I'm torn on the idea of them dropping their prices. I can understand that they'd want the market penetration that the Wii has. But just because the hardware is cheaper doesn't mean it's selling more software, and isn't that where they make most of their profit? Who is winning in the software race? I would think that they should only drop the console prices when the software sales start to drop. And that might be a few months after the hardware sales slow down, no?

As an aside, I liked Cory Doctorow's idea in Little Brother that the next gen of Xboxes are given away for free and the price gouging happens for the games instead. But in his future, that method fails MS.

Let's face it, a game console has one function in the eyes of most customers, and that is to play games. How many times have you done anything but play games on any of your systems? Many of you may watch a few movies on your Xbox or Playstation, but even that I suspect is minimal. And face it, the Wii Opera browser and PS3 internet browser isn't anyone's browser of choice.

And because most people don't see any added value in these features, they can't see why they're being forced to pay for them. I do think both the Xbox 360 and PS3 need a price cut to be considered competitors in this generation of consoles. The Xbox 360 Arcade has similar features to the Wii, so it would only need to drop to $250. Microsoft then could drop the other two SKUs down $30 or really push ahead of Sony and drop the prices $50 for the higher models.

Sony needs to drop its price at least $100. But with everything Song removed from the PS3 since its launch date, Sony has removed most of the features that would have made it worth $400. Sony has dropped backwards compatibility, removed memory card slot, halved USB ports, and slashed storage space. Sony may have released the daulshock3 controller, but you'll have to spend another $55 after you buy the system. And to add rumble to older games you'll need to download patches to the now measly 40GB HDD. Not an efficient solution. Even if Sony drops the price $150, I don't see it getting the sales increase the Xbox 360 would. And there is no guarantee that Sony won't remove anything else to lower cost. The only thing left that Sony could possibly drop to lower cost is the hard drive, but that would kill sales when people find out that the PS3 would be a BYOHDD (bring your own hard disk drive).

To "catch" Nintendo, you would need more than a price cut, you will need games that appeal to the Wii audience. But third parties aren't going to take that risk because there is always the Wii market which is proven and less costly. So it would mean that is up to Sony and Microsoft to start that market. But neither is know for that kind of games. You will need then second-parties to do it. But is it worth? First the systems are not tailored for that kind of games and second the controller is a great barrier (you can always pack-in a controller but the price would go up) And we must remember that Microsoft tried it (Viva Piñata, Scene It) but it kind of backfired. Taking everything in perspective is too complicated. So it´s better to call it a day and focus in your actual audience (and Sony and Microsoft are doing a fine job in that)

There are just two things to ponder:

1- Why hasn't Nintendo lowered the Wii price? If not for making it more market friendly because they can do it without losing any money. Other years Nintendo (with a system lagging behind) always said that the first reason to make a price cut was because the cost of manufacturing systems always lowers as the time passes. Greedy, greedy Nintendo...

2- What would happen next generation? Nintendo may up the system specs to make third-parties happy so it will level the graphical capabilities of the systems. What would Microsoft or Sony do?

All these companies exist for the profit. If market share brings profit, they try to expand it. However, profit can come from other sources. It is believed Sony pushed the PlayStation 3 not to win the "console wars", but to win the "format wars".

Regarding Mr. Obregon's question about why Nintendo hasn't dropped their price, why would they? Their system is still selling as soon as stocked. Cutting the price would only increment demand, which is already not met. Let's remember that Nintendo is a pure video game company. If they fail in their measurement of the market, they are terribly hurt. Thankfully they discovered Pokemon, something that has allowed them to expand to several other markets, but since they are tightly related to video gaming, they are likely to suffer in a similar measure. They need to make as much money as possible while they can.

Regarding his second question, that is what happens when you disrupt the market. Will they launch even more powerful versions of their consoles? Will they go family-friendly? Will they wait until Nintendo makes its first move to decide? What will Nintendo do? Will they push technology hard or provide a relatively better powered machine, expanding what Wii can do? Apple is a good example: the iPods have been relatively unchanged in terms of what they can do, all they do is reduce its size to maximize power, and to increase storage. Not much else is needed (other than pumping 720p for HD output).

Interesting point that the Nintendo DS decreased its numbers. Indeed, let's remember that it got a price cut in America only. In Europe and Japan it is still selling at the original price (and in Japan's case, the Nintendo DS Lite price is $10 higher than the original Nintendo DS). With the huge total install base and in each territory, they don't really need to push more hardware. It has been demonstrated through list of best selling video games in every territory, too, that the PlayStation Portable has no power to push software. 50,000 units/week seems a good number at which to execute a price adjust, but I would think they will do what Sony did with the PlayStation 2: keep it at $129 until the new handheld (not revision, but instead the sequel to Nintendo DS), then drop it to $99.

Finally, about the drop prices: Microsoft won't lower their price unless Sony does. They have twice the install base of the PlayStation 3, and still move more software. So, the question is whether Sony will drop their price. Personally, I don't think so. Xbox 360 and PlayStation 3 have been at a stalemate for several months in a row. Sicne Sony is counting on their exclusives to drive hardware sales above Microsoft's ones, I don't think they won't change their mentality now.

"I liked Cory Doctorow's idea in Little Brother that the next gen of Xboxes are given away for free and the price gouging happens for the games instead."

That's a funny idea regarding the company that can't give you a wireless card with a $400 console, or even let you play games online without charging you extra.