People say MS should drop the price. Great.
But the thing is,
Sony can equally do so... In fact more so, because they don't have Kinect bundled.
IMHO Kinect is not going to see equivalent decreases in manufacturing costs as the main hardware,
because even if a new camera type was cheaper, it's performance characteristics would be different,
which would be a bad thing to do when the Kinect control software sensitivity is already panned as so-so:
Having two different camera models creating different data for the same gestures would wreak havok.
So they can't change it. That cost is fixed as long as it is bundled.
The rest of it, they can't really reduce costs any more than Sony can.
All the market data is saying that Sony has massive pent up demand, that they could sell more at current price.
This means that a further price drop would tend to give them even more new sales,
as long as they can increase production to fulfill that new price-sensitive demand (on top of existing demand).
In other words, Sony could see sales increases WITHOUT dropping the price, just by increasing production,
but if they also dropped the price they would see disproportionately more (than MS would).
MS would be seeing less than half of that potential increase,
and the increase wouldn't be starting above their current production (like it is for sold-out Sony),
it would be starting by helping clear their current production that they can't sell.
If all the signs are pointing to this level of demand and market perception domination by Sony,
it's 110% in it's interests to drop the price as much as they can now if they can increase production enough
so that the sales difference compensates... (increasing forced bundling if necessary to not lose $ short-term)
Since they could get more out of a price drop (if they can also increase production enough),
i.e. the financial prospects for such a move can conservatively be forecast to result in disproportinately more sales,
I don't see why they wouldn't do so, especially if faced with the potential of MS doing so,
but even in the absence of that there is plenty of logic to boosting sales, especially in the USA market,
where MS is doing OK, but Sony would like to have 'total domination' now that the rest of the world is mostly in it's pocket.
(increasing production for markets like Brazil, ideally locally, would have similar logic, albeit USA is the biggest current market)