I believe Microsoft will use the opportunity of the firmware update to also update the Xbox 360 SKUs during a quiet time of the year. They will likely leave the Arcade SKU as is and restrict the changes to the Premium and Elite SKUs which are produced on the CSON production line, whereas the Arcades are all produced on the FDOU production line. With the Jasper revision they also made changes to the south-bridge of the console IIRC, and I believe they did this with an eye to a future revision which includes wireless.

Why wireless is becoming an even more likely addition to the Xbox 360 console:

1. SKU Differentiation.

When Microsoft reduced the price of the Xbox 360 Arcade they successfully broached a new market segment. Unfortunately they also influenced Xbox 360 purchasers to buy the cheaper and lossier Arcade SKUs over the Premium and Elite versions. By adding wireless they can add value to the higher priced SKUs, more profitable SKUs. It also lets them reduce the cost of the HDD addons as they will no longer be the only differences between the SKUs.

2. Competition.

Some of Microsofts best customers are the ones which require internet access for their consoles. If someone requires internet access they are likely purchasers of Live Gold and other online content for their console. As wireless penetration in the world increases, so does the need for wireless in a console and by not having it, they risk losing some of their best customers to Sony and the PS3. I know the wireless dongle doesn't sell very well so either the customers don't want it or more likely they are self-selecting and choosing a PS3 instead.

3. Content delivery.

They gotta be able to go online for you to sell it! Microsoft has noted a massive increase in the demand for online content since the NXE, if a customer cannot go online they cannot purchase goods and services so this is an immediately wasted source of revenue. If they want good Primetime adoption they will need a way to ensure that 100% of their potential customers can find their way online that is simple and idiot proof.

4. Features + Connectivity = Opportunity.

Connect it to the world! Microsoft already has Sync in Ford cars, so there are opportunities to link them so they can sell content and services for both synergistically. They can also implement other features of Live such as the ability for two consoles to system link and play together or go online together in a party, so they can sell more consoles and Live subcriptions to households who already have an Xbox 360.

Why increasing the HDD space is becoming more likely as well.

1. SKU differentiation.

Theres no rule which states that the Arcade SKU + 60GB starter kit must have identical HDD space to the Premium SKU. Again, like the wireless its just one way for them to increase demand and therefore revenue for the more expensive SKUs. When all is said and done the Arcade + 60GB starter pack will likely give them $30 less revenue than the Premium SKU once everything is considered. The real important SKU here is the Elite which traditionally had significantly more HDD space than the Premium, so therefore I expect them to raise the HDD space on the Premium up to 120GB and the Elite to 320GB which probably won't cost them all that much if anything at all. It also lets them discontinue their 120GB HDD pack so current Elite and Premium 60GB owners have an opportunity to upgrade to something much larger.

2. Competition.

Ladies and gentlemen, there are people who look at the side of the box and buy the console with the biggest numbers. It may shock you but when I sold computers I saw people doing just that. So its good for them to have the biggest HDDs between them and the PS3. Sadly, this is more important now especially as they start moving into the more "ignorant" consumer categories.

3. Content Delivery.

If they want to sell more stuff online, people have to be able to store it. Once someone fills up their drive the quantity of content they purchase falls sharply as well. Between the increased movie downloading, installs and new Xbox original or even Xbox 360 games they will need to increase the space available on their HDDs so they can sell more stuff to people. Its like a supermarket trolley, once its full people tend to just check out instead of purchasing more items.

Summary

Microsoft backed themselves into a corner on the HDD accessory and space issue because they used it as their main way to differentiate the different HDD SKUs. They cannot price their HDDs any lower or increase the space without it messing up their SKU system. A change is in order and this seems the best way to implement it. The Q2 Update is the perfect time to implement such a revision because its directly important to their Primetime push and a firmware update lets them take advantage of any features they may implement. This is much more practical than an end of year revision as they do not have to cycle the much higher stock levels in Q3/Q4 at a lower price nor will they lose as many sales due to stocking issues. Lastly the wireless issue is creeping up on them, every year more homes adopt wireless or will adopt wireless technology for internet as laptops and netbooks replace more conventional wired desktop computers.

Nice post, makes sense. I'm not as confident as you are. I think MS will probably just continue to bundle and make other price cut in September. Because it's the safest course of action.

They need to urgently reduce the price of addons though. There doesnt need to be a $100 gap between there SKUs. $199, $275, $349 is where I think their prices should be.

God, I can just imagine Sony's comparison chart next year...

Wireless: "Not available in earlier models."

Good read. There's some sound reasoning there. They should definitely be able to make up the losses of revenue on those highly priced accessories with added subcription fees and content downloads - so yeah I'm all for it. They should chuck in some MS points while they're at it.

Why would they add wireless for free when they sell those things for $100?
And the non-casuals who buy non-Arcade 360s are the most likely to pay $100 for wireless.

But even though it's making them money, I think the neXtbox console will have wireless.
And I can only imagine the hard drive size of the top Xbox3 model... 600 GB? 1 TB?

I think your thread is well written and an interesting perspective. With the (Rumored) PS3 price cut, integrating wireless into new 360's is a great counter. It will be interesting to see what all sides have up there sleeves this year.

I thought you disliked WLAN and thought it didn't work all that well? Do I just have a bad memory or why are you speaking about its importance now?

Anyway, what you said probably makes sense.

It would only make sense for them to include wireless if they could do it much cheaper than the stand alone adapter. They should sell the wireless adapter at cost or below cost anyhow. More people connected to xbox live = more things to brag about (17 million!!!!), more gold subs, more xbla games sold, more movies downloaded, more DLC sold.

It doesn't make any sense why they are milking people on a device that they use to spend more money.

If their cost to include wireless is $10, versus $25 for the stand alone, then it does make sense for them to include it inside the b0x;

The lack of current wireless I'm sure is only a concern of 10% or less of potential buyers.  Only 50% connect to live, and I'm sure only 1/5 of them have a clue about tech.

Constantly upgrading the hdd space and flash memory makes sense.  It's a bigger number, but also it doesn't cost that much.  A 60gb doesn't cost much more now than a 20gb.  The practical truth is that a 120gb is more than enough space for anyone, but that doesn't mean they won't still put out a bigger one.

I really don't see integrating wireless capabilities as a value added feature. It will increase costs for no reason. Or maybe I just underestimate its value/appeal, but as a customer it's not something I am looking for or want.

I like Microsoft's current approach...adding value rich features through software updates. Also, hopefully with increased 1) reduction in hardware components, 2) efficiency and reliability in hardware components we will see a slim model within a year.

I do wish Microsoft would allow more flexibility with external hard drives. That would be nice.

Yeah, the X360 should become the king of HDD space again because the original Xbox introduced HDDs for consoles, the X360 is the king of DLC and Xbox Live is the best and biggest online service for consoles and makes a lot of money for MS.

And in the long run wireless would be nice. In 2010 when my 3-year guarantee runs out I'd like to be able to buy a X360 Slim 120Gb with wireless.

wireless is still a very bad idea. it should be an option at best. its an unnecessary price burden that dose not provide significant upgrades, and in most cases performance is worse vs wired.

wifi is not idiot proof its harder then wired to implement.

now if your talking cell wireless the networks cant handle it in its biggest market so why do that? most of the states have such a fragmented availability of different networks as to make the additional cost outrageous for number of users who could use it


wireless=impractical, costly, too complicated .... maybe next gen if next gen is 2012 or latter

if anything all skus will have a hard drive, and larger hard drives, mainly due to the profit made from movies, netflix, music, content, game addons.