What does a ps3 price cut mean for Sony?

Its basically confirmed. Look at any site, and you'll see that rumors of a ps3 price cut that are very strong. Like Cliffy B once said "Its a funny thing about rumors on the internet, once in a while, they're actually true".

What does this mean for Sony?

1. Profits - Things were really bright for Sony in the beginning of 2008 when they told Business Week that the production cost of one ps3 became about $400. At that time, that was about the price of the 40gb console. The 40gb console went for $400, and the 80gb went for $500. Sony finally started to reach the break even point. Although production costs became less, Sony expected to see profits being made in late 2009, if they continued the 40gb, and the 80gb. We've already seen a price drop, when the 80gb started to sell for $400. Now, another price drop, hopefully, to $300. Sony stated that they were more focused on making profits than increasing the install base. So with 2 price drops in a little over year, will Sony still be atleast breaking even?

2. Install Base - Everyone agrees that if Sony, or any other company for that matter, will have an increase in sales when they drop the price. How many people do you know that will buy a ps3 after they drop the price? More sales = a bigger install base. But in Sony's case, is that true? The PS3 is one of the best bluray players in the market, but lately, other manufacturers have been able to make bluray players that were much much cheaper than the ps3. Before that, not many people were interested in bluray players or ps3 as only bluray player because of their high price. Bluray is something that ps3 owners can gloat about, but is that the sole reason that you bought the ps3? A $300 price point is a price that will be on par with nice bluray players on the market today. Sure you can get cheaper ones, but those are the players that lack a lot of features. If there was a price drop, the ps3 would sell a lot more because it would attract people looking for bluray along with gamers.

3. Competition - Will a price drop be able to pull the ps3 out of third place? In my opinion, no, but it would greatly increase the sales. Nintendo is in a league of its own, at least in Sony's eyes it is. Their biggest competitor is Microsoft's Xbox 360. Does a price drop mean that the Xbox 360 will start selling less? Maybe(only time will tell)... Although the ps3 will still be $100 more expensive than the arcade, it will be at the same price as the 360 Pro, and $100 cheaper than the Elite. The truth is, if you compare the value of the Xbox 360 Pro, and the PS3 with a price drop, with what you get right out of the box with a non gamer perspective, the PS3 has a lot better bang for its buck.

Sony's price drop will definitely get more people to buy the console, and attract a lot of people looking for bluray players. but will it be enough to bring it out of third place?