Sony could try an "apple" and position the PS4 as a premium device that shouldn't even be compared to those plebeian offerings from the "other guys". People don't even think twice about paying $699 for an iPad, and apple sells many millions a quarter. If they pull that off, then it could neutralize a lower priced Microsoft offering.
But they will have to demonstrate the "premium" value. That can be done either through games (visuals, ip, genre, etc) or through services and pricing. Truth is, I am still unsure what 8gb gddr5 vs 8gb ddr3+32mb eSRAM, and 1.4 tflops (going by the rumors) vs 1.9 tlfops would mean in terms of visual impact. EDGE, who first stated Sony's intention to match MS's 8gb RAM, also stated that the ps4 was "slighty more powerful" and that we will see another ps360 situation. If it does mean anything, it definitely won't be showing up immediately. I would argue that MS, despite the difference in spec, will be able to show amazing looking games when they unveil the Xbox. Most third party developers that were in ps4's unveil will be there and then some. Epic, Activision, Square, Capcom, Ubisoft, etc will all be there, along with the likes of EA, and co. The durango, if going by the rumored specs, is close enough to the ps4 that it will always get games that "look and feel" the same on the ps4, even if on closer inspection, you might spot one or two differences.
So, we are left with services and price. Watching the ps4 unveil yesterday, one thing that struck me was how most of the services it is going to offer are the same as some rumored services that the durango is going to offer. Sure we don't for sure what services it will have until its announced but the whole "reserving one or two cores and around 3gb" means it is going to pack quite a number of features and services. I am speculating here, but I think part of the reason Sony bumped up their RAM is so that they can be able to accommodate their plans for features and services. Enough that, should MS announce a particularly interesting service they too will be able to implement it.
So, price. From what I can understand 8gb gddr 5 RAM is really expensive and its either absolved by Sony in the console's price or they sell at loss. Its also possible that kinect is also very expensive from a BoM point of view but you can already see similarities in feature set between the PSEye and the kinect; both have 4 mics, one has 2 rgb cameras, the other has an rgb camera and a depth camera, and so one an do forth. So its looking like MS might have the advantage in pricing flexibility.
Ofcourse, even with all this MS themselves might decide that their own product is "premium" quality but at least they have quite the flexibility in pricing as compared to Sony.
