Wow - according to a Merrill Lynch analysis, the PS3 is going to be very expensive - possibly double the cost of the XBox 360 (which is going for $299 or $399):

According to Merrill Lynch, a financial management and advisory company, because of the cost of hardware componets, the PS3 may cost twice as much as the Xbox 360 by the end of 2006. The report includes an estimated breakdown of hardware costs by component and shipping predictions. Manufacturing costs has been the main factor. Here are some quotes from the report.

"…The PS3 will not only be significantly more costly than Xbox 360 at launch, but will continue to operate at a cost disadvantage for several years. … We think that the Xbox 360 could be selling at half the price of PS3 in the latter half of 2006."

So - not only are they giving Microsoft a year to itself in this space - they are going to have a serious price disadvantage as well. That's going to be a rather large problem, I think.

Looking at the current game systems, the GameCube retails at $99. For a large segment of the target audience, that qualifies as an impulse purchase (psychologically, getting under $100 does that, I think). The PS2 and the XBox are both at $150, which is up - but not that far up. Sony has had the advantage over MS for awhile, having hit the space before them, and having a larger batch of games.

The new XBox 360 price is too high to be a pure impulse play, but it's within the "we'll just get one big present" area for Christmas. Double that price though, and you are past the price of entry level PC's, for gosh sakes - and into serious "can we afford it" discussions between spouses. If Merrill Lynch is right, Sony is going to have to sell at a huge loss just to get in the game.