@ OP

It doesn't make sense. A price cut right now is impossible with sony's current financials but saying a price cut won't help them saleswise is a bit strange to me especially with the 360's current sales boost.

Cheap prices make people think less before they buy. I honestly won't be watching game reviews on gametrailers if games cost $20 not $60. Cheaper prices would sell anything. It's simple economics.

A PS3 price cut, even as deep as $100 and as early as March cannot turn the wheels of time backward in the race against the 360. Something irreversible happened in the last 3 months in Continental Europe and no price cut is going to change it:

The 360 had become socially acceptable in the continent.

To appreciate the importance and the magnitude of the transition in continental Europe we have to look at the numbers and recall history.

Microsoft and the 360 have a very painful and frustrating experience in continental Europe. The original Xbox was a flop and sold very little in the region. The 360, even through it had two holidays seasons as the sole HD console in the market (holidays 2005 and 2006 - before the release of the PS3) gained very little traction. The Europeans displayed such a strong bias against the 360 that it came in last even when it was the only console in the race.

The Europeans simply snubbed the 360, especially in the continent (the UK is another story). Sony ruled Europe in the previous generation and the Europeans seemed to be hell bent on waiting for the new PS3 rather than take a risk on Microsoft's new console. Even when the high launch price points of the PS3 were already known in xmas 2006, the Europeans decided to skip the much cheaper 360 and wait for the spring launch of Sony's new console.

The result - measly sales of the 360 through its first two xmas seasons.

In 2007 the PS3 is already in the market and is crashing the 360 sales in Europe. The 360 can barely hold to its prior year sales and is being outsold by the PS3 by a wide margin. Continental Europe seems to be boldly declaring that the 360 is not welcomed..

Fast-forward to fall 2008. Microsoft, with a series of price cuts reintroduces the Arcade at a $200 price point in late September. The company reports soon after that the model sales are increased six fold. Change is in the air, something big is going to happen in Q4.

Indeed looking at the 360 sales for the first 8 weeks of Q4 we find an astonishing change:

The floodgates opened. The sales in continental Europe grew to four-fold over the same period in 2007 and 2006. No other region in the world showed such a growth for the 360 this fall. Not even close.

This is a see of change. The Europeans, who stood like the Atlantic wall preventing the 360 invasion to the continent, have crossed the lines and are now endorsing the 360 in their masses.

Yes, the price point was the trigger for the change. But it is much deeper than that. The 360 is now acknowledged by continental Europe to be a solid and safe choice. It is clear to the European that it is not going to flop like the original xbox and that its library of titles is valued as great. Suddenly you don't have to apologize to your friends why you bought a 360. It became cool to own one. If not cool, at least a safe bargain and not a risky bet anymore.

Once the 360 acceptance happened, it was irreversible. The bias against the 360 is gone forever. The PS3 can and will drop its prices, but from now on the PS3 and the 360 will be evaluated on their merits without the original bias that hampered the success of the 360 for its first 3 years in Europe.

No more walk in the continental park for the PS3, with or without a price cut.

Makes sense?