Mega, the issue isn't that Sony's prices won't come down, but the fact that they come down at the same rate for the Wii and X360 via Moore's law. So for the PS3's components to drop by $100, it's going to still take around 6-9 months to do that (if not more), and the other console's component prices will drop another $50 in the same timeframe. But since Nintendo and Microsoft make money on each console sold, they're in a much better position to drop their price, or incentivize their console.

Include wifi, include a hard drive, and cut the price of xbl.

do all that and sony will be d00m3hd

The point is,  Microsoft has reasonably about 100$ of space to cut their prices and at that point,  that's about it.  They won't be able to go much lower.  The one advantage that Sony has is that it has a lot of flexibility with price as long as it is selling competitively.  (Continued software support and good exclusives will aid this process). 

The price of the products inside the PS3 will drop faster in price than the ones inside the 360,  I would imagine.  DVD drives aren't going to get much lower for example (And actually will increase in price if Blu-ray were to ever maintain more of the market).  Yet Blu-Ray drives will significantly keep dropping in price over several years. 

 I don't buy that the 360 is that cheap to produce. Plus don't forget about system failure it has, and will continue to cost the system, there are pros as well as cons when you rush your pruduct out in order to get a headstart.

But I do agree Sony will hold out as long as they can. Particulularly by hyping up their exclusives. Killzone 2 was able to get the PS3 to outsell the 360 last week and this week 360 outsold PS3 by only10k units. And don't forget this is going up aginst Halo Wars and GTA 4 exclusive content. Ninja Blade will not be enough to combat Infamous and FF13 Japan which I think honestly will come out around september.

So I'm no blind fanboy we all know 360 will outsell PS3 until PS3 gets a pricedrop but as long as it's not 2 to 1 as this X-mas was then Sony can afford to wait it out untill fall 09. At this point it's not just possible but probable.

And there is no way Mass Effect 2, even if it is PC/360 exclusive will becoming out before q4 2009.

Rpruett - Do you think that Sony can reduce it's price to $200 anytime soon? If the system costs roughly $400 to produce right now, we're looking at the PS3 reducing it's price by $300, or 42% in 2 years. If Sony continues at that rate, the PS3 will still be $230 to produce in November 2010. Do you really think that a $250 PS3 is going to set the world ablaze? Especially given the fact the 360/Wii should be at $150 or so by then?

By the time that the PS3 hits $200, and Sony isn't losing any money, next-gen systems will be out, and any sales the PS3 gets then will be just about moot.

@ Megadude - system failures aren't happening like they used to. The 360 is as reliable as any other system now, so any sort of costs associated with RRoD are gone. MS already wrote off the $1B for RRoD failures a year ago, which covered any future issues as well.

I don't care if you don't buy it.  It's still true.

@Rpruett
The 360 still has as much as $200 of headroom.  The main unit is the Pro, which is at $300.  By the end of it's lifetime it should be appropriately set at $100.  Thus Microsoft could cut the price to $249 this year with a $179 Arcade model, then next year drop to $149 and $199, then in 2011, drop to $99 and $149, and in 2012 when the next Xbox is launched, it can reduce the 360 to $129 or $99.  The PS3 in 2012 will just barely be reaching the $200 price point.  So really the 360 has all the options in the world where as the 360 doesn't.

Since the PS3 lacks the software sales and lacks the online revenue from subscriptions, it cannot keep taking a $100 loss on the system throughout or the PS3 as a whole will have lost them billions and been completely worthless.

 Last month my friends 360 died for the second time. I had been trying to pursuade him to get a PS3 for years. When Microsoft wanted $100 to fix his 360's DVD drive there was nothing I needed to say. There are still consoles out there waiting to die. I've been reading up, Microsoft was gung ho about getting the 360 out by Crismas 05. They cut corners and had a "deal with it later" philosophy. They did a lot of things right. You agree that the 360 is a powerful system right? How did they get such a powerful machine out so early? RROD is your answer.

Megadude, how old was his X360?

The point is that Microsoft is having diminishing returns on repair costs for the 360. Falcons fixed the vast majority of RRoD problems, and Jasper put the nail in the coffin for reliability problems. There are still a bit of 'bad' X360's in the refurb/replacement chain, but that's litterally the only way your going to get a bad 360 anymore. Which leads me to believe your friend that's had his 360 broken twice has a launch 360, or near it, and his last problem was over a year ago - how much does Sony charge for fixing an out of warranty PS3?

 He got his 360 in summer of 07. As for his system failure- It ould have been covered if it was "the" RROD (which is a loose GPU correct)? "The" RROD is covered, but this DVD drive failure thing (which I've been hearing about a lot) was not. I'm glad the new 360's don't come with RROD standard. I'm planing on getting one when the Arcade hits $150.