Last week Sony announced that the lowest price Blu-ray players won’t fall much below US$399 for the holidays while Toshiba is promoting $200 HD DVD players in a last ditch effort to achieve better market share for their players and movie titles. Sony’s move is smarter.

The Sony move is smart because, as Phillip Swann pointed out on Monday, Sony believes that they’ll sell more PS3’s at Christmas that all the HD disc players combined. The result will be that Toshiba’s Christmas firesale won’t gain player market share, but it will lose a lot of money for Toshiba, especially with some retailers reducing the HD-A2 prices even lower.

In addition, Sony has learned a thing or two about branding and customer appreciation of quality electronics from Apple. Reducing the prices of the Blu-ray players, which currently enjoy a nearly 2:1 ratio on movie title sales, will anger current, loyal customers.

Finally, Toshiba fought hard to get out of the trap of having salesmen refer to the HD DVD format as inferior because only the first generation systems output 1080i instead of 1080p. Now, Toshiba is in danger of reigniting that thought morsel in the minds of thousands of Best Buy salesmen. They’ll gladly point out that the superiority of the Blu-ray players costing much more. And take a bigger profit.

It appears to me that Toshiba’s desperate gamble to surge market share for their players and obtain a better ratio of movie sales next year is going to flop. Sony’s resistance to the idea of further price reduction has insight while Toshiba continues to throw Hail Marys into triple coverage.