PS3 still profitable after price cut

Quite possibly the biggest news out of Gamescom yesterday was Sony's abrupt announcement of a global PS3 price drop. The cheapest model is now $249, a $50 drop from $299. The system, which originally launched at $599 nearly five years ago, was a notorious loss-leader for the Japanese hardware manufacturer. Can the Blu-ray-playing, Cell-equipped console really be sold at that price without incurring a loss? The answer is "yes."

"It is still profitable," SCEA's John Koller said. "We're not going into the red."

"We've had this price drop in mind for over a year," Koller told IGN. Since then, Nintendo has been losing traction with the Wii, while Microsoft has been nearly unstoppable due to the popularity of its Kinect peripheral. Koller says that the price drop will encourage many to look at PS3 as a potential "second system."

"There's a significant number of Xbox 360 and Wii owners who would like that second console and want to have the opportunity to play these exclusive games and content experiences, and this new price point allows them to do that," Koller said. "There's a real opportunity for those consumers to be able to play, what we view, are the best games in the industry on the PS3 this fall.