The dollar value is a reflection of the import/export relationship a country has relative to the outside world. Meaning that if the 360 were entirely US-made and distributed it, it would be unaffected by the flucutations within the US. However, not all the parts are made in the US and the console itself is likely not even assembled in the US (correct me if I'm wrong 360 owners) which means that all the dollars that flow from Microsoft to companies outside the US become weaker meaning Microsoft needs to shell out more (except in explicit existing contracts) for the same product.

The end result will be that Microsoft's manufacturing costs go up so a price cut becomes more unlikely. Of course, I expect Microsoft to have fixed price contracts with several of its partners which will negate this to an extent (shifting the loss to Microsoft's partners).

Alright, I figured as much. Hardly anything is made completely in the USA nowadays it seems. =P

here in the USA ps3 is the same price 360 was for 2 and a half years. so where do you live?

With specialized part manufacturers located all over the world, it's unlikely for anything relatively complex (especially electronics) to be made entirely anywhere. Often parts will come from different countries to be assembled in another country only to be sold in yet another country. Cars are the largest example of this. Parts can come from Japan, Germany, and more only to get shipped to Mexico for assembly and then sold in the US.

Right, that's what needs to be made clear. Since the recession in the US started, the 500$ PS3 has:

1) Not become cheaper for US Citizens.
2) Become less profitable for foreign manufacturers to sell.

So there's two halves of the equation, and only the latter half has been affected. And I agree, profitability > install base.

I see all these posts requesting price drops. Do people realize that the US $ has fallen greatly. Thus consoles are actually a lot cheaper than they seem (at least in the US). This has cost international companies like the ones in gaming even more money. So they have actually gotten cheaper in the US while the EU foots the same bill.

A price cut right now to sell more hardware may not provide enough software boost to offset the monumental losses.

If you want a cheaper console, buy a wii or the 360 arcade and stop complaining! Any more price cuts and nintendo would be the only one left in the industry and that'll be the day I finally stop gaming. Discuss...