You cannot simply reduce the entire question to merely the price. We must also take into account marketing, the economy, the library, the quality, and public perception. Sony must overcome more then its current price point. The marketing must be strong, the economy must stabilize, they must have a significantly stronger library, and must convince consumers that the negativity is a thing of the past or was misplaced.

Fixate on one element at your peril. Were Sony to reduce their price at the expense of all it would not be very effective. Changing the price does you no good if nobody knows about what you did. Nor does it help if it causes sacrifices in the library. Further more it will not be as effective if the economy continues to decline. So its more then just hardware profit losses that must be considered. Sony has to market properly, and ensure that their library is better then what Microsoft has and will be offering this year.

Price is important, but it is not everything. Sony needs everything to surge ahead of Microsoft. I am reasonably sure they have no chance in hell on their end, and I am doubting the economic recovery isn't going to materialize any time soon to reduce the pressure.

Sony will outsell Microsoft in total consoles, no question (they're still selling lots of PS2s). The PS3 will outsell the 360 significantly, once the price drops to $299/299EUR (significantly = 30% or more).

is it just me or does Xbox's weekly lead of 50k per week seem small when the fact that the ps3 is twice the price is taken into cosideration. Imagine if the price of the ps3 dropped.

Yes the will if:
A] Price drops by $100
B] PS2 software simulator is announced for download from PSN

If:
-Sony cuts the price $100 and severely hampers profits again
-MS doesn't counter with an equally brutal move (as MS has said it would act if Sony dropped price)
----Brutal move could be to discontinue the arcade and drop Pro/Elite to $199/299 or keep the arcade at $149, do Pro at $199, and Elite at $249.
-All 2009 lineup for Sony is actually released in 2009
-MS explodes and 360 vanishes from the face of the earth

Then yes, Sony could stand a chance of beating Microsoft in console sales for 2009.

Great point : I will buy a PS3 if they annouce a simulator for ps2 software ( and a price drop of course)

Is it just me or does Xbox's worldwide lead of 8 million seem huge when the fact that the ps2 sold 120 million and the original xbox only sold 25 million is taken into consideration? Imagine how next generation will be.

So the PS3 simulates a PS2 game?  As in it gives the impression of playing a real PS2 game?  I think you meant software emulator.

lol no

If you seriously think about it, Sony had a horrid year last year.  The first 3+ months were supply constrained for M$ so that hurt them a lot in the sales department.  If they had the supply thing worked out in early 08 I think M$ would have an additional 500k- 1M sales.  So things could have been much worse for Sony.

As for Sony outselling M$ for the year, it is all but imppossible.  Trouble in the economic sector for nearly everyone + major corporate downward spiral for Sony = Very ruff year ahead.

M$ has a greater chance of outselling the Wii this Christmas (not going to happen) than Sony beating the 360 for the year.