I think that $500 should be fine honestly. They are releasing a console that will be on the market for years. It is a premium product that will sell to enthusiasts first. Down the road is when the thing will be cheaper for those who want to buy it. They don't need to sell it to everyone right away and having a lower price will do two things.

1. Require it to be sold at a loss. While it might already be doing that selling it for a deeper loss is not a very good business practice. $50-$150 at most. No one should make the kind of business sacrifice Sony made with the $200 or even $280 or whatever it was loss they had on the PS3.

2. Require the system to be too cheap. If they don't put decent hardware under the hood they could endanger their long term appeal. Sure software support can keep a system going but as a premium product it should retain a competitive edge and follow the trend and capabilities of software developers for 5 to 10 years.

I know everyone speaks of the economy but look at it this way. There will be people able to afford an expensive console. $500 in 2013 is not $500 in 2006, its more like $400. Inflation and wage increases have both had an effect. Over time they will be able to cut the price, $50 here, $50 there, each time being able to use that as sales leverage to attract more people. There are consumers who just flat out won't buy something at original price, one simple drop can bring them to stores. Even if the console was $400 or $300 at launch, there will be consumers who won't buy it until that first price drop.

If a $500 console dropped $50 every year after release would it sell more or less than a $300 console that doesn't have a price drop for 3 years. The cheapest console on the market will retain between $50 and $100 difference because as the cheapest console they have that sales advantage. If you look at the Wii and its price history you can see that clearly. As the cheapest console last year they had very little need to cut their price. Since it sold crazy amounts they really worked out for them. But that isn't to say things didn't work out for Sony and Microsoft at $400-$600 and their timed price drops. Wii sold ~100 million, PS3 & 360 sold ~150 million.

The Wii U is already the cheapest console. If Sony or Microsoft targeted their $300-$350 price they would set themselves up for competitive reaction just like Sony did with the Vita. Launching that at $250 forced Nintendo's hand and left Vita unable to move. If they launched Vita at $300 (and reduced memory card price because of that) Nintendo might have avoided the price cut, or simply went down to $200, but after the holiday and instead created a $200 bundle with games to boost sales. Then Sony could have reduced their price to $250 a few months after Nintendo reduced theirs to $200.

For Sony at least their next console needs to have quite the display of power. They are pushing forth the 4K tv market and in order to ensure it is viable they need to provide the market with compatible devices. The PS4 will be capable of 4K pictures, video, and various games. Not graphic heavy AAA games, but at least smaller titles and 2D games will output to 4k. There could be some upscaling as well. So they really don't want to skimp on the power.

At $500 Sony can minimize the loss per console damage they will endure and have the upper hand in timing price reduction to leverage sales. They have the game studios to sustain a software ecosystem early on they will have a much more feasible console then they ever had with the PS3.