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 The announcement of the PS3 price point started almost a turmoil in the community. Some people almost see Sony going out of business by people boycotting the PS3. Funny, how everybody forgets about product launches in the past. Let's look at the facts and Sonys current position in order to be able to better understand their decision. Let's make one thing clear here before I continue: i rather would like to pay less for the PS3!
Sonys current Market PositionLooking at where Sony stands today you'll notice that in contrary to their competitors Sony is still selling hugh amounts of their current console generation, the PS2. Being still the market leader in total (forget about the portable consoles for a moment) is able to approach the next gen market from two ends. With the still strong PS2 sales at the lower end still statisfice price sensible customers. As the PS2 is not going to die as the old Xbox and the Gamecube, this is going to persist for at least 2-3 more years. At the other end Sony is pampering early adopters and high tech geeks with the PS3. Learn from the PastAs with any other console generation the strategy looks like this: starting with a high priced product at first price points are moving slowly into mass market regions. Here in Europe the PS2 started in 2000 at €450. Over the years until today the price has been adjusted to €179, constantly extending the customer base. The same will happen with the PS3. As early adopters are eager to get the gadget into their hands they are willing to pay almost any price. By the end of 2007 Sony is most probably going to lower the price substantially as new customer groups need to be addressed. That's in line with the availability of the device. As Sony can not produce almost instantly hugh amounts of the PS3 at start the price is kind of prohibitive for most customers, which makes sure that the initial 6 million units will work. NextGen has its PriceOne can argue that the PS3 has way to much features for a game console. Wait a second. You were asking for next generation. If you just wanna stick to gameplay use your PS2 instead. As next generation is clearly about HD, Media, etc. it is more than obvious that new technologies have to be instegrated into the PS3. Or what would you say if Sony will bring out a new console in 2-3 years as the PS3 would not be sufficent from a hardware point of view to further satisfy the demands of developers. The PS3 is going to be produced at least 6-7 years and needs therefor to support features that might really come into the picture during the next couple of years. Let's take the famous Blu-ray debate on the net. People are argueing that they don't need a BD player and don't wanna spend the money. That's schizophrenic. At one side they want next gen at the other they don't wanna pay for it. As larger media sizes are required for future games (more assets, higher resolution) it would be ridicolous to just equip the PS3 with a DVD drive that is limited in this concern. Even by today the PS2 uses dual-layer DVDs in some cases. The same is true for HD video. In order to support the future standard of any household it should be standard now and not in 6-7 years. 
PS3 Component Cost Breakdown w/o HDD
As Sony is putting all this next gen equippment into the PS3 it obviously becomes expensive at least in the beginning. Sony ist most probably losing about $400 with every console at the day of lauch, which will eventually go down after production will be improved and devices will be higher integrated. Is Sony ever going to make money on the hardware? Most probably yes, but not during the first 2 years. You are paying for the Games, not the HardwareI getting a bit tired of all the BS written on the PS3 pricing in these days. People want next gen but are not willing to pay the price for it. Again, stick to the PS2 or get a Wii in this case. But you don't have next gen then. Anyhow, looking at this from another point of view, the hardware price really doesn't matter. As customers are really paying for those consoles when it comes to games, the hardware is just the entry ticket for all of this. With games being available for about €60 what are those €100-200 anyhow? You know the business model of razor blades ;-) If you are really interested to ride on the next gen wave, the PS3 is the gadget you need, the most powerful, supported, compatible and future-proofed device out there. Its your decision, so don't complain. Update: Finally, at least some commenters are stepping back a little from the "It's too f#@king expensive" stereotype ;-)
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