In the console market, the only real genuine winner right now is the Wii. Everywhere I go the Wii is sold out without fail. I read an article on Engadget where they mentioned that Walmart was talking about how it has tens of thousands of Wiis at Walmart.com. Within a few hours they added a 2nd part to the story about how Walmart had sold out. The Wii is just amazing in its current sales. The 360 has some genuine sales, probably at a level around where the PS3 is (maybe a little lower if the earlier part of the year was any indication) but is benefiting from two things. First and probably foremost after over 2 years Nintendo still can't come anywhere near making enough Wii's to meet demand. Perhaps that is intentional, but regardless the Wii option seems gone in a lot of cases (I've seen the Wii in stock a grand total of 7 times in the last 2 years and I go to gamestop a lot).

The 360 being priced at 199 is a nice runner up for the Wii crowd; that runner up status is almost certainly the primary reason for the big 199 price point holiday bump.  This is particularly related to parents who barely know the difference between the Wii and the 360 and think the 360 will work as a cheap stand in. It's not hard to see how someone can go from "I can't find a Wii which my kid really wants" to "I might as well get a 360 so I can give Junior something" and MS probably knows that, hence the 199 price drop. The REALLY smart move would have been for Sony to drop the PS2 to 99 dollars and undercut the 360 heavily, but baring that there's really no other low cost option with good perceived value around so the 360 wins by default.

It's almost impossible to see a parent thinking "well the 250 Wii is out, the 399 PS3 looks like my next step". If the parent was going to spend 300 dollars he would probably just buy the console the kid really wanted, the Wii, on Ebay at the scalper prices.  The only PS3 buyers now are the core HD gamers who are mainly interested in buying the best system on the market for themselves.  Those types of high end buyers do not make holiday sales numbers look impressive like the gift giving bargain bin console crowd that ignore anything that costs more then a few hundred bucks.

Of course there is also genuine interest in both the PS3 and the 360 as seen in the pre holiday numbers, and in that way I see a much brighter future for the PS3 even though the 360 fans are having their day now. Why? Because to be runner up to the Wii today the 360 has hit bottom on price (and still isn't selling out Wii style despite being far cheaper). Anyone remember trying to find a PS2 the holiday when it went to 199? I tried to buy one for a friend and it wasn't impossible, but it took a lot of work. I don't think I've seen 360s out of stock since 2005 when I got mine, and I mean that with all seriousness not as some dig at the 360. If at 199 a console isn't flying off the shelves and going out of stock it really never is going to. If anyone needs proof of that look at the Gamecube, they lowered that sucker to 99 bucks and it still didn't sell a whole lot even though it was still a current gen console at the time.

I don't know if the PS3 would be sold out at 199 like the PS2 and PS1 were (I suspect it would be), but I do know that at double the price it's been holding its own against the 360 all year (and winning until the tail end). Sony has the 299 and 199 cuts to go within the next year or two, and they will almost certainly stimulate demand each time. On the other hand the 360 only has the death of the console cut left (I have never seen a console drop to 99 bucks unless its on its death bed, Dreamcast, Gamecube, Xbox, PSOne ect.) It is clear that the 360 can outsell the PS3 when its half the price (though both still get trounced by the Wii which has both price and demand on its side while it seems the PS3 has demand but is hobbled by price and the 360 has the price but is hobbled by demand). What isn't clear is what the 360 is going to do when the PS3 goes to 299 much less once the PS3 has a slim version that drops to a sub 299 price point.

I don't really see how anyone but Nintendo is going to win the generation given their lead and demand, but I don't really see MS coming in a strong 2nd sustainably either. Eventually the Wii is going to reach an equilibrium between supply and demand killing off the low price point family demand for the 360 and/or the PS3 is going to get its price down to a more competitive level with the 360 and win on percieved value and 1st party lineup. Either situation sort of spells an inevitable return to the bottom of the console totem pole where the 360 was earlier in the year.

Quick prediction, both the PS3 and the 360 will have another price drop before the Wii goes anywhere below 250. I think it is realistically possible that at some point the Wii will either be the most expensive console on the market or tied with the lower end PS3 for the lowest price given its continued demand.