This price point for the arcade model will certainly help, $199 is the sweet spot. However Microsoft created on inferior Xbox 360 in the minds of gamers. They did the opposite with the Xbox 360 Elite. Although the cheapest Xbox 360 will soon reach $199, I believe that Microsoft still need to reach their sweet spot. I'm referring to the Xbox 360 Premium. When this version reaches $199.
I also think Microsoft will drop out their Arcade model, before the end of 2010. Because they price difference will be too small between their models. Eventually the arcade model will become irrelevant.
This price drop will only slowdown Sony and won't effect Nintendo that much. Sony needs to drop $50 within 6 months. The gap won't be different after these 6 months. Nintendo won't drop for at least 12 months. There might not be a price drop beyond 12 months, but simply add in motion plus to the bundle.
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