@ http://news.bbc.co.uk/1/hi/business/6718145.stm

"The BDP-S300 now costs $499 - half what the firm's first Blu-ray player cost at its launch six months ago."

 So, if they now have a stand alone BR player for $100 less than the PS3, when will we see the first PS3 price cut? I am betting this holiday sales period.

The PS3 isn't competing with blu-ray players, just as the PS2 wasn't competing with DVD players. So I don't see this driving a price cut with the PS3, especially since HDTVs need better penetration for HD film and player sales to pcik up.

price cut will happen, some time.

 Either when Sony can afford it, or when they feel they have no choice, whichever will come first. Hopefully it will be the former.

Often bleeding edge electronics are sold at a much higher margin in order to recover R&D costs and encourage electronics retailers to maintain stock; the initial Blu-Ray players probably never cost more than $300 or $400 to manufacture and ship. On the other hand the PS3 was manufactured at a loss and there is practically no retailer level profit from selling a PS3.

One thing that has been reported is that HD-DVD still dominates the stand-alone player market and (practically) all Blu-Ray movies are sold on PS3 systems. The shift in price on Blu-Ray players is probably to move stand-alone units and to limit the ability for HD-DVD to recover.

Sony/Blu-Ray boosters may doubt HD-DVD's ability to recover but movie collectors and videophiles are far more likely to buy a stand-alone movie player than a game machine that also plays movies; these people also buy far more movies per person and are likely going to influence non-early adopters on which format to choose. If these people choose HD-DVD because of how much more affordable it was ($350 for stand alone compared to $1,000) it could be a very big blow to Blu-Ray.

So now it almost makes sense to buy a Blu-ray player instead of a PS3?

That's precisely what I was thinking. I think for Sony, they want every portion of the PS3's manufacturing cost to drop ASAP.... except the Blu-Ray player. What happens if the Blu-Ray player is 300 dollars for Christmas 2008, and the PS3 is still 600? What happens after that, as the players continue to drop faster than the system?

I'm not at all suggesting that this completely invalidates the system's BR player. But I would say it does, at least, slightly hamper this advantage. Right now, some people are literally buying the PS3 as a Blu-ray player, and nothing else. As an electronics salesman, I've seen it myself several times. In the future, as price drops on the players themselves continue to outstrip those for the PS3, I suspect people will see the built in Blu-ray player as a nice bonus feature, but no longer a core selling point. Very much like the PS2's DVD playback (not essential, but a solid perk).

One more step to provide HD content to average users. DVD - > Blu-Ray transition gets some speed.

Just keep in mind that this isn't actually going very quickly. Currently, less less than .9 percent (or .009) of movie sales are actually high definition (meaning Blu-ray and HD-DVD combined). We're still miles away from mass acceptance of this stuff.