I think Microsoft is in a fairly good position to produce a price cut this year being that they will see further manufacturing cost reductions and las year they wrote off all expenses surrounding the Red-Ring Recall. Now the question is "Will they cut the price of the XBox 360?"
Part of me things Microsoft won't reduce the price and would favour increased functionality instead. It is possible that Microsoft would favour the release of a new SKU at the same price rather than lower the price of the XBox 360; depending on how insane Microsoft is, they could (potentially) even release a system with improved performance in order to run XBox 360 games at a full 60fps@1080p for $500 (this is less likely than a larger hard-drive, wireless internet or even a blu-ray drive). This type of strategy would be focused on maximizing sales to "Hard-Core" gamers, but would come at the expense of a lot of frustrated current owners ...
