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i personally believe that a majority of the current 360 slim buyers are people upgrading from the phat model.  that assumption stated, i don't think the arcade will have the huge numbers that we are seeing now because i believe upgraders are much more likely to be the type of consumer that wants the best model.  however, the arcade is a key part of the 360's success especially during the holidays.  without it MS would have a poor holiday, with it they'll most likely see a good holiday this year.