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 ...

 Yeah, that's what I was thinking... isn't what people complain about Nintendo that only the exclusives (Read: Ninty's games) sell?

 Regardless, exclusives are pretty much completely driving growth of the Wii, which calls into question their judgement in saying:

 Then again, that quote is so full of lose and fail that I feel dirty even quoting it.  How can they expect Wii to get a visible boost from any game when it can't even keep units on the shelves?  For that matter, what PS3 exclusive game has shown us a longlasting boost?  The closest they could get would be the sellers last holiday season, which would be R+C, Uncharted, etc; and I feel that that boost had more to do with the price cuts and BR's victory than anything else, and even with that the PS3 is trending downwards, with upward spikes every once in a while.