I'm pretty sure the reason why MS didn't release both SKUs simultaneously is because they simply didn't have the capacity to ship enough hardware units without effectively chopping off a percentage from the number of 250GB SKUs being shipped. All inventory is more or less experiencing 100% sell through.

From a business standpoint, everyone knows that the margins are higher on a $299 250GB SKU than a $199 SKU with no HDD. Even if MS sells the HDD cartridges separately for over $100, it doesn't cost them anywhere near that to add them to consoles straight from the factory.

So for MS to ship the Arcade 360S initially, it would have meant shipping fewer 250GB SKUs (which have been selling out at $299) and lower overall profits/revenue.

That $199 option is still on the table for consumers, even if it's not the best value for those who will end up adding features later (Kinect, HDD), but MS really has no reason to drop the entry price further until sales rates stagnate. Even if they sold them at $149, you can't count on buyers to add Kinect or a 250GB HDD for another $150 to improve the margins.

Well I think it should. The Arcade represents better value at $199. Most of the value in the HDD is games on demand and game installs with some movie purchases. However with 4GB and the ability to use a USB thumb drive it should be enough for Arcade and more than enough for streaming media, especially as it too has Wifi.

512MB -> 4GB represents a far greater improvement than 60GB -> 250GB. The return on investment beyond the first few GB at the moment starts to drop off precipitously. There are two big camps, the big HDD people on the right who need the 250GB and the group on the left who just want a few GB. There are more people on the left than on the right given the fact that the majority of consoles in this generation sold had less than 1GB of space. PS2, Wii, Xbox 360 Arcade.

Whilst I think the boost in the short term will be smaller, in the longer term the Arcade is more important this Christmas than the 250GB by a considerable margin.

I think it will be a pretty big deal.

Don't know why though. The Arcade itself was £129.99 2 years ago in the UK...

Arcade will give a nice spike, but nothing huge. KinectPLUSarcade will be a huge seller though

Halo Reach-fable 3 will be driving sales too.

Wow it is going to be £150. I said it would be £150 by mistake the other day, I meant Euros. The UK always gets ripped off on hardware.

I don't think it will have much of a long-term effect, but it will give a boost when it's released. 

Arcades are too cheap! Really faithful MS minions want to give it a lot more money!!!   

If you want Kinect to succeed I suggest you hope that Arcade pre-Kinect has little to no impact on 360 sales. People who want to buy Arcade and who are keen on Kinect would be wise to wait until November when the Arcade Kinect Bundle comes out. Of course if pre-orders for Arcade Kinect go on back order prior to Kinect launch, then people might chose to buy separately.

My guess is Arcade will cause a spike on release week and then go back to "normal" the following week, or the week after.

^^

What's for sure it would lack the novelty feel XB360S currently has.

OH SNAP! How could I be so blind? Now I see the light! MS will launch a new case every year now!!! 

it will add sales for sure but not as many as 360s 250GB.

first i think they will remove the wifi, but they still provide it also with 4GB built in memory.

certainly this will boost sales