The PS3 price-drop dilemma

I keep hearing rumors and reports that suggest that pretty soon Sony will cut the price of the PS3.  But cutting the price comes at a risk.

I have no doubt the PS3 is currently overpriced and I know that Sony is begging everyone to see it as more than a games console. But that doesn't change the fact that in the end it is still a games console – and an expensive games console at that.  Even if we did see it as an all-encompassing home The problem with cutting the price, especially so soon after release, is that Sony risks both devaluing the consoleentertainment system, it would then still be an expensive home entertainment system.  This is exactly the kind of problem that companies run into when trying to tweak a brand.  The PlayStation brand was always seen as a games console, but with the PS3 Sony has attempted to redefine the brand as an entertainment system. Thus far that gamble hasn't paid off.

So, Sony is left with a dilemma.  Stick with the current price and hope they can somehow distort reality and boost sales, or cut the price in an attempt make consumers more enthusiastic.  The problem with cutting the price, especially so soon after release, is that Sony risks both devaluing the console and at the same time angering those early adopters who paid a hefty price for being the first on their block to own one.  Sure, dropping the price of the PS3 by $100-150 would stimulate sales, but then Sony's got to find a way to make that cash back.

An alternative to dropping the price would be for Sony to sweeten the deal for consumers a little by throwing a voucher for a couple of games into the bundle.  This wouldn't be anywhere near as effective as a price drop but it might mean that Sony could hold out until next year without having to cut prices.

Either way, Sony will have to lose a lot more cash on the PS3 to see it gain any traction.

I'm pretty sure that Microsoft's Xbox 360 is also headed for a price cut too now that sales are starting to plateau.  Microsoft could choose to cut the price before Christmas (around Thanksgiving) and be guaranteed of strong sales over the Holidays or take a gamble that new games released this Fall (such as Halo 3) will boost sales enough to carry it into 2008.

[Updated: June 21, 2007 @ 9.50 am]  It seems that Sony's realized that more games are needed for the PS3.

Thoughts?