That is not relevant in this case, since these costs you mentioned do not happen due to the price cut.

^ Fishy: Not if you take the standpoint that those people wouldn't have bought a PS3 without the pricecut. Then you can consider everything they buy as an extra. This extra however first has to be higher than the incentive cost ($100) before that't worth anything.

Technically you're obviously right.

sony will make a comeback in sales, if the rumored price cut actually happens when its suppose to happen. also they really need all these big time titles to release this year if they truly want to make things interesting again, because if gt5 is delayed to 2010 and god of war 3 is delayed to 2010, then sony is going to be in for some trouble. yes they have uncharted 2 and a new ratchet and clank game, and such. but gow3 and gt5 are absolute musts for 2009 for sony. and with the lineup m$ has and what other games they might release which they havent announced as of yet and its price, things could get worse for sony if the games they need to be released this year are delayed. i think a price cut to $299 and $349 will help alot but the games like everybody knows is what drives system sales.

beat 360-50 50 chance(my guess)
beat Wii-98 02(everyone's guess)

It is relevant, here's why. If people don't buy the software, then you take a loss. You weight the risk of action, in this case a price cut, against that of inaction, no price cut. The goal is to make profit, not a zero sum game. So the number of games required to acheive increased overall profitability is important because it has to be weighed against the risk of taking loss.

There's two components which result in profit as you know, revenues and expenses. A price cut does not change the expenses side, it just reduces the hardware revenue (and hopefully boosts the software one). The risk of acting by making a price cut does not change the software development expenses.

Sony will come back of course. Why? Because they are like Godzilla. And Godzilla always comes back. Even when Mega King Ghidora has him in a throat grip, he always finds a way to come back. And the 360 isn't Mega King Ghidora.

 I think even giving the ps3 a 2% chance of beating the wii is too high

I think its entirely dependant on Sony as a whole. And in this circumstance, judging by amount of losses over the current and following financial yr, it will be very difficult to recover and cut costs on anything they sell.

btw, i hope they do too

     But the thing is, the battle between the Wii models and PS3 is likely to go on until 2015, because the current Wii and Wii HD (2010 release) have and will continue to have much weaker technology in them than the PS3, and the Wii 2 (2014) probably won't be any more technologically advanced than the PS3 or at least it won't be any more advanced than the PS3 than the current Wii is over the PS2.

      Now, the next XBOX (let's say anywhere from a 2009-2012 release) will be technologically superior by a wide margin than both the PS3 and Wii 2, but for its first year or three it will carry a hefty price which means that it will only be picked up by those that must have its must have launch title (Gears 3, 4; Halo 4 or 5; Fable 3), which will take it out of the picture until they can get that price down to where it can achieve mass market penetration.

     So that puts an extended battle going on between the technologically inferior Wii and the technologically competitive even when going up against the Wii 2 PS3, while the 360 is retired and the 720 super system is trying to get its price down enough to compete in the mass market.  The PS3 will beat both these systems in the later years of the gen much as the PS2 has beaten the 360 until fairly recent times, and the PS2 was still outselling the 360 in Japan last week according to one estimate I read.

     What it will come down to over this 6 year period is the games on the Wii and PS3.  I still think that you are going to see less sales for second and especially starting with the third games in series such as Wii Sports, Play, Music, Fit, as later installments won't really have much room for improvement over the earlier entries and Nintendo is going to have to rely on real games like Zelda and Mario at some point, but the PS3 will have many times the amazing games that the Wii is bringing to the market.  This will create a Gamecube versus PS2 environment between later Wii games and later PS3 games or perhaps a better example is a PSP versus DS environment and as much of last year showed, the PSP was dominating the DS in Japan right up to the introduction of the DSi (Wii 2) last year.  And last week the PSP beat the regular DS by 40,000 units in Japan.

     What this sets up is a scenario where the Wii has managed to use a few faddish games to build up an early lead (much like the DS with Brain Training and Nintendogs); however, over the long haul when more traditional types of games are the ones dominating the market again, the PS3 will show how much better these games are on the PS3 than on the Wii and the PS3 will be routinely whipping the Wii towards the end of the generation pretty much the way the PSP does the standard DS.  Except it will be on a more global basis as the PS3 will get the best support of the two consoles from both Western and Eastern developers.

     That translates into only about a 35-40% chance that the PS3 won't overtake the Wii by the time the PS4 is released.