Well that would settle the fanboy marketshare war but the actual console war (in terms of profit) would die. Hmm whats more important to MS or any company for that matter?

Even if they didn't have the RROD they may have been able to have the 60gb at 300 while the others would be 50$ cheaper. 199$ would be ridiculous even with the big software ratio.

Yeah, they really need to do that, In fact thats the only thing they can do to sell more than SONY now that they don't have the game lineup to do so. because if you check, PS3 has been slowly but consistently outselling 360 all 2008.

 Im talking about the 1.4 billion dollar fine they imposed on Microsoft last year. http://news.bbc.co.uk/2/hi/business/7266629.stm   And they still netted over 15 billion dollars in profit.

Until the PS3, there hasn't been a system where they didn't that money back within two years, and then roll on to massive profits there after.

The PS3 has already erased all of the profits the PS2 made, and it's still losing money full steam ahead.

As far as the suggested strategy of dropping the price is concerned: it is a good one.  More units sold = more third party attractiveness, more market share in the future, more franchises moving to the 360, etc.  The fact that we have almost nothing but unknowns about Microsoft's business specifics makes it something we can't really claim should be their next move.  The issue here is that MS seems focused on proving to its investors that the Xbox experiment can lead to a sustainable business and that they can generally profit from it.

Investors are of the mindset that MS keeps saying, "we'll be profitable tomorrow" when there is no good reason they don't just start being profitable now.  They've spent plenty of time losing money and it's a good time to start trying to dig out of that huge, huge hole. 

If not now, when?  Therefore, Xbox 360 price drops will be short for another year or so as MS proves profitability is attainable in the short and then long term.

Jenny: Microsoft has has virtually guaranteed profits in their OS/Office divisions where they've maintained a monopoly for many years and probably for at least a few more years to come.  The problem they're running in to is that they're a failure *everywhere* else.  MSN, online search, Xbox/entertainment, hardware, etc.  One thing that we know to be true is that the OS/Office monopoly will only last so long.  It's on a timer and Office is the only thing keeping it alive right now.  Once MS loses that, they need their diversity to carry them.

So far, they've been dragging all of their diversification attempts along and have failed, failed, failed.  They *need* to show success and their biggest non-windows/office project, perhaps their centerpiece, is the Xbox experiment.

LOL. First of all, no one is saying its a bad thing...I'm just arguing his point that companies "shouldn't" lose money.

Second of all, that strategy worked for Sony with PS1 because they had deeper pockets than competition and with PS2 because they were first to the scene. But for PS3 they have yet to see the fruits of their labour...

And lastly, they are not doing it because they "care" about the customers and what they think...they are doing it to cripple the competition and then get even bigger marketshare.

No, they're not trying to cripple competition.  They're trying to compete over the product life cycle.  The way it is supposed to work is that you have approximately one year of loss, then 4+ years of profit.  You want powerful hardware -- more powerful hardware than customers are willing to pay for today, and you want it so you can compete and so it will have a slightly longer life cycle.

Let's say you have one year of loss and 4 years of profit.  Well, this equates closer to three years of profit as the first year of profit is spent paying down the loss from the first year (this is the easy way to think of it).  That's about 2 years to break even.  If you miscalculate and get two years of loss, then suddenly you need spend twice as long recoverying and don't break even until you are four years in to a product life cycle.  Of course, this is over simplified, but it mostly makes sense.

Sony's problem is that there were many miscalculations with the PS3 and poor communication from Kutagari.  He thought Sony was losing its edge and that Sony should be able to make the product cheap and fast, regardless of how complex it was.  As a result, Sony over promised on the PS3 ("it will render dual 1080p displays", "it will have a 2 core cell processor", etc) and then under delivered.  And its cost (to Sony) was much higher than anticipated and as a result, the price ("five hundred ninety-nine US dollars") was extremely high.

These miscalculations cost Sony the console war.  Sony has done a good job turning around the PS3, but at best they'll end up in a virtual tie with the Xbox 360 for market share (maybe +5% of total market at best, but that's close enough to consider a tie), and they may not even make a profit on the system overall.

The primary reason Sony continued to sell the PS3 even though it looked as though selling it would cause them to lose more money than not is that they're a long-term company and are planning to keep the playstation name profitable long term.

Maybe Microsoft should just give them away? They'll make trillions on xbox live.

I think you are aright about the PS3 stuff but I still claim that they lowered the price of PS1 to 299 and then quickly to 199 to cripple Sega Saturn. N64 wasn't out yet and sega could not afford to go from 399 to 199 in a year after ps1's launch. So sega stayed at 299 and bundled games (virtua cop, daytona, vf2) but obviously it didn't work.

It doesn't work when both companies have deep pockets...hence why MS and Sony are not playing the price war but are both trying to help each other out actually to maintain a high price.

MS that make Windows and the MS Entertainment division are two different segmants of the larger company.  When people are talking about MS losing money, they mean the Entertainment part.

Those execs are expected by share holders to make a profit.

That's because they release shitty OS like Vista and companies are obliged to pay for 1000 licenses because they fear to use Linux and Mac is even more expansive. The reasons why Microsoft make so much money is because they don't have any competition. Microsoft throws already a lot of money for the XBox to buy exclusives and stuff like that. They have no reason to spend even more.