PS3 for Me? Not this Christmas...

Implications: The Xbox 360 has a bunch of people playing games only available on their platform.  So until PS3 has a game or two that I really have to have, I wouldn't buy one even to have as a "cheap" Blu Ray player.

Analysis: It's all about the games.  Xbox 360 has exclusives, especially the $300 million Halo 3 product.  Ironically, the game isn't all that much different than Halo 2, but it's a juggernaut none the less.  But other exclusive, innovative titles like BioShock are keeping the Xbox 360 ahead of the PS3 in terms of giving gamers a reason to buy.  Games move consoles, which is why the PS2 has such a huge installed user base.  Why upgrade to PS3 for $400 or more when tons of games are still being made for PS2, and it's priced under $150?  And that, in a nutshell, explains why more PS2s have been sold each month than Xbox 360s or PS3s - until the release of Halo 3.

Instead of dropping the price point, Xbox is giving more value in the form of games - Arcade (Uno, Pac Man) or the Forza "bundle" - which means they keep the revenue coming in flat vs a price drop for hardware.  Not a bad move, but still might not be enough to move significant volume of units.  They just hit 12 million in sales (not shipments) and have a long way to go before it's a mass-scale device in the living room.  At some point, Xbox 360 will have to drop in price - and a big drop to boot - before it starts replacing PS2 sales - and pre-empting PS3.

So in a nutshell, Playstation's price has little impact on Xbox 360 sales this holiday season.  When Metal Gear Solid 4 comes out and is exclusive to PS3, it could be the first real competition for Xbox 360 console sales.  Until then, Xbox has little to worry about - except the hardware warranty.