in fact a few users on here & I think NJ5 even made a thread earlier in this year saying "if SONY drop PS3 to $299 they may go bankrupt"

  If the guys at Sony are so smart, then how come they are losing to competitors in nearly every industry, and losing tons of money?

And they may go bankrupt as it looks, if they fail to achieve their goals on 3D tvs and online sales which looks very possible and have to engage in a price war with MS, we could be talking about how Sony went bankrupt in five years

Because in this economy people don't go after the luxury items, they go after the value driven items.

Additionally, we don't know for sure the ps3 is in a price war with MS. It certainly looks like MS is in a price war with Sony, but not the other way around.

http://www.sony.net/SonyInfo/News/Press/200911/09-133E/index.html

No they haven't, they recently stated they don't expect the gaming division to profit until March 2011.

At present Sonys gaming division has lost another $1,066,875,000 (that's a billion) in the last 6 months, so either the PS3 is killing them or Sony Vaio is one of the most inneffectively made products ever.

How is Sony not in a price war with MS but yet MS is in a price war with Sony?

Because MS responds to Sony price drops. Not the other way around.

How does that makes sense when the Xbox 360 is more expensive than the PS3? The price tag is the same but you gotta buy batteries (alkaline or rechargeable) or a recharging kit for 360 whereas PS3 has rechargeability right out of the box. And you gotta pay for Live Gold if you want to play online.

I've gone over this a hundred times, but I'll be happy to explain. Most consumers only care about (or know about, for that matter) upfront costs. Plus, I don't know if it's any different now, but my old box had a wired controller not a wireless one. You do have to pay to play online, but you don't have to.

Not to mention that the PS3 gives you Blu-Ray and Wi-Fi (Wi-Fi sucks but if you absolutely need it for online, its there) as well. The PS3 is playing the cost value game right now. Not MS. Before the price cut, Sony was losing even in Europe/Others this year. They needed that price cut to be competitive with Microsoft. Third-parties like Activision were screaming for a PS3 price cut and threatened to withdraw their support for the PS3. Sony had to play the price war game or else there would have been devastating consequences.

Yeah but those things, for the most part, are unnecessary to play games. Sony is playing the value game because it is consumers who were having a hard time finding value in the system when most are only going to play games on it rather than  watching BR movies like some of us do. Hey, some people paid 600$ for it. They saw value in the system. While you are right in saying that they needed a price cut to be competetive with MS, it's not because MS' price is better, but that PS3 just had a really bad price. Each has their own offerings and exclusive games, but they are not worth 400-600$ to play them according to most people.

Microsoft has no need to play the price war game. They are in a secure position. They have a solid first-party lineup, they have support from the third-parties. So as long as they have the software sales to back them up, which they do, they are fine. Because software is where you really make your money. Not hardware. Fanboy bread and circus console war numbers don't matter to shareholders. What's the point of price cutting to death in a console war if you are losing money?

MS came into being, and has always been in a price war with Sony in the video game market. Like you said earlier, they make money off of live and other things, and they can afford to drop the price. MS has a price advantage, and they would not want to simply give that up. Price is an important factor for many people. For example, when buying a DVD player, you can buy a 20$ player or a 50$ player. While the 50$ player can more sound channels and can play more formats, some people don't care about those things. Those people would prefer the 20$ player because then they could also buy a couple movies whereas the extra features would have gone unused in the first place.

The whole point of starting up a corporation is to make money. They didn't burn those billions to build the Xbox brand to please fanboys. They did it to get their foot in the door. To win favor from third-parties. Now that they have third-party support, they have no need to bleed anymore. They are finally in the black. They should keep that going and try to recoup all their investments in the Xbox brand.

This is very true, they've finally made it, for this generation. This will give them a much stronger base come next gen where it all starts again. At this point, MS may not be in a competetive price war, but rather a consumer based value model. There is such thing as a sweet spot in pricing, and MS is going to want to sell as many consoles as possible according to the razor blade model.

Microsoft should avoid selling the Xbox 360 at a loss so as long as they have the third-party support. And they will until the end of the gen because bottom line, third-parties are not going to abandon a console manufacturer that has 19+ million consoles (9 million more than the PS3) in North American homes. So as long as Xbox 360 gamers keep getting quality new games, they're gonna continue buying more Xbox 360 software and more XBL memberships and MS is gonna be laughing all the way to the bank. From now on, the console should be sold at a profit, with periodic price cuts after manufacturing costs go down significantly.

Consoles in this business are almost never sold at a profit. I think the 400$ ps3 console and the elite 360 are sold at profit, as well as any nintendo system, but that's because they've been hurting this gen. The attachment rate to these systems is about 9 games. At 15$ per game going directly to the console company, that's 135$ profit, 135$ worth of room to sell under console cost, factoring in that people are going to buy additional controllers as well. The reason MS did so badly this gen, compared to what they could have done, is that they had to pay out more than 1B$ worth of repair costs and additionally were doing R&D on the system through pretty much the entire gen to prevent such high cost penalties later on.

In conclusion, when Sony was looking at the market, they weren't saying "nobody is going to pay 800$ for a system when they could spend 300$ for a different system" they were saying "nobody is going to pay 800$ for a system". And down the line that kept happening. Nobody is going to pay 400$ for a system. The reality is that console buyers expect to pay from 200-350 plus or minus 50$. Being outside that price range can end up hurting the company.

@theprof00, there's something you are missing though, Microsoft responds to Sony's price drops because they don't need to move first. I'm sure they have analysts that are smarter than anyone here that have figured out that they obtain higher profit margins by waiting with price cuts. I'm sure they could easily handle selling everything MUCH cheaper, but they have no need to. That does NOT mean Sony isn't in a price war. Sony needs to cut prices just to be competitive. Is that not a price war?

Sony needs to cut prices to appeal to the consumer, not to push MS out of the way.

By cutting price, MS is creating the atmosphere of a price war. They want the consumer to look at the initial cost, instead of the value. But you're right, it is smart to return price cut with price cut. But at the price Sony was setting, MS was dropping their price even further. It's not like they were matching the pricing, they were outdoing it. That is in essence, a price war strategy.

Sony has yet to sell a console for cheaper than the cheapest MS console.

Consider as well, that MS needed to push Sony out of the way because of the sheer amount of brand recognition and dominance Sony has had over the last couple generations. There are several ways to enter a competetive market and be successful, and one way, is to take big initial losses in order to grow your base. That is what MS is doing. Yes, MS is taking losses at the most opportune times (in retaliatory price cutting) but that's only standard business. When there is increased competition, you must increase competition. Just because it is standard business does not mean that it isn't a price war.

It's a fine line and no doubt confusing, but sony is dropping price to reel in consumers who are on the fence, and MS is dropping price "turn" new customers. There are numerous people who wanted to buy a ps3 at launch but could not afford it.

financial reports are offtopic now?

There never was a 6 billion loss for the Xbox. Actually the losses of the PS3 are higher than the losses of the Xbox. And this is not even this gen. Besides that, MS used this money for building up the Xbox brand and Xbox Live. Sony lost money and destroyed some of the great reputation the Playstation brand had. That is something.

I applaud Sony for selling more than X 360, but this is a MINOR success of the major failure named PS3 (in comprehension to last gen and financially - NOT for gamers)