Dell is offering the 360 Arcade for $170. The Pro is $254, and the Elite is $339. Should we assume price cuts?

I did buy my 360 off Dell this month, actually. They have some ridiculous deals.

Sales are about a number of things stock liquidation, customer loyalty, increased traffic, and offsetting sales. Good prices on some products induce consumers to shop at your site, to continue shopping, and to return at a later time. Sales are good for business, but do not necessarily point to anything more relevant then a retailer looking to increase their profits.

That said these prices may also point to something else entirely. Sony may once again have issues with surplus supply. Which is actually to be expected. They were increasing production before the economic downturn, and their sales did not increase in the holiday months, or even maintain the previous years levels. Which means they have more units then there is a demand for from retailers.

Perhaps these retailers are able to make these bargains, because Sony was forced to give them better deals in order to maintain production levels. Sony may very well have lost capital in these deals, but if they did not acquiesce the stockpile would once again quickly lock up liquidity. Remember one million unsold units at retail price could lock up as much as half a billion in liquidity.

This I am finding highly interesting, because Sony has yet to announce a decrease in production of the console. While it is true this could force a price reduction it is equally true its a true disaster in the making. I am finding it hard to gauge how much Sony is willing to lose on the PS3 in this economy. The author is probably wrong it isn't stupid it is probably the only choice Sony has available.

Sony sells at a loss to retailers. Even if they do not sell the consoles that is no sweat off their corporate back. They avoid a general price cut, and they regain liquidity which will allow them to maintain production. In the end making the hardware more cost effective. The only downside is that this unbalanced pricing may in the end result in ever decreasing sales for retailers that are not getting the better pricing, and in the end they may retaliate by decreasing their support for the platform.

Short term this could be a good strategy. Long term however it can be a disaster in the making. Basically it gives Sony time to put their house in order. Logically they would need to decrease production to clear out the channel. Right now channel management is critical for Sony. Weak demand must see weak supply. Without that Sony could be forced into a corner again as they were in the first year, and investors are not going to forgive two billion dollars more in losses.

Just like that guy "g.e" said in the comments

This is Sony just testing out the sales from a possible price cut.

If sales don't go up dramatically then why cut price.


ps- In case you didn't realize it I'm "g.e."

@ fulcizombie: couldn't resist sneaking in a swipe at sony huh?

@ gebx: that seems like a logical idea, but why would they do it like this? Surely, there are better ways to test it than just here and there? Do a firesale of low GB units, and advertize it, and then check how fast it goes.

short sales-checks like this are hardly a sign imho, especially since you can't really check up on sales that only last a day or so, imho.

I'm not too sure these price reductions are really comming from Sony ...

While it is not the best long term strategy, getting people to come to your store to buy their PS3 because it is on sale below your cost gives you the opportunity to sell them a game or two, a couple of Blu-Ray movies, a couple of controllers, and a HDMI cable which are all much higher margin products; and (hopefully) you will recover the money from the sale. Even if you don't make a lot of money off of this, at least you will have reduced your inventory which increases the ammount of cash you have on hand and protects against future price reductions.

What other way to do it then do just select a few and see how the consumers respond? Amazon would be a good candidate since it has the advantage of being national, no need to deal with various suppliers to reach consumers coast to coast.

 $50 x 6-8 million consoles to be sold this year... yeah it would hurt pretty badly
 

A $50 dollar price cut can cost hundreds of million dollars, the same amount they're losing due to lower-than-expected PS2 sales and the exchange issue.

Dodece touched some relevant points. It's possible Sony has a production glut and is selling discounted PS3s to retailers.

It's most likely retailers looking at current trends in the recession and feeling they are over committed on PS3s. They eat a little margin, but gain vital shelf/warehouse space.