The first estimations of PS3's price and production costs have now surfaced, putting the expected US retail price at $399 and the manufacturing cost at a whopping $494 per console. Ouch.

PS3 will cost 54,000 yen ($494 approx) to produce as of Spring 2006, pricing individual components such as the Cell chip and the Blu-Ray disc drive at 11,000 yen ($101) apiece, according to predictions by financial management firm Merrill Lynch Japan Securities.

Given Xbox 360's widely expected $299 price tag, Merrill Lynch Japan predicts that Sony will try to sell its PS3 at $399 in the US, which will cause the company to lose almost $100 per machine.

Microsoft on the other hand is predicted to lose around $75 per Xbox 360 sold, with the machine thought to cost approximately $375 to make.

This puts Microsoft in a very good position. It has a console of comparable ability to PS3 launching first and with a cheaper price tag, with further potential to drop the console's price to coincide with PS3's (and Halo 3's, let's not forget) launch.

This is potentially a very damaging situation for Sony who, according to yet more startling words of wonder from figurehead Ken Kutaragi, expects customers to "work more hours" to afford this luxurious piece of equipment.

Kutaragi suggested that Sony may not even want to mark the console down as much as is being predicted. "Whether consumers think a product is expensive or cheap all depends on the balance between its appeal and price," he commented to Japanese publication Toyo Keizai.

"Our ideal [situation] is for consumers to think to themselves, 'OK, I'll work more hours and buy it,'" Kutaragi optimistically hypothesises. "We want people to feel that they want it, no matter what."

While many of you may think Kutaragi is being overly hopeful, he has more stunning logic to back up his claims.

"When Nintendo was selling its 16-bit machine at around 12,500 yen ($115), we sold the first PlayStation at 39,800 yen ($365)," he said. "The press was saying that it was expensive, but it was a huge hit."

However, some would be quick to point out that defeating ageing hardware at a higher price is a tad easier than beating a comparable console... especially when that console launches earlier, at a cheaper price and can do pretty much everything yours can.