Why PS3's price makes sense... (At least for the first 5-6 months.)

There’s been a great deal of crying and screaming about PS3’s rather steep price. To me, though, it makes perfect business sense given the trends over the last several console cycles. It’s a very supply and demand thing to do. With the PS2 and Xbox360 both, people bought them and then resold them for $800+ on Ebay. The supply was very tight, so only those who predicted the release in advance and reserved their system as much as 6 months ahead of time actually were able to purchase one at the list price. The real losers in this were Sony and Microsoft. The systems were going for double or triple list price and the two companies were selling it at a loss.

Sony is now just cashing in on the supply and demand by releasing this console for the first time period at a slightly inflated price. Whether this will backfire or not remains to be seen, but as a free market move it’s logical. The demand will likely be there for a limited number of consoles, (perhaps as many as the 5 million sony wants to sell by next june,) just like it was there to make the PS2 worth $1000 to some people. After the demand tapers off they can drop the price to a more reasonable 300-400 or 350-450. Hopefully by then they’ll have both major chips fully tested at 65nm and can drop the price accordingly without sacrificing their bottom line. (The initial console is a bit of a rushed thing given that they left the cell chip at 90nm where it’s considered a rather large chip.)