There's a point I made in another thread that I felt should be available to discuss separately.

There are those who say that Sony "can't" drop the price of the PS3 due to costs associated with making it.  That's not true at all.  The added sales from a price drop would cause more software sales and therefore more royalities thereby offsetting the price cut.  You have to look at the broader picture, not just the gaming market.  Sony needs to be careful about pricing the PS3 so as not to screw over their hardware partners in the Blu-ray Disc Association (BDA).  The standalone players need to generally be cheaper than the PS3 since the PS3 has multiple functions.  If the PS3 is lowered to $299 before Christmas, it robs the partners of standalone sales because why buy a standalone when the PS3 is the same price and does more?  After Christmas when the partners have made their holiday $ and they are getting closer to lowering their player prices again, then Sony can further reduce the PS3.  There are important partnerships in place here.  It puzzles me as to why people don't seem to realize that the majority of the decisions that Sony has made about the PS3 have been based on furthering Blu-ray rather than the gaming market.  Whether you agree or disagree with their approach, it is the route they've chosen to take.  There's much more money to be made on Blu-ray than gaming.

No responses? This is why this board is a joke sometimes. Thread after thread of "console A sux, console B rulez" or "what kind of vegetable would your favorite game character be" get hundreds of responses. Factual analysis of what is REALLY going on gets ignored. I have found very few members that I'm able to have an actual intellectual discussion with.

Yeah that is a good point. I never thought of it, but I never really discuss a PS3 price drop. Plus I don't think a price drop would help PS3 too much unless it could match the 360 price.

They can't keep up with the loss-leading strategy though, not when their profit margins are down so low...so the ideology of 'sustaining the losses now and we'll recoup those losses in the next 3 years' isn't really feasible route for them.

The other thing to consider is that they'd screwing over the sales of their own entry-priced Blu-ray players...so in effect 'cutting the nose to spite the face.'

There have been rumors for awhile that the PS3 would drop to $299 around March and I believe that for the reasons I stated above. Dropping the price before Christmas does more to harm the BDA hardware partnerships than it does to help the PS3 in the videogame console world. Despite the naysayers, the PS3 will be fine at the end of the gen even if it ends up 3rd. Nearly 18 million of any product after only 2 years is nothing to sneeze at.

I don't think Sony will be too concerned about their partners , they just aren't able to substain too much loss in the current economic climate and will likely be trying to cut costs wherever they can , that means pocketing the saving made by cheaper PS3 production as opposed to competetive price cutting.

Yes Sony will suffer in the long term if they don't price cut but self preservation is a bigger priority than market dominance.

But it's not just 'offset' by selling more software...they're already losing money on each PS3 sold and if they were to drop the price by another $100, sure they'd sell more software but if it's estimated that royalties are around $6 per game they would need an attach rate higher than 17 to 'offset' those losses. Which is twice as good as any console has ever had it.

I think up to a $75 dollar price cut could occur without offending BDA partners but I do not think it is that easy fo Sony to afford that much of a cut.

Lets just think about the cost of a PS3 relative to a comparable stand alone player. A reasonable unit for comparison is  the Sony BDP-S350 because it matches up feature and perormance wise reasonably well, though it is not as good as the PS3 in several categories it is close. The cheapest I have seen this player is $250, though there have been short duration deals here and there for cheaper I think that is a reasonable low price for it. I pick this one in particular because I have been personally debating between it and a PS3 recently and am leaning toward it. Now lets enumerate the additional costs a PS3 has over the BDP-S350:

- wifi ($20)

- hard disk ($40)

- more RAM  ($30)

- higher end processor ($25)

- higher end video ($25)

- bluetooth ($15)

- additional USB ports ($5)

- controller expense vs IR remote ($15)

- more complex mother board due to additional feature integration ($25)

I made some guesses at costs for these component differences, I am open to corrections on these especially with linked evidence. The total additional cost comes out to $200, so even if I am off and my estimates are double accross the board they are still losing money on the $399 price point when packaging and distribution is included. And this I think is being generious by not including indirect costs such as advertising, marketing, PSN, Home.

Lets say for argument sake that my estimates were all way to high and that they currently break even on the $399 PS3. I think for the stand alone player to lose significant sales to BD Player buyers (not people looking specifically for a game console) it would need to be at most $75 more expensive. But agian lets be generous and say a $75 price cut is what would "offend" partners. To cover that $75 loss they would need to sell 4 or so full priced new games.

A ton of guessing and estimating, but I think the reality is the PS3 cost enough more then stand alone players to produce to keep the difference in prices acceptable to partners as long as they do not take on huge losses.

A very interesting and valid point. Most of us, including myself often overlook this factor, but I have heard about this as well. Thanks for bring it to our attention again.

Um... what? The reason nobody thinks of this is because even if this were a factor, it wouldn't matter. You didn't explain how Sony would be able to offset the costs of a $100 price cut, at all.

"The added sales from a price drop would cause more software sales and therefore more royalities thereby offsetting the price cut."

Why don't they give it out for free then? Seriously, you've got to put numbers up here, otherwise it doesn't work.