with the recent price cuts sony must be continuing to lose well over 100 dollars on each system. i can't possibly see them being able to financially afford a price cut before xmas '08 at which time i think they'll drop another 100 bucks for the holidays. sony is definitely stuck between a rock(nobody wants their system) and a hard place(they can't afford to lose any more money on each system than they already are). microsoft, knowing the situation that sony is in should drop the price of the 360 down to $300 early next year. that would get them in the same range as the wii, it would be a strong attempt to kill off the ps3, and i don't know how much it is costing to make them now but i'm guessing its not much more than 300 bucks so they wouldn't really lose too much money.

i wanna see the hd war get bloody! if microsoft goes a bit more into the red, which they've never had a problem doing, with a price cut sony will have to follow suit and bleed money to the point where they have to give up or keep the price and just accept a very distant third place this gen with no chance to catch up. be bold microsoft!!!

Of course they want to turn a profit.  But what's literally more important than turning a profit is providing a credible plan for turning a profit.  Sony recently told investors that FY09 will be profitable for the PS3 (after their huge losses recently posted).  They can project profitability and secretly plan for a price cut and know they can't price cut.

There are two issues here. 

1) the long term strategy for the company

2) The short-term demands of Sony's (growingly) western investors.

Companies will routinely use excuses to explain their failure to maintain profitability -- 'aggressive competition required price cuts' and 'sales were lower than anticipated', even if they expected those things.  Surely Sony expected a price cut for a while.

Hell, MS blew the whistle on Sony's $399 model back in July!  

So while Sony needs to maintain a semblence of appeasing the investors, they need to focus on their long term strategy.  And their long term strategy requires, among other things, maintaining third party support and mindshare.  Sony has been hemmoraging mindshare since the 360 was released, and even more since the PS3 was released.  Another price cut could go a long way to mitigate that problem.

The third party problem is closer to irreversable for a given system.  It becomes a negative feedback loop -- once the PS3 gets less support, there are fewer reasons to buy it and less reason to support it.  A few huge releases can't fix this problem simply because *everyone* has huge releases these days and costs are simply too high for people to buy systems for games en masse ($60 games, $300+ systems, etc).

If sales continue their trend through the holidays and further drop after the holidays, I assure you that Sony will produce another price drop *somehow*, even if they have to lose hundreds of millions more.

Sony is not losing money on the PS3 hardware anymore, and the PS3 price will come down even more in 2008. Here's why:

Most of the original expense ($125) of the PS3 was the BluRay diodes. Hard to grow, hard to quality-control. Well, that cost is down to $20 or less. Electronic components fall 30% a year, and the PS3 shifted to 65nm chips, down from 90nm. Add it all up, and iSupply's estimate of $800 in manufacturing costs for the first PS3 units is down to $500 or so. The $499/$599 models are clearly in the black, but isn't Sony taking a bath on the $399 units?

Nope. The reason is the strength of the euro. The PS3 is manufactured in China, which ties its currency (loosely) to the US dollar. At current exchange rates, 399EUR = $575 US. Sony is clobbering Microsoft in Europe, and the profits from those European sales offset losses in the US.

Sony's game division will report losses for awhile, simply because they're going to spend lots of money on a mass ad campaign. 

@SlorgNet

Where is the factory that manufactures people like you, and is their any way I can sabotage the reactor. Sorry I could not help myself. The thought just struck me, and I had to share.

No the PS3 is not profitable. While it is a common conception that the initial cost of the machine was eight hundred dollars. That reasoning is and was flawed. Thats the cost of the hardware in the machine perhaps. However that ignores all the secondary expenses. Things like manufacturing, transportation, storage, development, coding, advertising, and various other expenses. The costs do build up rather fast. Seriously its not like you toss all the bits into a wooden box shake and out pops a PS3.

Further more Sony doesn't walk into a electronics supply store every day. They order in advance, and they order in bulk. The parts in the machine you bought today were manufactured six months ago when the price was much higher. That is ignoring the fact that Sony obviously stockpiled components early on seeing as they felt demand would be stiff.

Even if you ignore my logic up till this point. Sony has yet to sell through all the machines they produced up until the end of April. So they are still taking the initial losses and they compounded them with price cuts. I think I shared this with you before, but for some reason you ignore it every time. There is no way Sony has made a dime off of the PS3.

Your blaming continuing losses on advertising. Congratulations you just blew my mind. I am going to have to clean the walls now. You can't be serious. What exactly do you think Sony is going to be spending on this godly add campaign. Wait don't tell me a subliminal mind control beam bounced off the stratosphere. I can feel it the implant in my head is vibrating.

Please for the love of all things gaming read the financial expectations of Sony themselves. Then realize that is their entire gaming division. Then realize that the PS2 is profitable, and I don't know. Can anything get through to you.

@dodece, you did not get your gold plated 25 inch bravi with sony ps3 built in demo it self destructs after 3 hours of use, but playing the finished versions of GTAIV, GT5, MGS4 ... I broke down and cried at the awsomeness.... until it imploded killing my cat while forming a quantum sigularity

Ummm... casual means (by definition) APPEALS TO EVERYONE. And yes - 'building', and online community IS casual (I think you just described Facebook!).

'PS3 haters' - <snigger> 

...

Do you disagree that LBP will be a litmus test for PS3 owners? I don't see any certainty that GT fans or MGS fans will also be LBP fans? And how many casual gamers own a PS3??

(And who is the Rolf guy again?)

Good point - but they are "reasonably" big. Both are 1st-party, both are significant releases - both have had a lot of promotion (dare I say hype?)?

I'm sure if LAIR would have been a better title, it would be much closer to being considered a "big title in Japan" - its very much the sort of game that does well in Japan. Just a new IP.

...

It is too early to judge EoJ though - we'll only know its real success (or failure) after a few months. 

Eye of Judgment is such a cool idea, I hope it does well.

Haven't you heard? Sony is giving free PS3 in 2010.

While I agree from the standpoint that the margins on those products alone will support it I think a price cut to any of their gaming division products is only going to stir up more angst with shareholders.

I really really hate the idea from a business standpoint, but as a consumer if they are planning another cut then I feel even more justified in the fact that I have been telling people to hold off for '08. And depending on the amount of the cut they are definitely getting down within my range. But then again that might not matter if they don't bring back full BC...which I expect still btw. I am pretty sure the 60GB discontinuation was a sales ploy...but I think a lot of people saw that.