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I think it's because a lot of the hardware sales from last fall's price drop went to a "soft" audience.  The Arcade model became so cheap that you sort of just shrugged and said "might as well".  A lot of people picked it up to get in on Halo, Gears and maybe Fable but couldn't be counted on to continue buying games as if it were their main console.  I imagine the attach rate dropped a lot specifically because of the price drop because Microsoft used to discuss their high attach rate all the time; these days not so much.