I suspect that Sony expected that it would lose market share this holiday season to both Nintendo and Microsoft. However I also suspect that Sony probably did not expect to lose so much market share. This will not be the first time that Sony has had the PS3 dance close to dangerous margins, but with over two years on the market retailer patience is probably already quite thin.
According to this weeks data the PS3 is standing at just over 17% of the North American next gen console market. This week the console accounted for just over 13% of next gen console sales. The sobering realization is that Sony once more is going to plumb the limits of tolerable margin. Once again they are going to test the tolerance of retailers. Frankly it is like playing with fire, and they are right if you play with fire eventually you will get burned.
This will not be the first time this generation that Sony has tread these particular shores, but they always seem to recover towards safer margins before the hammer can fall, but if you tempt fate often enough. Fate does have a way of delivering a death blow, and it looks as if Sony is going to push it even farther this time around. Getting to within a few weeks of discontinuance if you believe the rumor that is.
Were I a PS3 owner I would be deeply concerned, because this strategy leaves Sony at the mercy of their rivals. Who can attack at the weakest moment. Sure the price cut may help the PS3, but what if Microsoft or Nintendo drop two or three blockbuster titles at that exact same point. The PS3 price cut may get lost in the excitement about those titles, and that could be the few weeks needed to cast the die for retailers.