With Mark Cerny saying from launch that his first objective in the hardware team was to reduce the size of the PS4's considerably large APU, we can assume once these roll out the cost of manufacture will drop a fair amount (smaller die -> less silicon -> lower cost). Alongside te fact that thePS$ is running on x86 architecture any breakthroughs in the PC manufacure industry could be thought to have influence on the manufacture of the console. Since the days of the complex and expensive cell are gone we could expect to see the cost of compnenets within the PS4 drop like pc hard ware does year on year. The reprocussion of this being that Sony will begin making more on each PS4 sold than any other console generation before.

November NPD has really proven the power of pricing and to say the least the eyebrows of Sony execs must at be raised after the defeat of the PS4 by around 50% but will this be enough to cause a reaction from sony. As things stand it is evident Sony wants to maintain and increase profit margins, indicated by not matching the price this holiday as their competitor "grabbed some gasoline and set fire to millions of dollars to appease the gaming gods" - ( quote hilarious gamr whose name escapes me) But sony isn't so foolish as to forget that the competion is a marathon not a race so surely they must have some long term strategies as well such as taking a hit to profit now for greater pay off later. That in itself is the definition of the console market, being loss leaders.

Since we can establish its not a question of if but when, it becomes clear that timing is crucial. If we go by speculation that microsoft will drop their price back to $350 again but permanantly holiday 2015 then should sony do the same? Naturally they would want to undercut but with profit in mind do you think they will opt for value addtions, maybe a 1tb PS4 for $350. Or should they go a step further, maybe  Shawn Layden can recreate Steve Race's 10 second PS2 e3 presentation "$299". While we saw the PS4 was out selling the XB1 even after kinect removal and XB1 having an arguably stronger line up for all of 2014, do you think a price parity $350 offer will be enough to maintain or extend PS4's lead considering the momentum XB1 is beginning to pick up. Little doubt in PS4 maintaining is WW lead but in the US price is king, should Sony undercut microsoft? Can they afford to take the hit? Will there be a respectable pay off for such a risky move?

I'm no expert so correct me if i'm wrong, but wouldn't a $350 1tb PS4 be able to turn a profit at sale considering the current 500gb hdd is $37 so a 1tb shouldn't be twice as much in cost, they  should be able to shave off  that much in production cost with a smaller die and the price of parts falling

That said 399 next holiday would be a huge misstep imo

bigger HDDs don't even correlate directly to cost.  a 1tb rarely costs twice as much as a 500gb.  So yeah they would make a nicer profit on those and I bet many would be willing to pay for it.  Plus the PS4 was designed to go down in cost quickly so I'm guessing they're already going to be able to be profitable at $300 by the time September rolls around.

I imagine they'd skip 1TB hard drives and include 2TB

349 1tb PS4 for sure. But maybe they will want the cut to do a massive splash and hit 299, benefit of 299 is that there is no need for free game bundles.

There will be no free games in the bundles, they are not in the position ms is in.

$299 PS4 with 500GB > $349 PS4 with 1TB

I think they are going to skip the $349 price point completely and go straight to $299. Especially considering that at that point MS will no doubt have a $299 console on the market too.

I also think that they won't be putting a 1Tb HDD in the PS4 for a very very long time. It sounds nice and all but they don't have to, they would rather add external HDD support and just call it a day. I also don't think they would want to have tons of different SKUs in circulation, so we will see nothing more than the white and black PS4 SKUs, and rather than see full custom consoles going forward we will just get custom faceplates.

And as for its effect, a $299 PS4 will be a very very big deal. And at that point, I don't think a $250 X1 makes much of a difference, unless MS can somehow manage to come in at $299 with two free games or $250 with one free game.

If this price drop is done in november 2015, then I don't think they would be taking much of a hit if any at all. By that point they could be selling the PS4 and making a profit on the box at $299.

Certainly no 299. 350 + some goodies sounds good. Whatever keeps them in the black.

I'm hoping it's a $299 bundle because I want a PS4 really bad and seeing what XB1 has done this year, and the price may go lower next year, Sony will have to match that. They were a little too cocky, and even though they're winning worldwide, if XB1 pulls that again they won't be much longer.