A month ago, the CEO of Activision, Bobby Kotick, complained about the high cost of Sony’s PlayStation 3. Kotick’s threat to Sony, to lower the price of the PS3 or Activision stops making games for the console, is covered here.

Yesterday, in an investor call, Sony CEO Nobuyuki Oneda revealed that manufacturing costs of the PS3 are down by 70%.

Sony reported the company’s first annual loss in 14 years when it released its fiscal first quarter earnings yesterday. Further, the company is projecting over a $1 billion loss through March 2010. Sony may be blaming poor sales on the state of the economy, but people like Bobby Kotick would be sure to argue the price of the PS3 is to blame.

Why does Sony’s PS3 cost so much?

The cost of manufacturing each console is roughly $800. The price to buy a PS3? $399. While it may be the highest priced console against its competitors, Microsoft’s Xbox and the Nintendo Wii, Sony is taking a hit for every PS3 sold.

Sony saw some relief in January when it announced that the cost of manufacturing had dropped by 35% to $450. Though a 70% drop in cost seems to be just what the company needs, which would allow, as rumored, Sony to drop the price of the PS3. But will Sony really want to eat into its new profits, especially after a first quarter in the red and a poor outlook for the rest of the fiscal year?

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This may come as a surprise, but for the past 5 weeks straight the PS3 has been outselling the Wii…in Japan!  Nintendo sales are hurting in Japan, despite the fact they continue to boom here at home. Apparently Nintendo is not putting out the software needed to keep its fans faithful.

A Nintendo spokesperson has said “We hope to line up strong software to support hardware sales in the second half of the year.”   The boost in PS3 sales have been attributed to the quality titles they have been releasing, something Nintendo is not doing.

” It is still the first few months of the year when sales are slow for the industry, so we are not particularly concerned.”  From what I have been hearing they should be! Some economists are saying Nintendo’s stock will soon drop and now is the time to sell.

I think that it all comes down to putting out quality games, and Sony has done an excellent job of that.  Last year, we had Metal Gear Solid 4, Little Big Planet, Resistance 2, just to name a few titles.  I honestly can’t remember the last time Nintendo put out a title I was even remotely interested in (aside from Resident Evil 4), and I am not being biased - just realistic. Unless Nintendo starts releasing some innovative games, I foresee this trend continuing.

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It’s no surprise that the PS3 has not been doing to well in terms of sales. There are a number of factors working against Sony’s console, one of them is its bulky size. When matched against a console like the Wii that is compact and easy to move, it doesn’t stand a chance. Another factor is its price. With the sagging sales we can’t help but wonder when Sony will be making a price cut.

OK so you have heard all this before and you are wondering where this is going! Well…according to some new marketing stats from EEDAR, it appears we can expect a sales rebound for the PS3 next year. With the help of a price cut, EEDAR believes PS3 could seriously bounce back. As of now we have heard no official statement from Sony on this, but maybe with this news we will.

I think bottom line it comes down to the games. We have seen good games sell consoles before, this was certainly the case with Resident Evil 4 and the Gamecube. Sony has a good line up of games ahead, and cutting the price now could mean a pretty nice sales boost.

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