Following the news of a price drop on the low-end PlayStation 3 in Japan, speculation ran rampant about Sony perhaps lowering the price here in North America as well. Sony, however, appears quite comfortable with the $499 and $599 offerings in the U.S. and has already denied that any price drop is coming. Dave Karraker, SCEA's Sr. Director, Corporate Communications, told GameDaily BIZ, "The price cut in Japan is not a prelude to similar actions in the U.S."

That said, a price drop could be coming sooner than we'd think. We spoke with John Taylor, an analyst at Arcadia Research who said, "There's no reason to cut price for the first wave or two of product. If there is going to be a price drop, I'd bet on springtime, not launch."

Taylor also gave us some insight into why Sony may have decided to cut the PS3 price in Japan before the system even launches. "Sony has gotten used to huge market share advantages in North America, Europe and Japan. They are making the assumption that their brand is strong enough in Europe (~75% share of CG installed base at CYE 05) to let the other guys get a beach head. They are focusing quantity in NA in an effort to keep consumers from making up their minds to buy a 360. In Japan, their primary competition is Nintendo, and the price differential is TOO big. Maybe that's what's on their minds," he said. "Moreover, online play as a differentiator is less important in Japan because MS has not successfully made it a competitive advantage. So, what does Sony compete against? A low price Wii for older TV sets, and, with HDMI, a bid for newer sets..."

Michael Pachter of Wedbush Morgan Securities believes a PS3 price drop in the U.S. is coming "eventually," but he didn't venture to guess a timeframe other than "next year." With regards to the situation in Japan, though, Pachter seemed to agree that the major factor for Sony in Japan was the price differential with the competition.

"The yen price is around 49,999 for the lower priced PS3 and 39,999 for the Xbox 360. So correlate that; let's just truncate those numbers to 499 vs. 399, and that's what it is here... So Sony was out of whack with their pricing because they weren't 10,000 yen higher. And I'm not trying to suggest that 10,000 yen is exactly $100, but the point is... Sony for whatever reason had priced at a greater premium in Japan than they did in the U.S. and Europe. So all they're doing is getting it in line with the U.S. offering," Pachter told GameDaily BIZ. "And my guess is that this means they're going to keep the gap at no more than 100 bucks. So should Microsoft cut the price of the 360 in the future, which I think is a strong likelihood next year, Sony will cut the price of the PS3."

For Pachter, however, the critical news coming out of the Tokyo Game Show wasn't the price drop so much as it was the inclusion of HDMI in the low-end PS3. "This now tells me that I can get Blu-ray and I can play the output on my 1080p TV with the lower priced box. So it makes the higher priced [$600] box even less attractive, because you've got to really like wi-fi and lots of disk storage to pay an extra 100 bucks for that... It seems to me that maybe they're acknowledging that they shouldn't have pushed the higher priced box, and they're going to push the lower priced box," Pachter said.

"And initially, I know their production plan is 80% higher priced PS3s, but frankly what I think you're going to see from consumers is people will pay the $600 for the first few hundred thousand boxes—they'll lap 'em up in an hour—and then they're going to all complain that GameStop 'gouged' them. And GameStop is going to say, 'It wasn't us. That's what Sony gave us.' And Sony's going to get a lot of negative press from consumers who feel they got gouged... and then they'll get 'religion' and make a lot of cheaper boxes," he added.

Pachter also shared with us some interesting comments from SCEA President Kaz Hirai: "In so many words, Kaz Hirai said to me, 'Resistance: Fall of Man is 20 gigs. We think that when developers start recognizing the potential for this box and start building these kinds of files, they're going to do it first for PS3 and then dumb it down for the 360, and you're going to see the difference between PS3 games and 360 games.' And if he's right, then Microsoft's got a problem."