrogamers too will be delighted to receive 20 ports of very old games, but those that bought 3DS for its most advanced features and buy only native games for it will be utterly pissed for not having the option to choose two or three new 3DS games instead.

Lower price = increased hardware sales. Hardware is often sold at a small profit or a loss. The loss can be recouped through gamers purchasing on average between 8 to 10 games per console over a few years. Games and accessories make the big profits for companies.

8 to 10 or more is an attach rate typical of home consoles, portables actually have lower ones, even the mighty DS is under 5 (will most probably reach it before its end of life, anyway), PSP is under 4. If the HW losses are low, though, even 3 should be enough, so you're right anyway, unless 3DS flop so hard to not even reach it. In a year, thanks to components price reduction, if enough pieces have been produced (even a few millions more than what have already been made should be more than enough to allow the first production process tuning and cost reduction), 3DS should be profitable even at $170, so Nintendo must just resist and deliver the games.

One last thing: particularly now, with still so little games, of which many not available in every region, removing the region lock would help a lot.

Region lock is always stupid: if the importing volumes are little, it's not relevant and it just pisses some users, that often happen to buy more games than average, if the importing volumes are large, it kills a big business, reduces SW sales in a relevant way and pisses many users off, so it does big damage. It's a lose-lose choice just to protect a minority of publishers that still stick to jurassic release policies in a globalized world.

Do people really buy fewer games  for handhelds? :o 

Yes, http://www.vgchartz.com/weekly.php?reg=World&date=40748 . In the right column, WW SW Totals table, there is the tie ratio.

Current weekly SW : weekly HW tie ratio (not present in the table, but most easy to calculate)  is higher than LTD one, but this is due to the huge installed base and by now it can shift the LTD one very little.

That is a pretty drastic price drop, it is crazy that had that much of a cushion where they can easily drop the price like that.

nintendo was making a pretty big hefty profits that they can drop the price that much