Is it Time for Sony to Drop the PS3's Price?

— -- At up to $470 fully loaded, Sony's PS3 doesn't come cheap, so I'm going to have to agree with EEDAR analyst Jesse Divinich when he suggests the PS3 is getting clobbered by Microsoft's recent Xbox 360 price cuts. The PS3 costs around $400 in its base configuration, ascending to upwards of $470 if you tack on an HDMI cable ($20) and Bluetooth headset ($50). The Xbox 360 tends to be slightly to significantly more expensive if you load up its three configurations with most of the PS3's bells and whistles, but its base pricing still seems lower when you scan sticker to sticker.

We tend to think in terms of those stickers, not "total cost of ownership," so cheaply priced, modular technology fares historically better than "one-size-fits-all," even if buying up all the individual widgets costs more in the long run. If the Xbox 360 Arcade is $200 and the PlayStation 3 is $400, those of us without a flag in either camp tend to see "fifty percent cheaper" and rationalize our expenditures in terms of money on the table, otherwise known as "How much do I minimally have to spend to play that ?"

Factor in a tumbling investment market, sprawling consumer debt (and nonexistent consumer savings), general mortgage gridlock, and what's going to win hearts and wallets this holiday season probably has more to do with Bottom Line than luxury tech-bling, namely stuff like Blu-ray and 50-inch LCD TVs and digital-download-swollen hard drives. Or if you're thinking more along the lines of "save money, stay home," then you're probably looking to build out your home tech spread in small pieces, one trend at a time.

Don't tell that to Sony. The company's made it pretty clear it plans to hold the line on pricing through 2008. When German magazine DIE WELT asked Sony CEO Howard Stringer Stringer if Sony would reduce the price of the PlayStation 3 before Christmas, Stringer replied: "I think not."

EEDAR's Divinich predicts September's 360 sales will be up 31 percent weekly, in stark contrast to a 7 percent weekly decline for the PS3. He believes Sony needs to seriously rethink its position on a holiday price cut, especially if September's PS3 sales reveal a monthly total of under 200,000 units, which he says "could be an indication that the Xbox 360 price cut played a bigger role hindering PS3 sales than we originally expected." I agree, and without qualifications.

What's Sony thinking? It's essentially got two games -- Resistance 2 and LittleBigPlanet -- in its holiday quiver: The former's a sequel to 2006's bestselling first-person shooter Resistance: Fall of Man, while the latter's an unproven but hugely anticipated casual-angled action-platformer with social networking and customization tools hypothetically genre-bending enough to launch millions of consoles.

But what about Xbox 360 exclusives like Fable 2 and Gears of War 2? Gears of War 2, no one's really arguing, is 2008's Halo 3. I think it'll be even bigger, personally, and I say that as someone with mixed sentiments toward the original (which, incidentally, has nearly twice Resistance's total worldwide unit sales). While I'm personally most excited about LittleBigPlanet, put me in a room and apply thumbscrews and I'd have to admit Microsoft has the edge here by a pretty wide margin.

(For a closer look at the above four games and 11 more, check out our 15 Coolest Games of Fall 2008 feature.)

Sony's argument: Hardware costs are brutal, and the company can probably hold its own -- if it places last, it'll be a strong last. That's a reasonable position, and maybe the cost-per-part bleeding doesn't justify sell-through gains if the PS3 dropped to $300 or even $350, but three years into the PS2's life cycle it was positively soaring, with sales of over 50 million units worldwide.

By comparison, the PS3 has only sold around 15.7 million units globally since it launched in November 2006. That's a 34 million deficit to shore up over the next 12 months, just to achieve intergenerational parity. Factor in the loss of exclusives like Devil May Cry 4 and Final Fantasy XIII (and who knows what else to come) and Sony's rolling a price-point boulder uphill, both ways.