The only problem with that is, absolutely nothing stops somy from also making a slim and releasing it for $250. Or even $199 if they really wanted to and leave the PS4k at $350/$399 as the premium option.
There is nothing MS can do. And all this will get a lot worse. The truth is their one saving grace so far is that sony is settlimg on making as much as possible from each individual PS4 sale so they haven't gone aggressive and slashed prices. Just imagine what happens if sony makes a super cheap PS4 option priced at $199.
I really do think a $250 slimline model will work. Past price reductions have worked, at least on the short term. The last one didn't do nearly as much, as April was still down YoY, but the March-to-April decline was smaller than the ones for the PS4 and Wii U, so at least the temporary price cut did slow down the bleeding. Plus it was April. The XBO may simply be at about peak potential at $300 and/or with the current model. The OXbox and 360 had similar problems with poor sales growth. The OXbox's second price cut didn't do much of anything, and it took three price cuts before it really hit its stride, and the 360 didn't really experience any significant growth until the 360S was released, with prior price cuts giving boosts of several months that ran out of steam and sale dropping back to previous baselines:
Also, the idea that the XBO is a lost cause "because PS4 domination" or whatever is a claim without basis in reality. The PS2 was unquestionably more dominant than the PS4 is, yet two of the three price cuts to the Xbox had a significant effect on sales. This generation is much closer than the sixth, and while the PS4 has had a commanding lead since it was reduced to $350, there is no reason to assume that the XBO cannot follow in the footsteps of its predecessors and end up a late bloomer. Shrink it down, give it an attractive price (no more than $300, preferably $250), and it should start to move more systems. And FWIW, compared to previous Xbox systems, the XBO isn't doing horribly, though last month was definitely a very bad month: