I had been expecting them to change the hard drive options this fall like last year. The cost to produce hard drives is relatively the same no matter the size. You pay for the platters, not how much data fits on it.
So in reality, the Pro/Elite cost identical to produce. And with the newest changes, they are removing the HDMI cable bundled with Elites. So essentially rebranding the Pro as the Elite isn't changing anything and is actually giving them higher profits by not including the HDMI cable. When the Pro originally launched back in 2005, it was selling for a slight loss, but in 2006 MS was already making ~$75 profit per machine sold (still at $400 retail cost). In late 2007 they lowered the cost by $50 to compete with the PS3 price-cut. Still profitable and got the Falcon revision to lower production costs. In late 2008 they finally dropped the prices down to $200/300/400 (just a $100 drop in 3 years) and released the Jasper revision which again lowered production costs. So surely if MS was making $75 profit back in 2006 on the $400 Pro/Premium, they are still making decent profits on the current $300 Pro and have room to cut the price even further.
The way I see it, they are setting things up for a $149 Arcade and $249 "Elite" this fall. They may even offer limited edition bundles with a 250GB hard drive like the PS3 did with the 160GB or offer larger HDD's as an upgrade.
If they keep the black color of the Elite and drop it to $249, it will sell like hot cakes in the US where EVERYONE knows the 360 is the dominant HD console and the Elite is the best 360 SKU. The Arcade at $149 would remain at half the price of the PS3 to maintain that ratio and still outsell it well over the holidays.
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