The more money I spend on hardware, the less I spend on games. Simple math, really. And my games-2-get catalog is pretty damned big, lemme tell ya. Damn DS and Wii. ;)

 But how many 'Hardcore'  console gamers that will pay ANY price are there? My guess is about 10M, and all of those multi console gamers.

The rest of the world is made up of casual gamers who are less likely to buy a ps3 than a 360/wii. 

I think that the avg consumers should not be lumped into a particular game category. I think that the avg consumer only looks at this: "I want this game, how much do I put down before I can play it?"

The avg consumer doesn't start with 5-10 games, they start with one. They evaluate the total cost before playing vs the desire for the game. So, effectively the games don't cost $50-$60. For this gen, they cost from $250 for the Wii w/ Wiisports to $460 for the 360 to $660 for the PS3. I just don't think that there is any single game that justifies the cost of $660. Especially $250 gets you the "cool" game that everyone is raving about.

For sony to compete for 2nd place in this gen, they'll have to drop at least $150 by October. $200 to put xbox in 3rd place. $300 for a chance against the Wii. Any less than $130 drop by end of this year guarantees a 3rd place finish for this gen. If they drop < $130 by end of this year, PS3 will be at 360's mercy of how far they want to be ahead of the PS3 in this gen.

Of course, this doesn't take into account whether or not share holders will allow them to drop the prices at a further loss.  Like the OP said, rock and hard place        

Only the most hardcore of the hardcore will pay $600 for a PS3 even to play those games.  I put myself somewhere between a casual gamer and a hardcore gamer and my yearly budget for games is $400 (buy used and sell after beating). 

 In addition, you guys predicting the prices are crazy.  You still can't find a wii.  No way they drop the price this Christmas.  They'll wait til next summer sometime. 

 Lastly, I think their is a good possibility that Sony gives the 20 gig PS3 another run.  They know they can't drop the 60 gig to $400, but they need to hit that price point to give delelopers some confidence that they aren't a gamecube saleswise.  So I think it'll be PS3 60gig $500, 20 gig $400, Xbox 360 Elite $420, Pro $350, Core $250, and Wii $250.

after one year, you will see, who was right and who was wrong. =) but i on 100% know, that amazing games will boost ps3 sales more, then just price cut.

I do believe that the above poster hit pretty much on the head. Call them what you will, but $500 is a lot of money to most people in the world (including the US and Japan). Add to that fact, games in general are not a high priority and you understand this generations numbers. I dont think there is anyone out there who wouldnt like to have a higher end console (360 or PS3), but is it really worth it to pay >$500 for something so optional when there are alternatives that are arguably just as much fun for less than half that cost (Wii & PS2)? I will get worse graphics, but that doesnt mean I, my children, my girlfriend/wife, friends, and plain people from Kentucky wont enjoy them just the same. Enjoyment is enjoyment and it isnt always based on how much money you spend and I think most people understand this.

I think what will probably happen in the next few years is this. Sony will decide to either give up on this gen and just tread water until the next or they will bite the bullet and try to make a move to regain the lead which is only possible with a $200 or so price cut (or match the 360 price whichever is lower). Doing so will put them in strong competition with the 360 and improve sales dramatically in Japan. I don thing there is anything they can do now to catch up to anyone but they still have a chance to be profitable or at least break even if they can sell more consoles and regain 3rd party confidence. Sony will not go out of business or stop making consoles regardless of the choice they make since they have very deep pockets.

If the 360 hits $250-$300 (possible with drop in production costs) the Wii will be in trouble if they dont do something drastic. If the other consoles decide to compete at the price level, Nintendo will probably release an upgraded Wii with better capability (upgraded not entirely new). By that time, hardware will have gotten cheap enough for them to make a console powerful enough to compete with the 360 & PS3 at the $250 price point. All games designed on the new system should also play on the old with a simple scaling in graphics. Since they will probably have most developers working with them this would essentially seal the generation in their favor and give them a huge boost next generation.

The 360 will probably remain in 2nd and compete well against the Wii especially with a few price cuts and improvements to their failure rates. If they want to compete in japan they will probably need to drop the price to Wii levels. They will not win japan by any means but if they can at least sell a few million they can plant the seeds for the next generation however I dont think the japanese are going to tollerate short term hardware failures from a relative new comers so they need to iron those issues out completely.

Time will show, but for now, after 1,5 year, x360 has poor sales. i mean, ps3 Doesn`t have much games, and has high price - so sales are low. and now x360 - 1) has games 2) price is not that big, BUT sales are still low. Why such amazing console is not selling like 300-400 per month? for example, ps2 in first year till 2001 march 31 had 10,6 mln. sold, almost like x360. and on 2002 march 31 already had 28 mln. consoles sold, i just don`t see, how M$ is going to sell another 18 mln. it has games, it has price, so what is a problem? imho - high failure rate. Or maybe you see another problem? so yeah, 250$ for a system without ability to save games, maybe some people will buy, because 250 is not much, for a system wich may die. btw, some people speak about choice, 299$ - what choice? IS there any Real gamer which would buy a system, which cannot save games ? I don`t see a point. And prefer 512Mb MC for 50$ over 20GB hdd and other premium features, it`s just stupid. Anyway, price cut is a good thing, but it won`t help much, just like with ps3. ps3 problem - NO games. x360 problem - high failure rate. As long as companies won`t solve those problems, both consoles won`t have big sales.

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If the 360 hits $250-$300 (possible with drop in production costs) the Wii will be in trouble if they dont do something drastic. If the other consoles decide to compete at the price level, Nintendo will probably release an upgraded Wii with better capability (upgraded not entirely new). By that time, hardware will have gotten cheap enough for them to make a console powerful enough to compete with the 360 & PS3 at the $250 price point. All games designed on the new system should also play on the old with a simple scaling in graphics. Since they will probably have most developers working with them this would essentially seal the generation in their favor and give them a huge boost next generation.[/qoute]

 Not going to happen.  People said the said thing about the DS.  2 year lifespan, not powerful to compete with the competition, place holder until the real system arrives, etc.  The Wii is making money big time.  It's going to pass Gamecube lifetime sales in within 2 years of being released.  3rd party support is picking up and the Wii could be the dominant (PS2 like) platform by Christmas.  They aren't just going to drop it, that would make consumers that bought the wii (which by now is a lot) very upset.  That would make 3rd parties upset, because they have been moving all their support over and then Nintendo is going to say, "Ha, ha just joking, we don't want you to support that platform, support this new HD platform of ours."  Which at the time of release will be 20 M units behind the Xbox 360 and 10 M behind the PS3. 

Notwithstanding the Wii is a monster now.  Hypothetically if the Xbox 360 (Pro) dropped to $250 tomorrow and Nintendo made no price changes to the wii, 360 would probably win the war.  But the wii wouldn't be performing at PS3 like levels just because their is an alternative.  It does some things completely different than the 360, which is why the market has responded so positively to it.

CrazzyMan - I think the 360's problem is its lack of penetration in non-English speaking markets, which from what I've heard is at least partially attributable to their poor marketing there. That and of course the price for the main one ($400) is still too high for most casual gamers. Which is why I think the PS3 won't see much benefit from a price cut, 'cause even if it gets to $400 it'll still just be selling at 360 levels in NA/EU with a slight bump in Japan (where the 20 GB is already ~$400).