the problem is that there is something that most consumers see as an equivalent good , the 360, sony needs a loot of game that the 360 cant match to justify the hi price of the PS3, and that is what is happening with the wii people see more value because there is nothing like it in the market at a lower price. But he knows all that is all PR

Well it depends on whether the price cut comes in the form of a slim which will cut costs. With the PS3 at this price they will make money won't they? Due to stronger software sales

Don't forget how long it would take to download some of the games if they were to go DD only. The world isn't ready for that.

well, currently there is no PS3 slim, so that doesn't add to this equation. People want a price cut on the current model. If they can cut costs and pass 100% of the savings on to the user, then obviously it wouldn't cause them to go in the red.

As for making money on software, if we assume Sony makes $10/game and they take a $100 price cut, they need each user to buy ~10 games. Of course they have online content too, but so far the average is closer to 8 games per person. Also, take into account all those people who were willing to pay $400 and buy 8-10 games, and you are making less money overall. While they may make the money back in the long run, is it really worth sending yourself in the red for this year? Sony needs to prove to investors that they can make money, and I really think they are going to do that this year by not cutting the price unless they reduce costs on their end first and they can continue to forcast a profit.

I agree that there is no potential for a $100 long term price cut without the slim to cut costs. You also have to remember that most people, out of those 8 games, will likely have 2 first party games, giving closer to $30, which means those 8 games will make up the $100, but still, I think the assumption is that they lose at least $40 currently, so a $100 cut would cost them loads.

I can see the current models being sold for $300, but only as a temporary measure to clear stock for the slim, which will either be $300 or $350

I still think a $100 price cut can be more than justified for the SCE division.
There is no doubt that cutting the price will lose them alot of cash, but due to not fully knowing updated production costs we don't know exactly how much.
Also, if you take into consideration increased software sales for the division this fall, that will help counter the losses.
The PSP Go is also a little gem in my eyes. As far as Im concerned, Sony will be making at least 60$ profit per console, and in the UK i'd say around £65. If it has a reasonable Christmas, even if it only sells 200,000 units on its own....it's alot of cash.
Throw in the potential of GT5 which would be an extra $30+ Million in Sony's pockets, then I think that with a $100 price cut this fall, Sony could still get away with very very small losses, or even make a profit.

The thing is....how are they going to counter these price cut losses throughout 2010? I know production costs will likely fall again, and that the economy should start recovering, but I still wonder whether or not these losses could be met.

I suppose only Sony knows if it's viable, not just this fall...but in the longer run

Here's the kicker though. Sony ISN'T forecasting a profit. They're still expecting to be quite far in the red by the end of the fiscal year and in the meantime they're expecting a 30% increase in PS3 sales over last year. Neither of these make sense if a price cut isn't coming. First of all, there is absolutely no way Sony is going to have shipped 13 million PS3s without a significant price drop. Then there's the fact that at a $40 loss per console, PS3 will most definitely be profitible by Q3 when the 45nm Cell chips roll out. If Sony has a Christmas season where they're making money off of every system they sell then I really can't think of a reason as to how they could be predicting such a huge loss for the fiscal year.

A price cut is the only answer.

As far as I see it, they NEED to keep the price up... They simply can't force themselves further in the red.

Are you referring to: "It’s what you get for your dollar"?

I see no problem with that statement.

Not really. Sony could drop the price of the PS3 by $100 by releasing the leaked 120GB PS3 slim this fall which will likely cut development costs by at least $75 if it includes a matte finish, smaller frame, 45nm Cell ships, smaller motherboard, and smaller heatsinks. At that point they'll be losing at most $65 per console, which is only $25 per console more than they are losing now. However, that $65 will add up fast if it's multiplied by 8 million becoming 520 million. However, between the increased sales of PS3 games, assessories, and PSN cards due to the expanded userbase, the massive profits gained by the PSP Go, the increased profit margin of digitally distributed PSP games, and the massive 1st and 2nd party game lineup for both PS3 and PSP coming in the next 9 months including the money printer Gran Turismo 5, Sony could easily subsidize a loss as relatively meager as 520 million.

However, here's the strange thing. Sony is expecting their entertainment division to still have a 1.3 billion loss for the year, which all but confirms a PS3 price cut since I can't think of a single reason as to how Sony could be that far in the red with a profitible PS3, a HUGELY profitible PSP Go, and two Gran Turismo games.