I (sort of) agree with you ...

At $600 the PS3 only seems reasonably priced to early-adopting hard-core gamers or people who were already in the market for a Blu-Ray player. The demand for Blu-Ray players is still really small so I am only going to talk about the early-adopting hard-core gamers (refered to gamers). Gamers are likely to already own an up-to-date PC or XBox 360 and are going to notice that most of the third party titles that are available for the PS3 are also available for the PC and XBox 360; and in some cases have been available for over a year. This means that (for the most part) they see that spending $600 on a PS3 only really gives them access to Sony's first (and second) party development which doesn't justify the initial purchase.

This situation is unlikely to change in the near future ...

There has to be a pricedrop WW this year.

I expect at the very least a $100 drop this year in the US bringing it down to less than $499 which will be comparable with the 360 Elite.  Seeing as the UK are paying way over the odds for the units, there need to be a huge reduction there.  Currently minus VAT, UK residents have to pay $700 for the unit which is $100 more than the Americans.  That is why I fully expect a drop of around £100 making the system £325 (inc VAT) or even less.

IMHO, what Sony need to do is:

Fall 2007 - US - $599 $449,  UK - £425 £299

Fall 2008 - US - $449 $299, UK - £299 £199

Fall 2009 - US - $299 $199, UK -  £199 £150

 In the UK, I would expect the price to fall to £325 this fall, then mid-08, down to £250. However, generally I would agree with you.

Unless the US Dollar has some kind of massive turnaround, there is no way they can lower the price in the US. The dollar has gotten so weak against the Yen, some companies like Ibanez guitars have had to raise prices on its products.

PS3 has a good selection of games ,thing is most are multiplattform (and the PS3 version is usually ported from the X360 ) so that doesnt move a lot of hardware .Only exclusive games are Motorstorm ,Resistence and Virtua Fighter 5 .Resistence was a launch game ,VF5 seems to have flopped and Motorstorm we dont know yet ....it the new america chart on this site is faithful (something doubtful to say the least )then Motorstorm hasnt done very well (ony 160K sold ) .More exclusive games have to appear to justify the buying of the console for the users that hesitate between it and the competency .Yes ,having Oblivion ,Fear ,Rainbow Six ,Call of Duty 3 ,Virtua tennis 3 and all the others is quite good but as long as they are in other formats it doesnt move units .

Sony is right now in a bad position .They must lower the price at least 100 $ ,release some of the heavy-hitters and make their act toghether with the Home .If they can put the console in 499 in direct conmpetency with the 479 X360 Elite ,introduce Home and release some must-have exclusive titles as Killzone 2 ,Heavenly Sword ,Lair ,Ratchet and Clank  and MGS4 things will surely improve big time .As long as those conditions arent achieved sales will be lagging .

I agree that is what Sony should do but Sony has never been known to have a large quantity of major price reductions; the PS2 droped $100 after 18 months (to $199) and then only recieved $20 price drops every year or two. I expect Sony will probably reduce the PS3 in the following way (if they have a choice)

$599 -(2007)-> $499 -(2008)->$399 -(2009)->$299 -(2010)-> $249 -(2011)-> $199 -(2012)->  $149

A real XBox 360 will have a price history like:

$399 -(2007)->$299 -(2008)-> $249 -(2009)-> $199 -(2010)->  $179 -(2011)-> $149 -(2012)->  $129

And I expect the Wii to have the following rate of reduction

$249 -(2007)-> $199 -(2008)->  $179 -(2009)-> $149 -(2010)->  $129 -(2011)->$99

Anyone know how many PS3's ( in hardware sales ) it will take to come out of the red at the current price?

Adding an additional $100 for nearly $300 loss per console seems too hefty if you ask me. At this rate, Sony can't see any profit per system until five games are bought.

To make things worse, a dev. company can't turn a profit on a game unless it sells 500,000 units*. Thus many developers have been discussing rather limited titles to be launched on PS3.

This price drop would have to usher in a whole lot of sales, ( which I think is doubtful ), for game developers to even consider being more loyal and agressive with publishing PS3 games exclusively.

Sony is reconsidering new budgeting, even if not a drop yet.

I'll tell you why they are doing this. Here's the cost of the premium 360 at launch. Ignore the left column about the PS3. That was just an initial estimate.

That column does leave out labor, which brings the total cost to $525.

Now this is the actual manufacturing cost of the PS3 at launch. The chart is long, so I'll add it up, but you have the link to double check. And I'll be adding up the 20GB version, even though it's only supported in Japan now, since it's closest to the Premium 360.

Processor: $89

Disc drive: $125

Graphics chip (counting the 256MB of VRAM): $129

Memory (the 256MB of XDR): $48

Hard drive: $43

Labor: $39

Subtotal: $473

Now the "other doodads", that are necessary to the system, are the power supply: $37.50, Bluetooth module: $4.10, Cooling system: $22, System Enclosure: $31, Emotion Engine/Graphics Synthesizer: $27, and HDMI: That isn't listed, so I'll assume it's $15 until one of you can tell me the correct price. These all add up to: $136.60

Total: $609.60

Since the total cost of the 20GB is $805.85, there's a $196.25 worth of parts, that may not even be necessary for the system. And this is the same for the 60GB version.*

So the PS3 has $200 extra in its manufacturing cost, which doesn't even count the Emotion Engine and blu-ray. So those are actually not the problem. If this extra cost was not there, the PS3 could sell at the same price as now, but with losses even smaller than the 360 ($100 for the 20GB, and $50 for the 60GB). This would allow costs to drop faster, and allow a price drop to be affordable much faster.

And I do place the blame on Katuragi. Howard Stringer, CEO of Sony, pointed out all the times Katuragi would refuse to discuss the development of the system with Stringer. Katuragi simply over-engineered it. A more economic redesign would be the best solution. It wouldn't be anything radical, not likely even an external change. It would just be figuring out where all that extra cost comes in, and get rid of it

*Adding up the extra parts of the 60GB version: HDD difference: $11, Wireless module: $15.50, PC Memory Card board: $5, Enclosure difference: $2, and labor difference: $1, we have $34.50, the total cost is $644.10. Subtracted from the total of $840.35, we have $196.25 again.

It is actually far worse than that because Sony doesn't make $60 per game that is sold. From licencing fees Sony can make (approximately) $10 per game and will make $30 to $40 for every first party game that is sold after they have paid off the development and marketing costs. Essentially, you can't make up a $300 loss based on game sales alone ...

The likely way that Sony intended to recover these losses is that they anticipated reducing the cost of the console at a far slower rate than the console's manufacturing costs were reduced; which (in general) isn't too unrealistic because (I anticipate) that by moving to a 65nm process, removing the emotion engine, and eliminating a SKU Sony has probably already reduced the cost to manufacture the PS3 by $100 or more. 

They make far less than $30 for a $60 game sale. The retailer takes off $20-30 of the top. Then after that you have to remove marketing and development costs. At best they can hope to make $10-15 from a first party title, $5-7 for a third party title. I posted a Forbes analysis for the breakdown of Gears of War, and the amount of profit generated is a lot lower then most think.